GREATER SAINT LOUIS COMMUNITY FOUNDATION COMBINED FINANCIAL STATEMENTS YEARS ENDED MARCH 31, 2014 AND 2013

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1 GREATER SAINT LOUIS COMMUNITY FOUNDATION COMBINED FINANCIAL STATEMENTS YEARS ENDED

2 TABLE OF CONTENTS YEARS ENDED INDEPENDENT AUDITORS REPORT 1 FINANCIAL STATEMENTS COMBINED STATEMENTS OF FINANCIAL POSITION 3 COMBINED STATEMENTS OF ACTIVITIES 4 COMBINED STATEMENTS OF CASH FLOWS 6 8

3 CliftonLarsonAllen LLP CLAconnect.com INDEPENDENT AUDITORS REPORT Board of Directors Greater Saint Louis Community Foundation St. Louis, Missouri Report on the Financial Statements We have audited the accompanying combined financial statements of the Greater Saint Louis Community Foundation which comprise the combined statements of financial position as of March 31, 2014 and 2013 and the related combined statements of activities and cash flows for the years then ended, and the related notes to the financial statements. Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of the combined 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 combined 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 combined 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 combined financial statements are free of material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the combined financial statements. The procedures selected depend on the auditors judgment, including the assessment of the risks of material misstatement of the combined 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 combined 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 combined financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. (1)

4 Board of Directors Greater Saint Louis Community Foundation Opinion In our opinion, the combined financial statements referred to above present fairly, in all material respects, the financial position of the Greater Saint Louis Community Foundation as of March 31, 2014 and 2013, and the changes in its net assets and its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America. a CliftonLarsonAllen LLP St. Louis, Missouri August 21, 2014 (2)

5 COMBINED STATEMENTS OF FINANCIAL POSITION ASSETS CURRENT ASSETS Cash and Cash Equivalents $ 17,612,525 $ 31,581,898 Investments 204,679, ,518,275 Accounts Receivable 90,061 21,835 Unconditional Promises to Give - Unrestricted, Net 186, ,590 Contributions Receivable - Charitable Lead Trusts 48,127 45,911 Prepaid Expenses 23,246 52,170 Total Current Assets 222,639, ,377,679 PROPERTY AND EQUIPMENT, NET 110, ,628 UNCONDITIONAL PROMISES TO GIVE - UNRESTRICTED - LONG-TERM, NET 153, ,460 CONTRIBUTIONS RECEIVABLE - CHARITABLE LEAD TRUSTS - LONG-TERM 695, ,283 Total Assets $ 223,599,086 $ 220,408,050 LIABILITIES AND NET ASSETS CURRENT LIABILITIES Accounts Payable and Accrued Expenses $ 141,414 $ 115,330 Gift Annuity Obligations 329, ,964 Grants Payable 1,657,700 1,532,967 Total Current Liabilities 2,129,078 1,978,261 GIFT ANNUITY OBLIGATIONS - LONG-TERM 1,244,341 1,319,153 GRANTS PAYABLE - LONG-TERM 1,120,650 1,670,140 Total Liabilities 4,494,069 4,967,554 NET ASSETS Unrestricted 218,361, ,651,302 Temporarily Restricted 743, ,194 Total Net Assets 219,105, ,440,496 Total Liabilities and Net Assets $ 223,599,086 $ 220,408,050 See accompanying Notes to Combined Financial Statements. (3)

6 COMBINED STATEMENTS OF ACTIVITIES YEARS ENDED Temporarily Unrestricted Restricted Totals REVENUES, GAINS AND OTHER SUPPORT Contributions $ 13,262,816 $ - $ 13,262,816 Investment Income 5,113,732-5,113,732 Change in Value of Split-Interest Agreements - Charitable Lead Trusts - 35,164 35,164 Fees and Other Revenues 62,738-62,738 Net Gains on Investments 18,326,280-18,326, Net Assets Released from Restrictions 81,075 (81,075) - Total Revenues, Gains and Other Support 36,846,641 (45,911) 36,800,730 EXPENSES Grants for Charitable Purposes 30,164,002-30,164,002 Change in Value of Split-Interest Agreements - Annuity Payables 260, ,502 Administrative Expenses 1,680,795-1,680,795 Trustee, Investment and Legal Fees 1,030,910-1,030,910 Total Expenses 33,136,209-33,136,209 CHANGE IN NET ASSETS 3,710,432 (45,911) 3,664,521 NET ASSETS, BEGINNING OF YEAR 214,651, , ,440,496 NET ASSETS, END OF YEAR $ 218,361,734 $ 743,283 $ 219,105,017 See accompanying Notes to Combined Financial Statements. (4)

7 COMBINED STATEMENTS OF ACTIVITIES (CONTINUED) YEARS ENDED 2013 Temporarily Unrestricted Restricted Totals $ 48,931,374 $ - $ 48,931,374 4,239,155-4,239,155-37,271 37,271 82,113-82,113 10,816,566-10,816,566 81,075 (81,075) - 64,150,283 (43,804) 64,106,479 33,338,981-33,338, , ,688 1,497,532-1,497, , ,233 35,980,434-35,980,434 28,169,849 (43,804) 28,126, ,481, , ,314,451 $ 214,651,302 $ 789,194 $ 215,440,496 See accompanying Notes to Combined Financial Statements. (5)

8 COMBINED STATEMENTS OF CASH FLOWS YEARS ENDED CASH FLOWS FROM OPERATING ACTIVITIES Cash Received from Contributions $ 8,851,478 $ 24,419,640 Cash Paid to Gift Annuitants (335,314) (320,989) Cash Received from Fees and Other Revenues 62,739 82,113 Cash Paid for Charitable Grants (30,588,759) (33,469,932) Cash Paid to Trustees, Suppliers, Employees and Service Providers (2,599,680) (2,352,232) Interest and Dividends Received 5,113,732 4,239,155 Net Cash Used in Operating Activities (19,495,804) (7,402,245) CASH FLOWS FROM INVESTING ACTIVITIES Purchases of Investments (14,015,355) (28,494,869) Sales of Investments 19,541,786 41,858,541 Purchase of Property and Equipment - (5,095) Net Cash Provided by Investing Activities 5,526,431 13,358,577 NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (13,969,373) 5,956,332 CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 31,581,898 25,625,566 CASH AND CASH EQUIVALENTS, END OF YEAR $ 17,612,525 $ 31,581,898 See accompanying Notes to Combined Financial Statements. (6)

9 COMBINED STATEMENTS OF CASH FLOWS (CONTINUED) YEARS ENDED Reconciliation of Change in Net Assets to Net Cash Used in Operating Activities Change in Net Assets $ 3,664,521 $ 28,126,045 Contributed Investments (4,361,193) (24,675,660) Net Gains on Investments (18,326,280) (10,816,566) Depreciation and Amortization 57,017 57,949 Change in Value of Split-Interest Agreements 225, ,417 Change in Assets and Liabilities Accounts Receivable (68,226) 506 Contributions Receivable - Charitable Lead Trusts 81,075 81,075 Unconditional Promises to Give (62,993) 82,345 Prepaid Expenses 28,924 (30,282) Accounts Payable and Accrued Expenses 26,084 18,866 Gift Annuity Obligations (335,314) (320,989) Grants Payable (424,757) (130,951) Net Cash Used in Operating Activities $ (19,495,804) $ (7,402,245) See accompanying Notes to Combined Financial Statements. (7)

10 NOTE 1 NATURE OF ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Nature of Organization The Saint Louis Community Foundation, operating as the Greater Saint Louis Community Foundation (Foundation), is a tax-exempt, non-profit, autonomous, publicly supported, non-sectarian philanthropic institution established in The Foundation is dedicated to improving the quality of life throughout the metropolitan St. Louis region by helping individuals, families and businesses make a difference through charitable giving. The Foundation represents thousands of donors through hundreds of separate component funds supporting a broad range of community interests. Combined Statement Presentation The combined financial statements include the accounts of the Saint Louis Community Foundation (Trust), the Saint Louis Community Foundation, Inc. (Corporation), the Greater Saint Louis Real Estate Foundation (Real Estate) and the Alberici Foundation (Alberici). The Corporation is a publicly supported charity as described by IRC Section 509(a)(1) whose directors also serve as the governing body for the Trust. The Real Estate and Alberici entities are separate corporations with separate Boards of Directors. The Corporation is the sole member of Alberici and as such maintains significant control over Alberici s board, its governing documents and certain aspects of its operations, in particularly, approving certain financial transactions, acceptance of certain gifts and any modifications to its governing documents. All assets of the Corporation, the Real Estate and the Alberici entities are administratively managed by the Trust. The Real Estate had no activity during the years ended March 31, 2014 and Significant intercompany transactions have been eliminated in these combined financial statements. Total contributions by entity for the years ended March 31, 2014 and 2013 are as follows: Corporation Entity $ 11,440,003 $ 44,895,446 Trust Entity 1,122,813 3,285,928 Alberici Foundation 700, ,000 $ 13,262,816 $ 48,931,374 Basis of Accounting The accompanying combined financial statements have been prepared on the accrual basis of accounting in conformity with U. S. generally accepted accounting principles. (8)

11 NOTE 1 NATURE OF ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Basis of Presentation Under the accounting standards set forth by the Financial Accounting Standards Board, the Foundation is required to report contributions received as unrestricted, temporarily restricted or permanently restricted support, depending on the existence and/or nature of any donor restrictions. In addition, the Foundation 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. Temporarily restricted net assets are for the support of specific operating activities. At present, the Foundation has no permanently restricted net assets. The Foundation maintains its internal accounts in accordance with the principles and practices of fund accounting. Fund accounting is the procedure whereby resources with various restrictions as to expendability or user purpose are classified for accounting purposes in accordance with activities or objectives specified by donors. These combined financial statements, which are presented on the accrual basis of accounting, have been prepared to focus on the Foundation as a whole and to present balances and transactions according to the existence or absence of donor-imposed restrictions. As stated in the Foundation s gift instrument agreements, the Foundation s Board of Directors, in furtherance of the purposes of the Foundation, has the ultimate authority and control over all property gifted to them and the related income derived therefrom. Such authority includes the ability to remove a donor restriction. Accordingly, the accompanying combined financial statements classify all net assets (fund balances) as unrestricted except for certain contributions received under charitable lead trust agreements as more fully described under Note 4. However, to assist with the classification of resources in accordance with the activities or objectives specified by donors, the following categories of unrestricted net assets are used by the Foundation: Designated Contributions whereby donors are able to designate a specific organization to be the recipient of the income generated from these funds. However, the Foundation s Board of Directors retains the authority to rescind a donor s designation if the charitable organization is no longer operating in an efficient manner, is no longer operating within the tax-exempt purpose for which it was established or is no longer in existence. Donor Advised Contributions that are subject to donor recommendations regarding the particular organizations and projects that are to receive grants from these funds. The donor recommendations are solely advisory and the Foundation s Board of Directors is not bound by such recommendations. Field of Interest Contributions whereby the donors are able to channel their resources into broad areas of interest, e.g., arts, education, health care, work with the elderly or youth services. The Foundation s Board of Directors uses the income from these resources to make grants to programs or organizations that are most likely to achieve positive results for that area of interest. (9)

12 NOTE 1 NATURE OF ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Basis of Presentation (Continued) Scholarship Contributions whereby donors may name the scholarship, designate a particular field of study, designate a specific educational institution or program and select eligibility requirements. Scholarship funds may be established to benefit any level of education from preschool to postgraduate studies and vocational training. Discretionary Contributions not having donor-imposed recommendations, that are used to respond to changing community needs as determined by the Foundation s Board of Directors. Supporting Organization Contributions to an independent foundation legally affiliated with the Foundation. The supporting organization has its own board, grant-making program, and investment structure. Operating Used in connection with administrative services provided by the Foundation. All transfers made between funds have the prior authorization of the Board of Directors. Estimates and Assumptions The preparation of combined financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the combined financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Credit Risk The Foundation maintains its cash in bank deposit accounts at various financial institutions. The balances, at times, may exceed federally insured limits. Also, the Foundation s investments are subject to the inherent risks associated with the securities market. Cash and Cash Equivalents Cash and cash equivalents represent cash in banks, money market funds, certificate of deposits, and similar short-term investment vehicles. The Foundation considers investment vehicles maturing in twelve months or less to be cash equivalents. The majority of the Foundation s cash is maintained in uninsured money market accounts. (10)

13 NOTE 1 NATURE OF ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Investments The Foundation maintains its investment portfolio with approximately twenty financial institutions. An investment committee monitors the performance of these institutions and makes recommendations to the Board of Directors who set overall investment policy. An external investment consultant is engaged to monitor portfolio performance according to the Foundation s investment policy and to report to the investment committee on a quarterly basis. The investment managers at these financial institutions manage the portfolio to achieve the stipulated investment objectives. Investments in mutual funds, equities and fixed income securities are carried at fair value based upon quoted market prices on established exchanges. Cash and cash equivalents are carried at cost which approximates fair value. Investment in limited partnership consists of a single partnership that holds assets comprised of marketable debt and equity securities. The Foundation s pro-rata limited partner share equals 99% of the partnership s holdings and is valued at quoted market prices reduced by a 15% lack of marketability discount on the partnership interest. Other investments consist of notes receivable, life insurance contracts, private investment funds, ownership interest in a limited partnership, ownership interest in a limited liability corporation, and other miscellaneous holdings and are carried at estimated fair value. Net changes in fair value of investments and realized gains and losses on investments disposed are reported in the combined statements of activities as net gains or losses on investments. Both the purchase and sale of investments are recorded effective on the trade date. Donated securities are recorded at their fair value at the date of donation. In general, investments are exposed to various risks, such as interest rate, credit and overall market volatility risk. Due to the level of risk associated with certain investments, it is reasonably possible that changes in the values of the investments will occur in the near term and that such changes could materially affect the investment balances and the amounts reported in the combined statements of financial position. Accounts Receivable and Unconditional Promises to Give Accounts receivable consists of consulting fees. Unconditional promises to give consist of nonoperating pledge donations from individuals. Unconditional promises to give are recognized as revenues in the period the promises are received. Accounts receivable and unconditional promises to give are stated at the amount management expects to collect from balances outstanding at year end. Based on management s assessment of the credit history with customers and donors having outstanding balances and current relationships with them, it has concluded that realization losses on balances outstanding at year end will be immaterial. Unconditional promises to give are recorded net of an allowance for doubtful accounts of $22,387 and $24,840 as of March 31, 2014 and 2013, respectively. Management has deemed that no allowance is necessary for accounts receivable as of March 31, 2014 and (11)

14 NOTE 1 NATURE OF ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Contributions Receivable Charitable Lead Trusts The Foundation recognizes its beneficial interest in the underlying assets of these splitinterest agreements as temporarily restricted net assets. The initial transaction to recognize a new charitable lead trust is to record both a receivable and contribution revenue measured by the present value of the future cash flows. Distributions from the trusts and collected by the Foundation are reported both as reductions in the receivable and as reclassifications from temporarily restricted net assets to unrestricted net assets. Amortization of the initial discount is recognized as payments are received by adjusting the receivable and recording as revenue the net change in the value of the split-interest agreement as is presented under the temporarily restricted net asset class in the combined statements of activities. Property and Equipment Property and equipment are carried at cost less accumulated depreciation. Maintenance and repairs are charged to expense as incurred. When property and equipment are sold or otherwise disposed of, the related cost and accumulated depreciation are removed from the accounts and any profit or loss arising from such disposition is included as an increase (or decrease) in unrestricted net assets in the year disposed. The assets are depreciated over periods ranging from five to seven years, using the straight-line method. Long-Lived Assets The Foundation s management reviews long-lived assets for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an 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 fair value of the assets. Assets to be disposed of are reported at the lower of carrying amount or the fair value less costs to sell. Contributions Contributions are recognized as revenues in the period received. Conditional promises to give, which depend upon specified future and uncertain events, are recognized as revenue in the periods when the conditions upon which they depend are substantially met. The Foundation does not have any conditional promises to give as of March 31, 2014 and (12)

15 NOTE 1 NATURE OF ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Gift Annuity Obligations The Foundation is the beneficiary of several gift annuity agreements. Annuity agreements represent the present value of future annuities payable to the annuitants as of March 31, 2014 and 2013, as determined by the terms of the annuity agreement and present value factors provided by the Internal Revenue Service. The gift portion of the annuity agreement is calculated using methods and rates provided by the Internal Revenue Service and is recognized upon receipt. Discount rates range between 2% and 6.2% based on the year the gift was received. Upon the donor s death, the excess, if any, of the initial gift received from the donor, plus investment earnings thereon, over the cumulative distributions paid to the donor, will be either expended as a grant or held as an endowment with the investment earnings distributed as stipulated by the gift annuity contract. Intra-Fund Loan The Board periodically approves investing a limited amount of pooled investment resources from the Discretionary Fund into the Operating Fund under an intra-fund working capital loan agreement. The purpose for these transactions is to bridge any shortfalls in cash flows, which may occur within the Operating Fund, as a result of market valuation losses. Such losses erode the asset base upon which the Foundation earns its fees necessary to effectively administer all of the component funds. Because both the Operating Fund and the Discretionary Fund are classified as unrestricted under United States generally accepted accounting principles, the intra-fund lending activities have no effect on the overall unrestricted net assets (fund balances). Any working capital loan would use the interest rate provided by the Internal Revenue Service and called the Applicable Federal Rate (AFR), for a mid-term loan at the time the loan was authorized by the Board. As of March 31, 2014 and 2013, there were no outstanding balances of the intra-loan funds, and no interest was paid between funds. Grants for Charitable Purposes Grants for charitable purposes are expensed in the period that they are approved by the Board of Directors. Income Taxes All four entities, the Trust, the Corporation, the Real Estate entity and the Alberici Foundation, are exempt from federal income taxes under Section 501(a) by reason of being an organization described in Section 501(c)(3) of the Internal Revenue Code (the Code). Allocation of Expenses Expenses are allocated by functional expense between program, fundraising, and general and administrative services based on management's estimates. (13)

16 NOTE 1 NATURE OF ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Fair Value of Financial Instruments The carrying value of cash and cash equivalents and accounts payable and accrued expenses approximates fair value due to the short-term nature of these instruments. Investments approximate fair value based on the descriptions under Fair Value Measurement in Note 1. The fair value of unconditional promises to give, contributions receivable charitable lead trusts and grants payable is determined as the present value of expected future cash flows using a discount rate. Gift annuity obligations are reported at fair value based on the life expectancy of the beneficiaries and the present value of expected cash flows using a discount rate established at the time of the gift. The carrying amount of all other financial instruments approximates fair value. Fair Value Measurements The Foundation follows an accounting standard that defines fair value, establishes a framework for measuring fair value, establishes a fair value hierarchy based on the quality of inputs used to measure fair value, and requires expanded disclosures about fair value measurements. In accordance with this standard, the Foundation has categorized its investments, based on the priority of the inputs to the valuation technique, into a threelevel fair value hierarchy. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). If the inputs used to measure the financial instruments fall within different levels of the hierarchy, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument. Financial assets and liabilities recorded on the combined statements of financial position are categorized based on the inputs to the valuation techniques as follows: Level 1 Financial assets and liabilities are valued using inputs that are unadjusted quoted prices in active markets accessible at the measurement date of identical financial assets and liabilities. The inputs include those traded on an active exchange, such as the New York Stock Exchange, as well as U.S. Treasury and other U.S. government and agency mortgage-backed securities that are traded by dealers or brokers in active over-the-counter markets. Level 1 includes various common stocks, preferred stocks, mutual funds, hedge funds, corporate bonds and U.S. Treasury obligations. Level 2 Financial assets and liabilities are valued based on quoted prices for similar assets, or inputs that are observable, either directly or indirectly for substantially the full term through corroboration with observable market data. Level 2 includes private collateralized mortgage obligations, municipal bonds, corporate bonds, hedge funds, various common stock and mutual funds, investment in a limited liability partnership, contributions receivable - charitable lead trusts and gift annuity obligations. Level 3 Financial assets and liabilities are valued using pricing inputs which are unobservable for the asset, inputs that reflect the reporting entity s own assumptions about the assumptions market participants would use in pricing the asset. Level 3 includes hedge funds, closely-held stock and investments in limited liability companies. (14)

17 NOTE 2 INVESTMENTS Investments at March 31, 2014 consist of the following: 2014 Fair Value % Cost Common Stock $ 56,622, $ 40,431,810 Mutual Funds 78,824, ,269,195 Corporate Bonds 50,764, ,313,145 U.S. Government Obligations 5,034, ,039,616 Hedge Funds 8,436, ,937,317 Investment in Limited Partnership 1,722, ,603,166 Investment in Limited Liability Companies 3,271, ,271,544 Other Investments 2, ,108 Investments at March 31, 2013 consist of the following: $ 204,679, $ 165,867, Fair Value % Cost Common Stock $ 46,883, $ 36,590,003 Mutual Funds 62,695, ,087,688 Corporate Bonds 48,531, ,459,480 U.S. Government Obligations 3,950, ,863,502 Hedge Funds 11,367, ,190,202 Investment in Limited Partnership 2,230, ,217,767 Investment in Limited Liability Companies 11,851, ,851,644 Other Investments 7, ,687 $ 187,518, $ 163,267,973 Investments are carried at fair value in accordance with accounting principles generally accepted in the United States of America. For the years ended March 31, 2014 and 2013, unrealized gains of $14,582,248 and $7,491,443, respectively, were recorded to adjust the investments to fair value. (15)

18 NOTE 2 INVESTMENTS (CONTINUED) Investment in Limited Partnership The investment in limited partnership consists of a single partnership that holds assets comprised of marketable debt and equity securities valued based on unadjusted quoted market prices within active markets. The Foundation s pro-rata share (net of a 15% lack of marketability discount) of these underlying marketable securities consists of the following at March 31, 2014 and 2013: Fair Value 2014 Cost Equity Holdings $ 1,133,958 $ 1,015,096 Fixed Income Securities 588, ,070 $ 1,722,360 $ 1,603,166 Fair Value 2013 Cost Equity Holdings $ 915,138 $ 909,608 Fixed Income Securities 1,315,474 1,308,159 (16) $ 2,230,612 $ 2,217,767 The limited partnership also holds cash and cash equivalents totaling $41,256 and $116,274 as of March 31, 2014 and 2013, respectively, and is included within the Foundation s total cash and cash equivalents as reported on the combined statements of financial position. Investment in Limited Liability Companies As of March 31, 2013, the Foundation had six separate equity interests in limited liability companies. During the year ended March 31, 2014 the Foundation sold/redeemed several of these interests and at March 31, 2014 held three separate equity interests in limited liability companies. The Foundation s investment in the companies ranges from 1.4% to 10.1% at March 31, 2014 and 1.4% to 11.7% at March 31, Fair value of the equity interests was derived from independent appraisals and totals $3,271,544 and $11,851,644 at March 31, 2014 and 2013, respectively. Private Investment Funds Included under investments above are investments in various private investment funds whose aggregate carrying values at March 31, 2014 and 2013 totaled $8,436,293 and $11,367,609, respectively. These investments, also known as hedge funds, provide the means for the fund manager to, for example, take both long and short positions, use arbitrage, buy and sell undervalued securities, trade options or bonds and engage in other investment activities for the purpose of reducing volatility and risk while attempting to preserve capital and provide positive investment returns under all market conditions. At March 31, 2014 and 2013, the Foundation s holdings in hedge funds total approximately 4.1% and 6.1%, respectively, of the total carrying value of all investments.

19 NOTE 3 UNCONDITIONAL PROMISES TO GIVE Unconditional promises to give are expected to be collected in the following periods at March 31, 2014 and 2013: Pledges Due in Less Than One Year $ 208,720 $ 182,430 Pledges Due in 1-5 Years 164, , , ,230 Allowance for Uncollectible Pledges (22,387) (24,840) Discount to Record Promises to Give at Present Value (10,690) (5,340) $ 340,043 $ 277,050 Discount rates ranging from 1% to 2% were used to record unconditional promises to give at the present value of the future cash flows at March 31, 2014 and NOTE 4 CONTRIBUTIONS RECEIVABLE - CHARITABLE LEAD TRUSTS The following is a schedule of the gross minimum payments to be received from charitable lead trusts at March 31, 2014: Year Ending March 31, 2015 $ 81, , , , ,075 Thereafter 572, ,275 Discount to Record Charitable Lead Trusts at Present Value (234,992) $ 743,283 Discount rates ranging from 3.25% to 5.75% were used to record contributions receivable under charitable lead trusts at the present value of the future cash flows at March 31, 2014 and (17)

20 NOTE 5 PROPERTY AND EQUIPMENT Property and equipment consists of the following at March 31, 2014 and 2013: Leasehold Improvements $ 6,823 $ 6,823 Computers 373, ,348 Office Furniture and Equipment 97,331 97, , ,502 Less Accumulated Depreciation (366,891) (309,874) $ 110,611 $ 167,628 NOTE 6 GRANTS PAYABLE Grants payable by fund are as follows at March 31, 2014 and 2013: Discretionary $ 20,000 $ 113,229 Designated - 28,438 Donor Advised 1,444,700 1,377,600 Scholarship Fund 25,000 56,200 Supporting Organization 1,294,000 1,636,000 $ 2,783,700 $ 3,211,467 Grants authorized but unpaid at year-end are reported as liabilities. Grants to be paid in more than one year are discounted using a rate of 1%. The following is a summary of grants authorized and payable at March 31, 2014: Year Ending March 31, 2015 $ 1,657, , , , ,000 Gross Grants Authorized but Unpaid 2,783,700 Less: Discount on Long-Term Grants (5,350) Total Grants Payable $ 2,778,350 (18)

21 NOTE 7 FAIR VALUE MEASUREMENT The Foundation uses fair value measurement to record fair value adjustments to certain financial assets and financial liabilities that are measured on a recurring basis. The fair values of significant financial assets and liabilities that are measured on a recurring basis at March 31, 2014 and 2013 are as follows: March 31, 2014 Quoted Prices Significant in Active Other Significant Markets for Observable Unobservable Total at Identical Assets Inputs Inputs Fair Value (Level 1) (Level 2) (Level 3) Investments: Common Stock $ 56,622,825 $ 56,568,041 $ 54,784 $ - Mutual Funds 78,824,848 78,750,590 74,258 - Corporate Bonds 50,764,982 50,343, ,899 - U.S. Government Obligations 5,034,357 5,034, Hedge Funds 8,436,293 4,974, ,975 2,865,148 Investment in Limited Partnership 1,722,360-1,722,360 - Investment in Limited Liability Companies 3,271, ,271,544 Other Investments 2,108 2, Total Investments 204,679, ,672,349 2,870,276 6,136,692 Contributions Receivable - Charitable Lead Trusts 743, ,283 - Gift Annuity Obligations (1,574,305) - (1,574,305) - Total $ 203,848,295 $ 195,672,349 $ 2,039,254 $ 6,136,692 (19)

22 NOTE 7 FAIR VALUE MEASUREMENT (CONTINUED) March 31, 2013 Quoted Prices Significant in Active Other Significant Markets for Observable Unobservable Total at Identical Assets Inputs Inputs Fair Value (Level 1) (Level 2) (Level 3) Investments: Common Stock $ 46,883,269 $ 45,968,131 $ 915,138 $ - Mutual Funds 62,695,430 62,695, Corporate Bonds 48,531,709 47,909, ,423 - U.S. Government Obligations 3,950,315 3,204, ,432 - Hedge Funds 11,367,609 5,070, ,725 5,641,342 Investment in Limited Partnership 2,230,612-2,230,612 - Investment in Limited Liability Companies 11,851, ,851,644 Other Investments 7,687 7, Total Investments 187,518, ,855,959 5,169,330 17,492,986 Contributions Receivable - Charitable Lead Trusts 789, ,194 - Gift Annuity Obligations (1,649,117) - (1,649,117) - Total $ 186,658,352 $ 164,855,959 $ 4,309,407 $ 17,492,986 Financial assets valued using Level 1 inputs are based on unadjusted quoted market prices within active markets. Financial assets and financial liabilities valued using Level 2 inputs are based on inputs other than quoted prices (interest rates) that are observable for the financial asset or liability. Financial assets valued using Level 3 inputs are based on unobservable inputs for the asset or liability used to measure fair value that rely on the reporting entity s own assumptions based on the best information available under the circumstances. Inputs under fair value measurement guidance refer broadly to the assumptions that market participants would use in pricing the asset or liability. (20)

23 NOTE 7 FAIR VALUE MEASUREMENT (CONTINUED) The following table sets forth a summary of changes in the fair value of the Foundation s Level 3 financial assets for the years ended March 31, 2014 and 2013: Investment in Hedge Closely Held Investments Investments Funds Stock in LLCs Total March 31, 2012 $ 6,655,877 $ - $ 9,023,295 $ 15,679,172 Total Gains or (Losses) (Realized/Unrealized) 138,735 - (443,195) (304,460) Purchases/Contributions In - 5,195,889 4,378,101 9,573,990 Sales (772,883) (5,195,889) (1,106,557) (7,075,329) Transfers In/Out of Level 3 (380,387) - - (380,387) March 31, ,641,342-11,851,644 17,492,986 Total Gains or (Losses) (Realized/Unrealized) 829,339 - (858,700) (29,361) Purchases/Contributions In 592, ,305 Sales (4,197,838) - (7,721,400) (11,919,238) Transfers In/Out of Level March 31, 2014 $ 2,865,148 $ - $ 3,271,544 $ 6,136,692 The amount of total gains (losses) for the period is included in changes in net assets within the combined statements of activities. All assets have been valued using a market approach. There have been no changes in valuation approaches or techniques. Fair value measurements of investments in certain entities that calculate net asset value per share (or its equivalent) as of March 31, 2014 and 2013 that have limits as to redemption frequency or notification period are as follows: Redemption 2014 Frequency Redemption Net Asset Unfunded (If Currently Notice Value Commitments Eligible) Period Hedge Funds $ 1,758,604 None Monthly-Annually Days Hedge Funds $ 785,861 None Quarterly-Semi- Annually 1-90 Days (21)

24 NOTE 7 FAIR VALUE MEASUREMENT (CONTINUED) Redemption 2013 Frequency Redemption Net Asset Unfunded (If Currently Notice Value Commitments Eligible) Period Hedge Funds $ 1,617,561 None Daily-Monthly 1-15 Days Hedge Funds $ 3,098,834 None Quarterly Days At March 31, 2014 and 2013, there were no unfunded commitments in regards to investments. Fair value measurement policy includes: Common stock and mutual funds are invested in domestic and international companies. These assets provide full disclosure of the underlying holdings and are valued using fair value methods that have quoted values observable on a daily basis. Corporate bonds and U.S. Government bonds are valued daily utilizing fair value market methods and are observable on a daily basis. These assets provide full disclosure of the underlying holdings whereby the Foundation is able to verify its account balances daily if necessary. Hedge funds are invested in a diverse portfolio of long/short funds, event driven funds, turnaround situation funds, and other strategies. These assets are valued utilizing observable fair market methods available on a daily basis along with unobservable inputs used to determine the fair value in which case the valuation used is the most current data available estimated at our fiscal year end or may be based on their net asset value. Investment in limited partnership consists of investments in domestic and international companies, as well as corporate and government bond funds. These assets provide full disclosure of the underlying holdings and are valued using fair value methods that have quoted values observable on a daily basis. Investment in limited liability companies are assets consisting of closely held private interests. These assets are valued using pricing inputs that are unobservable and reflect the reporting entity s own assumptions. The assets are valued at March 31, 2014 and 2013 using the most current appraisal. (22)

25 NOTE 8 NET ASSETS Temporarily restricted net assets are available for the following purposes at March 31, 2014 and 2013: Charitable Lead Trust - Timing Restriction $ 743,283 $ 789,194 Net assets were released from donor-imposed restrictions as follows for the years ended March 31, 2014 and 2013: Temporarily Restricted: Charitable Lead Trust - Timing Restriction $ 81,075 $ 81,075 NOTE 9 ENDOWMENT NET ASSETS The endowment consists of individual funds established for a variety of purposes. As required by generally accepted accounting principles, net assets associated with endowment funds, including funds designated by the Board of Directors to function as endowments, are classified and reported based on the existence or absence of donorimposed restrictions. As stated in Note 1, under the Foundation s gift instrument agreements, the Board of Directors has the authority to remove a donor restriction, thus at March 31, 2014 and 2013, endowment net assets consist of only funds designed by the Board of Directors to function as endowments. Return Objectives and Risk Parameters The Foundation has adopted investment and spending policies for endowment assets that attempt to provide a predictable stream of funding to programs supported by its endowment while seeking to maintain the purchasing power of the endowment assets. Endowment assets include those assets of donor-restricted funds that the organization must hold in perpetuity or for a donor-specified period(s). Under this policy, as approved by the Board of Directors, the endowment assets are invested in a manner that is intended to produce results, over time, to out-perform a weighted, blended market index based on the target allocations established for the portfolio after adjusting for an estimated rate of inflation and net of investment management and custody fees while assuming a moderate level of investment risk. Strategies Employed for Achieving Objectives To satisfy its long-term rate-of-return objectives, the endowment 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 endowment targets a diversified asset allocation that places a greater emphasis on equity-based investments to achieve its long-term objectives within prudent risk constraints. (23)

26 NOTE 9 ENDOWMENT NET ASSETS (CONTINUED) Spending Policy and How the Investment Objectives Relate to Spending Policy The Foundation has a policy of establishing its spending policy annually. The rate determined by the Board of Directors for the fiscal year ends of March 31, 2014 and 2013 was 4.00% for both years, and is based on a 16 quarter trailing average. In establishing this policy, the endowment considered the long-term expected return on its endowment. This is consistent with the organization 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. Endowment net asset composition by type of net asset at March 31, 2014 and 2013: Unrestricted Net Assets - Board-Designated Endowment Funds $ 59,178,455 $ 52,115,453 Changes in the unrestricted endowment net assets for the years ended March 31, 2014 and 2013: Endowment Net Assets, Beginning of Year $ 52,115,453 $ 49,944,469 Investment Return: Investment Income 1,272,032 1,179,445 Net Gains on Investments 6,608,879 3,278,427 Total Investment Return 7,880,911 4,457,872 Other Revenue 15,400 1,500 Contributions 2,038, ,606 Expenses: Charitable Grants 1,588,179 1,385,729 Operational Expenses 7,657 - Trustee, Investment and Legal Fees 338, ,642 Administrative Expenses 525, ,592 Net Transfers 412, ,031 Total Expenses 2,872,195 2,490,994 Endowment Net Assets, End of Year $ 59,178,455 $ 52,115,453 (24)

27 NOTE 10 RETIREMENT PLAN The Foundation maintains a tax-qualified 403(b) deferred compensation plan. Under this plan, employees may elect to defer a percentage of their salary subject to Internal Revenue Service limits. After one year of service, the Foundation will contribute on behalf of the employee 2.5% of the employee s salary plus matching contributions equal to the employee s contributions to the 403(b) plan up to 4% of the employee s compensation. The Foundation s expense for the 403(b) plan totaled $47,968 and $35,924 for the years ended March 31, 2014 and 2013, respectively. NOTE 11 ADMINISTRATIVE EXPENSES Administrative expenses consist of the following for the years ended March 31, 2014 and 2013: Salaries and Benefits $ 1,044,524 $ 975,967 Marketing and Brochures 180,789 59,510 Rent 93,231 88,924 Professional Fees 78, ,853 Depreciation 57,017 57,949 Data Processing Expenses 54,222 45,458 Meetings and Seminars 30,008 28,374 Fundraising 18,056 6,400 Travel 15,750 13,457 Office Expenses 15,258 16,051 Dues and Subscriptions 14,147 8,780 Special Events 13,928 8,435 Insurance 13,413 12,595 Miscellaneous 11,704 6,485 Banking Fees 8,563 4,935 Telecommunications 8,547 8,522 Postage and Freight 8,056 8,071 Parking 7,934 9,256 Outside Services 5,975 5,290 Printing and Duplicating 1, Program Related Expenses - 4,000 $ 1,680,795 $ 1,497,532 (25)

28 NOTE 12 LEASE COMMITMENTS The Foundation leases its principal office space under an operating lease which expires on March 31, Rent expense associated with this lease totaled $80,622 and $76,439 for the years ended March 31, 2014 and 2013, respectively, and is included under administrative expenses of the operating class of net assets in the accompanying combined financial statements. The Foundation leases a copier and fax machine under an operating lease which expires in September The expense associated with this lease totaled $12,609 and $10,417 for the years ended March 31, 2014 and 2013, respectively. Future minimum rent payments are as follows at March 31,: 2015 $ 94, , ,882 Total $ 106,472 NOTE 13 FUNCTIONAL EXPENSE CLASSIFICATION The functional expense categories are as follows for the years ending March 31, 2014 and 2013: Program $ 32,806,337 $ 35,457,123 Management and General 277, ,725 Fundraising 52, ,892 $ 33,136,209 $ 35,920,740 NOTE 14 INCOME TAXES The Foundation has adopted ASC , Income Taxes, as it relates to uncertain tax positions and has evaluated their tax positions taken for all open tax years. Currently, the 2010 and subsequent tax years are open and subject to examination by the Internal Revenue Service. However, the Foundation is not currently under audit nor has the Foundation been contacted by the Internal Revenue Service. Based on the evaluation of the Foundation s tax positions, management believes all positions taken would be upheld under an examination. Therefore, no provision for the effects of uncertain tax positions has been recorded at March 31, 2014 and (26)

29 NOTE 15 SUBSEQUENT EVENTS The Foundation has evaluated subsequent events through August 21, 2014, the date which the combined financial statements were available to be issued. (27)