United States Figure Skating Association

Transcription

1 Date Due PLEASE COMPLETE Time Due Draft for Discussion Purposes Only Services Requested Format Revisions Track Changes Accept Changes Print (Lined/Clean) Name: Return document via: Special Instructions: United States Consolidated Financial Statements Year Ended June 30, 2009 (With Comparative Totals for 2008)

2 Consolidated Financial Statements Year Ended June 30, 2009 (With Comparative Totals for 2008)

3 Contents Independent Auditors Report 1 Consolidated Statement of Financial Position 2 Consolidated Statement of Activities 3 Consolidated Statement of Cash Flows 4 Summary of Significant Accounting Policies Supplemental Material: Independent Auditors Report on Supplemental Material 21 Statement of Financial Position Information 22 Statement of Activities Information 23

4 Independent Auditors' Report Board of Directors United States We have audited the accompanying consolidated statement of financial position of United States ( Association ) as of June 30, 2009, and the related consolidated statements of activities and cash flows for the year then ended. These financial statements are the responsibility of the Association s management. Our responsibility is to express an opinion on these financial statements based on our audit. The prior year summarized information has been derived from the Association s 2008 consolidated financial statements. Those financial statements were audited by other auditors whose report dated October 15, 2008, expressed an unqualified opinion on those financial 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 consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Association s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, 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 consolidated financial statements referred to above present fairly, in all material respects, the financial position of United States at June 30, 2009, and the changes 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. November 2, 2009

5 Consolidated Statement of Financial Position (With Comparative Totals for 2008) June 30, Assets Cash and cash equivalents $ 2,881,765 $ 1,335,658 Investments 56,934,595 71,682,540 Accounts receivable, net 965, ,481 Inventory, net 106, ,719 Prepaid expenses and other assets 259, ,116 Property and equipment, net 1,391,254 1,533,608 Historical artifacts, at cost 688, ,261 Promise to give restricted to endowment, net 205,338 - Investments restricted to endowment 93, ,332 Beneficial interest in perpetual trust 101, ,337 Total assets $ 63,627,330 $ 76,329,052 Liabilities and Net Assets Accounts payable and accrued expenses $ 1,048,408 $ 931,072 Deferred revenue 1,175,214 1,454,649 Total liabilities 2,223,622 2,385,721 Commitments and Contingencies Net assets Unrestricted: Board-designated for reserves 52,744,248 64,372,009 Board-designated for skaters 6,014,412 6,951,863 Invested in property and equipment and historical artifacts 2,079,515 2,221,869 60,838,175 73,545,741 Temporarily restricted 137, ,921 Permanently restricted 427, ,669 Total net assets 61,403,708 73,943,331 Total liabilities and net assets $ 63,627,330 $ 76,329,052 See accompanying summary of significant accounting policies and notes to consolidated financial statements. 2

6 Consolidated Statement of Activities (With Comparative Totals for 2008) Year Ended June 30, Unrestricted Temporarily Restricted Permanently Restricted Total Total Revenue, support, and gains Dues, admissions, and activity fees $ 4,032, $ 4,032,660 $ 3,831,073 Skating events and sponsorships 5,651, ,651,739 2,044,023 Broadcasting and licensing 1,883, ,883,179 1,481,317 Publications 303, , ,286 Contributions 332,036 4, , , ,036 USOC and PSA grants 856, , ,291 Net investment (loss) return (10,924,847) (20,386) (21,130) (10,966,363) 565,980 Net assets released from program restriction 112 (112) Total revenue, support, and gains 2,134,933 (16,265) 184,208 2,302,876 9,893,006 Expenses and losses Program services: Membership activities and services 2,018, ,018,196 1,784,032 Development and support of athletes 4,017, ,017,798 3,872,733 Skating events 5,347, ,347,138 3,228,372 Governance and judging 484, , ,801 Publications 415, , ,674 Total program services 12,282, ,282,823 9,805,612 Supporting services: Management and general 1,853, ,853,429 2,025,543 Donor development 706, , ,339 Total supporting services 2,559, ,559,676 2,388,882 Total expenses 14,842, ,842,499 12,194,494 Change in net assets (12,707,566) (16,265) 184,208 (12,539,623) (2,301,488) Net assets, beginning of year 73,545, , ,669 73,943,331 76,244,819 Net assets, end of year $ 60,838, , ,877 $ 61,403,708 $ 73,943,331 See accompanying summary of significant accounting policies and notes to consolidated financial statements. 3

7 Consolidated Statement of Cash Flows (With Comparative Totals for 2008) Increase (Decrease) in Cash and Cash Equivalents Year Ended June 30, Cash flows from operating activities Change in net assets $ (12,539,623) $ (2,301,488) Adjustments to reconcile change in net assets to net cash provided by operating activities: Depreciation 175, ,844 Net investment loss (return) 10,966,363 (565,980) Change in accrued interest on investments (26,536) - Contributions restricted to endowment (205,338) - Change in beneficial interest in perpetual trust 21,130 14,782 Decrease (increase) in operating assets: Accounts receivable, net (644,821) (61,450) Inventory, net 12,146 3,147 Prepaid expenses and other assets 146,837 (265,262) Increase (decrease) in operating liabilities: Accounts payable and accrued expenses 117,336 (139,073) Deferred revenue (279,435) 577,478 Net cash used in operating activities (2,256,481) (2,461,002) Cash flows from investing activities Transfers to cash from investments, net 3,828,797 97,763 Net withdrawals from investments restricted to endowment 6,897 - Purchase of property and equipment (33,106) (56,060) Net cash provided by investing activities 3,802,588 41,703 Net increase (decrease) in cash and cash equivalents 1,546,107 (2,419,299) Cash and cash equivalents, beginning of year 1,335,658 3,754,957 Cash and cash equivalents, end of year $ 2,881,765 $ 1,335,658 See accompanying summary of significant accounting policies and notes to consolidated financial statements. 4

8 Organization The United States ( U.S. Figure Skating, Association, we, us, or our ) is the national governing body for the sport of figure skating on ice in the United States, and is so recognized by the International Skating Union ( ISU ) and the United States Olympic Committee ( USOC ). Our headquarters are located in Colorado Springs, Colorado. We promote and regulate participation in the sport of figure skating throughout the United States of America. Our mission is to provide programs to encourage participation, enjoyment, and achievement in the sport of figure skating. Established in 1921, our membership now includes approximately 600 member clubs and more than 190,000 registered skaters. Recognizing that competition at every level is a principal incentive for figure skaters to train, develop, and improve their proficiency, we sanction official test sessions to measure progress in the various branches of the sport. We also sanction, directly or indirectly, all official U.S. figure skating competitions. Member clubs throughout the United States conduct the tests and competitions. By ascending the competition ladder, competitors registered with U.S. Figure Skating develop opportunities to gain entry to international figure skating events, among them the Olympic Winter Games and World Championships. The World Figure Skating Museum and Hall of Fame ( Museum ), an activity of U.S. Figure Skating, honors the heritage of our sport. Serving as an international repository for the sport of figure skating, the Museum is dedicated exclusively to the collection, preservation and interpretation of the history and historical artifacts of figure skating throughout the world. The greatest names in figure skating are honored in the Hall of Fame, housed within the Museum. Ice Network, LLC ( Ice Network ) is a wholly-owned subsidiary of the Association created in 2007 to hold exclusive rights to certain interactive media assets licensed to it by the Association. Ice Network and the Association have an agreement with MLB Advance Media, LP ( MLBAM ) under which MLBAM is solely responsible for the development, management, operation, and maintenance of the exclusive, official website and interactive media assets of Ice Network. The agreement expires on June 30, 2011, but may be extended by mutual agreement. 20 First Street Properties ( Properties ) is a separate, tax exempt not-for-profit title-holding company created in 2004 solely for the purpose of owning, holding title to, and maintaining the land, buildings, and improvements of the Association s headquarters located at 20 First Street in Colorado Springs, Colorado. The United States Figure Skating Foundation ( Foundation ) is a separate, tax exempt not-for-profit organization established in 2000 to receive, hold, manage, and invest funds transferred, conveyed, or contributed to it by or for the benefit of the Association. The Foundation is governed by a separate board 5

9 of directors, a majority of whom are appointed by the Association s board of directors. The board of directors of the Foundation authorizes supporting distributions to the Association. Reporting Entity and Principles of Consolidation The consolidated financial statements include the assets, liabilities, net assets, and activities of the Association, Ice Network, Properties, and the Foundation. All significant intercompany transactions and balances have been eliminated in consolidation. Collectively, these consolidated entities are hereinafter referred to as, U.S. Figure Skating, we, us, or our. Comparative Financial Information Our financial statements include certain prior-year 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 ( GAAP ). Accordingly, such information should be read in conjunction with our audited consolidated financial statements for the year ended June 30, 2008, from which the summarized information was derived. Basis of Accounting Our financial statements have been prepared on the accrual basis of accounting. Basis of Presentation We report information regarding our financial position and activities according to three classes of net assets unrestricted, temporarily restricted, and permanently restricted, as follows: Unrestricted Net Assets - net assets available for use in general operations. Temporarily Restricted Net Assets - amounts subject to donor restrictions that may or will be met by expenditure or action, and/or the passage of time, and certain income earned on permanently restricted net assets that has not yet been appropriated for expenditure. Contributions restricted by donors for specific purposes, spent in satisfaction of those restrictions in the year received, are reported as unrestricted contributions in the consolidated statement of activities. Permanently Restricted Net Assets - assets whose use is limited by donor-imposed restrictions that neither expire by the passage of time nor can be fulfilled or otherwise removed solely by actions we may take. The restrictions stipulate that resources be maintained permanently but permit us to expend the income generated by those resources in accordance with the wishes of the donors. 6

10 Cash and Cash Equivalents For purposes of the statements of financial position and cash flows, we consider all highly liquid investments with original maturities of three months or less, and which are not held for long-term investment purposes, to be cash and cash equivalents. Cash and highly liquid investments held for longterm investment purposes, regardless of original length to maturity, are reported as investments and are excluded from this definition. The net amount of operating cash added to, or withdrawn from, our longterm investments is reported as an investing activity in the statement of cash flows. Investments Investment purchases are initially recorded at cost or, if contributed, at the fair values of the investment assets received at the date of contribution. Subsequent to initial acquisition, investments are reported at fair value in the statement of financial position, and unrealized gains and losses are included in the statement of activities. Net investment return consists of interest and dividend income, and the realized and unrealized gains and losses on the investments, less investment management and custodial fees. With limited exceptions, investments are managed by independent professional investment management firms. Firms are selected, monitored, and reviewed by management and the board of directors with the assistance of an independent investment advisor. Investments include cash, money market funds, U.S. Treasury and Agency securities, individual equity and debt securities, commingled mutual funds and trusts, and pooled-investment funds. Some of our investments are exposed to various risks that may cause their reported fair values to fluctuate from period to period and could result in material changes in our net assets. Investments in equity securities fluctuate in value in response to many factors, such as the activities and financial condition of individual companies, general business and industry market conditions, and the state or perceived direction of the economy. The values of debt securities fluctuate in response to changing interest rates, credit worthiness of issuers, and overall economic policies that impact market conditions. The values of alternative investments, such as hedge funds, can fluctuate in response to direct market conditions and other factors that may or may not have a high correlation to overall market direction. Certain of our investment managers are permitted to use investment strategies and techniques designed to achieve higher investment returns, reduce volatility, or decrease correlations to major market indices and other asset classes. Strategies and techniques, such as the use of leverage, futures and forward contracts, option agreements, and other derivative instruments, could increase the impact of favorable or adverse security price movements on our investments. 7

11 Accounts Receivable, Net Accounts receivable are comprised of amounts due under contracts with event sponsors, marketing agents, licensees, and broadcasters. Also included are amounts due from clubs for dues, merchandise, shortfalls of member dues, test fees or sanction fees. We use the allowance method to determine the uncollectible amounts and base our estimates on historical experience and subsequent collections. We estimated the allowance for doubtful accounts to be approximately $4,200 as of June 30, Inventory, Net We maintain limited amounts of program-related inventory consisting primarily of achievement pins, medals, emblems, team/logo apparel, and other supplies held for resale to clubs, members and athletes. Inventory is reported using the first-in-first-out method at the lower of cost or estimated fair value. Inventory at June 30, 2009 has been reduced by an allowance for obsolescence of approximately $3,700. Prepaid Expenses and Other Assets Prepaid expenses and other assets consist primarily of expenses paid and tickets purchased in advance of future skating events. Property and Equipment We capitalize all purchases or donations of property and equipment in excess of $1,000, and compute depreciation on a straight-line basis over the estimated useful lives of the assets, ranging from three to thirty-nine years. Upon sale or other disposition, the asset and its related accumulated depreciation are removed from the accounts, and any remaining gain or loss is included in the statement of activities. Costs of repairs and maintenance are charged to expense when incurred. Historical Artifacts, at Cost The Museum s historical artifacts are capitalized at original cost, or if donated, at fair value at the date the artifacts were received, and are not depreciated because the Museum intends to preserve these assets in perpetuity. Impairment of Long-Lived Assets We review asset carrying amounts whenever events or circumstances indicate that such amounts may not be recoverable. When considered impaired, the carrying amount of the asset is reduced to its estimated fair value, and the impairment loss is included in the statement of activities. There were no impairments of long-lived assets during the year or at June 30,

12 Promises to Give Restricted to Endowment, Net Unconditional promises to give expected to be collected within one year are recorded at their estimated net realizable values. Unconditional promises to give expected to be collected in more than one year are recorded at the present values of their estimated future cash flows, computed using risk-adjusted interest rates. Amortization of the discount is included in contribution revenue. Conditional promises to give are recognized when the conditions are substantially met. We anticipate full collection of outstanding promises to give at June 30, Beneficial Interest in Perpetual Trust U.S. Figure Skating is the beneficiary of an irrevocable perpetual trust. The beneficial interest in the trust is reported at its estimated fair value in the statement of financial position. Distributions from the trust, and unrealized gains and losses, are included in the statement of activities. Endowment Composition of Endowment As required by GAAP, net assets associated with endowment funds, including funds designated by the board of directors to function as endowment, if any (collectively Endowment ), are classified and reported based on the existence or absence of donor-imposed restrictions. Because the board of directors has not designated any unrestricted net assets to function as endowment, our Endowment includes only donor-restricted funds totaling $326,670 at June 30, The earnings of these funds have been restricted by the donors for specific purposes (Note 8.) Interpretation of Relevant Law The board of directors has interpreted the Colorado Uniform Prudent Management of Institutional Funds Act ( 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. At June 30, 2009, there were no contrary donor stipulations. As a result of this interpretation, we classify as permanently restricted net assets (a) the original value of gifts donated to the Endowment, (b) the original value of subsequent gifts donated to the Endowment, and (c) accumulations to the Endowment made in accordance with the direction of the applicable donor gift instrument at the time the accumulation is added to the fund. The remaining portion of the donor-restricted Endowment that is not classified as permanently restricted net assets is classified as temporarily restricted net assets until those amounts are appropriated for expenditure in a manner consistent with the standard of prudence prescribed by UPMIFA. In 9

13 accordance with UPMIFA, we consider the following factors in making a determination to appropriate or accumulate donor-restricted endowment funds: 1. The duration and preservation of the fund 2. The purposes of the organization and the donor-restricted endowment fund 3. General economic conditions 4. The possible effect of inflation and deflation 5. The expected total return from income and the appreciation of investments 6. Other resources of the organization 7. The investment policies of the organization. Return Objectives and Risk Parameters We have adopted investment and spending policies for Endowment assets that attempt to provide a predictable stream of funding to programs supported by the Endowment while seeking to preserve the original fair values of the Endowment s assets. Under this policy, as approved by the board of directors, Endowment assets are invested primarily in equity and debt securities in a manner designed to achieve a low-to-moderate level of investment risk. Endowment investments, over full market cycles, are expected to produce results that equal or exceed the price and yield results of comparable market indices or other appropriate management style indices. Actual returns in any given year will likely vary from this amount. Strategies Employed for Achieving Objectives To satisfy our long-term rate-of-return objectives, we utilize a total-return strategy in which investment returns are achieved through both capital appreciation (realized and unrealized) and current yield (interest and dividends). We target a diversified asset allocation that places a greater emphasis on equity-based investments to achieve our long-term return objectives within prudent risk constraints. Spending Policy and Relation to Investment Objectives We follow a policy that considers the long-term expected return on the Endowment, and appropriate for distribution each year only so much of the accumulated earnings in excess of the permanently restricted net assets of the Endowment as we anticipate spending on donor-specified purposes. Accordingly, over the long term, we expect the current spending policy to preserve the permanently restricted net assets of the Endowment. This is consistent with our objective to preserve the original fair values of the endowment assets as well as to provide an opportunity for real growth through capital appreciation and new gifts. 10

14 Revenue Recognition Contributions are recognized when an unconditional promise to give is received. Dues, publications, and other period-related revenues are recognized in the period to which they relate. Admissions, activity fees, broadcasting and licensing revenues, and skating-event and sponsorship revenues are recognized when the related event or use occurs. Donated Services and Materials Many individuals volunteer their time and perform a variety of tasks that assist our clubs, members, and athletes. Although the value of these services is significant, it is not recorded in the financial statements because the recognition criteria established by GAAP are not met. Donated professional services are recorded at the respective fair values of the services received. Donated property and supplies are recorded at fair value at the date of donation. Expenses Expenses are recognized in the period incurred. Expenses paid in advance, but not yet incurred, are deferred to the applicable period. Functional Allocation of Expenses The costs of conducting our programs and supporting-services 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. Use of Estimates The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of support, revenue, expenses, and distributions during the reporting period. Actual results could differ from those estimates, and those differences could be material. Financial Instruments and Credit Risk We manage deposit concentration risk by placing our cash, bank money market accounts, and money market mutual funds with various local, regional, and national financial institutions. From time to time, portions of our cash or money market account balances may exceed FDIC or other insurance limits; cash held in money market mutual funds is not insured. We have experienced no losses in these accounts. 11

15 Our investments in securities are made primarily by professional investment management firms, and are monitored by management and the investment committee of the board of directors. Though the market values of investments are subject to fluctuation on a year-to-year basis, management and the investment committee believe that the investment policy is prudent for the long-term welfare of U.S. Figure Skating. Fair Value Measurements On July 1, 2008 we adopted the provisions of FASB SFAS No. 157, Fair Value Measurements, and SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities,. SFAS No. 157 requires no new fair value measurements. However, it establishes a common definition of fair value to be applied with all existing GAAP requiring use of fair value. It also establishes a framework for measuring fair value, and expands disclosures about fair value measurements. SFAS No. 157 defines fair value as the price that would be received to sell an asset or paid to transfer a liability (i.e., the exit price ) in an orderly transaction between market participants at the measurement date. Fair value is a market-based measure considered from the perspective of a market participant who holds the asset or owes the liability rather than an entity-specific measure. Therefore, even when market assumptions are not readily available, we establish our own assumptions to reflect those we believe would be used by market participants in pricing the asset or liability at the measurement date. SFAS No. 157 establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the observable inputs be used when available. Observable inputs are inputs that market participants would use in pricing the asset developed based on market data obtained from sources independent of U.S. Figure Skating. Unobservable inputs are inputs that reflect our own assumptions about the assumptions market participants would use in pricing the asset developed based on the best information available in the circumstances. The hierarchy is broken down into three levels based on the reliability of inputs as follows: Level 1 Defined as observable inputs such as quoted prices in active markets for identical assets or liabilities. Level 2 Defined as observable inputs other than Level 1 prices. These include quoted prices for similar assets or liabilities in an active market, quoted prices for identical assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. 12

16 Level 3 Defined as unobservable inputs for which little or no market data exists, therefore requiring an entity to develop its own assumptions about the assumptions that market participants would use in pricing the asset or liability, including assumptions about risk. See Note 2 for further information about the financial assets and liabilities we report at fair value. SFAS No. 159 permits entities to choose, at specified election dates, to measure non-financial assets and liabilities at fair value (the fair value option ), and requires an entity to report in the statement of activities at each subsequent reporting date those unrealized gains and losses on items for which the fair value option has been elected. Upfront costs and fees related to items for which the fair value option has been elected are recognized currently in the statement of activities and are not deferred. Upon adoption of SFAS No. 159, we did not elect to measure any eligible items at fair value. Election to Defer Application of FIN 48 We have elected to defer the application of FASB Interpretation No. 48, Accounting for Uncertain Tax Positions ( FIN 48 ), in accordance with FASB Staff Position ( FSP ) FIN FIN 48 interprets FASB SFAS No. 109, Accounting for Income Taxes, and replaces SFAS No. 5, Accounting for Contingencies, with respect to the accounting for all tax positions taken (or expected to be taken) on any income tax return. FIN 48 applies to all open tax periods in all tax jurisdictions in which we are required to file an income tax return. We anticipate that no cumulative effect adjustment will be necessary upon adoption of FIN 48, and believe that no uncertain tax positions have been taken or are expected to be taken that could have a material effect on our income tax liabilities. We believe that our operations have been conducted in accordance with our tax-exempt status, and that our tax-exempt status has been properly maintained. We will continue to follow SFAS 5, Accounting for Contingencies, until we adopt FIN 48. Reclassifications Certain accounts in the 2008 financial statements have been reclassified for comparative purposes to conform to the current year financial statement presentation. 13

17 1. INCOME TAXES U.S. and U.S. Figure Skating Foundation are exempt from federal income taxes under Section 501(c)(3) of the Internal Revenue Code, and qualify for the charitable contribution deduction under Sections 170(b)(1)(A)(vi) and (viii), respectively. Pursuant to Sections 509(a)(1) and (3), respectively, the organizations have been determined not to be private foundations. 20 First Street Properties, which has no operating activities, is exempt from federal income taxes under Section 501(c)(2). IceNetwork LLC is a disregarded entity for income tax purposes, and is included and reported as a part of the Association s activities. Income from activities not directly related to tax-exempt purposes is subject to taxation as unrelated business income. During the year ended June 30, 2009, no unrelated business income taxes were incurred or paid. 2. FAIR VALUE DISCLOSURES Assets measured at fair value on a recurring basis have been categorized based upon a fair value hierarchy as of: June 30, 2009 Quoted Prices in Description Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Balance as of June 30, 2009 Investments Cash and money market funds (1) $ 7,675,343 $ - $ - $ 7,675,343 U.S. Treasury securities (2) 2,809, ,809,108 Corporate bonds and bond mutual funds (2) 13,398, ,398,169 Domestic equities and equity mutual funds (2) 16,518, ,518,154 Foreign equities and equity mutual funds (2) 5,451, ,451,611 Pooled investments: U.S. Olympic Foundation (3) - - 8,960,236 8,960,236 Real estate investment trust (2) 969, ,962 Fund of hedge funds (4) - - 1,245,768 1,245,768 $ 46,822,347 $ - $ 10,206,004 $ 57,028,351 Beneficial interest in charitable trust (5) $ - $ - $ 101,207 $ 101,207 14

18 2. FAIR VALUE DISCLOSURES (CONTINUED) Investments are reported in the consolidated statement of financial position based on the existence or absence of donor-imposed restrictions as follows at: June 30, 2009 Investments: Unrestricted $ 56,934,595 Restricted to endowment 93,756 $ 57,028,351 (1) (2) (3) (4) (5) The fair values of cash and money market funds are equal to the sum of the account balances. The fair values of direct investments in debt and equity securities, and investments in exchangetraded investment funds or open-ended mutual funds are based upon quoted market prices for identical securities in active markets, and published redemption values at the close of business at June 30, 2009, respectively. Certain of our investments are held in a pooled investment fund sponsored and managed by the United States Olympic Foundation ( USOF ). The USOF invests on behalf of the United States Olympic Committee ( USOC ) and national sports organizations recognized by the USOC. The USOF maintains a broadly diversified portfolio, and provides audited financial statements to the organizations on whose behalf it invests. We review the audit report and prepare an investment roll-forward from the date of the financial statements (December 31) to our year end (June 30), and compare the results reported by the USOF to appropriate benchmarks for the various categories of investments in the pooled investment fund. We hold an investment in a fund-of-funds managed by a large investment management firm. The fund-of-funds invests in other funds, including funds-of-funds, to create a portfolio of funds having widely diversified investment strategies. The funds have varying degrees of transparency into their underlying holdings, and the investment management firm reports fair value information accumulated from the various fund managers. Performance results are monitored by the investment management firm and compared to benchmarks selected to help evaluate an individual strategy or the skill of an individual manager compared to similar managers. See Note 5. 15

19 2. FAIR VALUE DISCLOSURES (CONTINUED) Below is a reconciliation of the beginning and ending balance of assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the year ended: June 30, 2009 Fair Value Measurements Using Significant Unobservable Inputs (Level 3) Beneficial Interest in Perpetual Investments Trust Beginning balance $ 13,501,699 $ 122,337 Distributions (685,177) (1,271) Net realized and unrealized (loss) included in the statement of activities (2,610,518) (19,859) Ending balance $ 10,206,004 $ 101,207 (Loss) included in the statement of activities attributable to the change in unrealized (loss) relating to assets still held at June 30, 2009 $ (2,610,518) $ (19,859) 3. NET INVESTMENT LOSS Net investment loss was composed of the following for the year ended: Temporarily Permanently June 30, 2009 Unrestricted Restricted Restricted Total Dividend and interest income $ 1,920,066 $ 7,190 $ - $ 1,927,256 Net realized and unrealized loss (12,669,180) (27,576) (21,130) (12,717,886) Investment management and custodial fees (175,733) - - (175,733) $ (10,924,847) $ (20,386) $ (21,130) $ (10,966,363) 16

20 4. PROPERTY AND EQUIPMENT Property and equipment consisted of the following at: June 30, 2009 Land $ 237,963 Building 2,509,469 Equipment 2,525,126 5,272,558 Accumulated depreciation (3,881,304) 5. BENEFICIAL INTEREST IN PERPETUAL TRUST $ 1,391,254 We are the beneficiary of an irrevocable perpetual trust ( Trust ) administered by a bank. We receive periodic distribution of Trust net income; however, we will never receive the assets of the Trust. Distributions of Trust net income must be used to purchase appropriate trophies for first, second, and third-place winners in various figure skating events. At June 30, 2009, we estimated the fair value of the assets held by the Trust to be $101,207 based on quoted prices in active markets for identical securities. During the year ended June 30, 2009, we received distributions of $1,271 from the trust. 6. LEASE OBLIGATION We lease printing and copying equipment under a non-cancelable operating lease that expires in May Future minimum lease payments are due as follows during the years ending: June 30, 2010 $ 33, , , , ,583 Total $ 159,983 Lease expense was $46,536 for the year ended June 30,

21 7. RESTRICTIONS ON NET ASSETS Board-Designated Net Assets At June 30, 2009 unrestricted net assets designated by the board of directors for the support of skaters and for reserves were $6,014,412 and $52,744,248, respectively. Temporarily Restricted Net Assets Temporarily restricted net assets consist of contributions restricted by donors for particular purposes as follows at: June 30, 2009 Club activities $ 96,594 Museum operations 41,062 $ 137,656 Temporarily restricted net assets of $20,791 were released from restriction during the year ended June 30, 2009 because they were expended in accordance with donor restrictions that they be used for club activities. Permanently Restricted Net Assets Permanently restricted net assets of $427,877 consist of endowment fund assets to be held in perpetuity and the beneficial interest in perpetual trust. Interest earned on permanently restricted net assets may be appropriated for expenditure in satisfaction of donor-specified purposes and in accordance with the trust agreement. 8. ENDOWMENT The endowment is composed of donor-restricted contributions and the amount of unrestricted net assets designated for endowment by the board of directors from time to time (none at present). Earnings arising from permanently restricted funds are temporarily restricted until appropriated for expenditure. Earnings arising from board-designated funds are unrestricted. The endowment was allocated among the following net asset classifications at: June 30, 2009 Unrestricted Temporarily Restricted Permanently Restricted Total Donor-restricted for permanent operating endowment $ (27,576) $ - $ 326,670 $ 299,094 18

22 8. ENDOWMENT (CONTINUED) Changes in endowment net assets were as follows for the year ended: June 30, 2009 Unrestricted Temporarily Restricted Permanently Restricted Total Endowment net assets, beginning of year $ - $ - $ 121,332 $ 121,332 Investment return: Investment income - 6,897-6,897 Net loss realized and unrealized - (27,576) - (27,576) Total investment return - (20,679) - (20,679) Contributions , ,338 Distributions - (6,897) - (6,897) Other changes: Reclassification of deficiency in original fair value of permanently restricted net assets over current fair value (27,576) 27, Endowment net assets, end of year $ (27,576) $ - $ 326,670 $ 299,094 Funds with Deficiencies From time to time, the fair value of permanently restricted endowments may fall below their original fair values, the amounts UPMIFA requires us to retain as funds of perpetual duration. In accordance with GAAP, a deficiency at June 30, 2009 has been reported in unrestricted net assets in the amount of $27,576. The deficiency resulted from unfavorable market fluctuations that occurred during the year ended June 30, RETIREMENT PLAN We sponsor a tax-deferred retirement plan ( Plan ) for our employees pursuant to Section 403(b) of the Internal Revenue Code. All employees are immediately eligible to make pre-tax contributions in which they are immediately vested. After completing three months of service, we match employee pre-tax contributions at levels established by the plan. These contributions also are immediately vested. In addition, we may, but are not required to make additional employer discretionary contributions. These contributions are vested over three years at the rate of one-third per year. During the year ended June 30, 2009, we contributed $70,395 in matching and employer discretionary contributions to the Plan. 19

23 10. COMMITMENTS AND CONTINGENCIES In the normal course of conducting our events and activities, we enter into a variety of contracts that may include revenue and expense sharing agreements, guarantees, limitations reimbursement arrangements, and other terms and conditions that entitle or obligate us to receive income or incur expenses in future periods. 11. SUBSEQUENT EVENTS We have evaluated subsequent events through November 2, 2009, which is the date the financial statements were issued. 20

24 Supplemental Material

25 Independent Auditors' Report on Supplemental Material Board of Directors United States Our audit of the basic consolidated financial statements included in the preceding section of this report was performed for the purpose of forming an opinion on those statements taken as a whole. The supplemental material presented in the following section of this report is presented for purposes of additional analysis and is not a required part of the basic consolidated financial statements. Such information has been subjected to the auditing procedures applied in the audits of the basic consolidated financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic consolidated financial statements taken as a whole. November 2, 2009

26 Schedule 1 United States Statement of Financial Position Information June 30, 2009 USFS Association USFS Foundation Eliminations Total Assets Cash and cash equivalents $ 2,877,786 $ 3,979 $ - $ 2,881,765 Investments 7,602,563 49,332,032-56,934,595 Accounts receivable, net 991,952 - (26,650) 965,302 Inventory, net 106, ,573 Prepaid expenses and other assets 259, ,279 Property and equipment, net 1,391, ,391,254 Historical artifacts, at cost 688, ,261 Promises to give restricted to endowment, net 205, ,338 Investments restricted to endowment 93, ,756 Beneficial interest in perpetual trust 101, ,207 Total assets $ 14,317,969 $ 49,336,011 $ (26,650) $ 63,627,330 Liabilities and Net Assets Accounts payable and accrued expenses $ 1,021,094 $ 53,964 $ (26,650) $ 1,048,408 Deferred revenue 1,175, ,175,214 Total liabilities 2,196,308 53,964 (26,650) 2,223,622 Commitments and Contingencies Net assets Unrestricted: Board-designated for reserves 8,813,326 43,930,922-52,744,248 Board-designated for skaters 663,287 5,351,125-6,014,412 Invested in property and equipment and historical artifacts 2,079, ,079,515 11,556,128 49,282,047-60,838,175 Temporarily restricted 137, ,656 Permanently restricted 427, ,877 Total net assets 12,121,661 49,282,047-61,403,708 Total liabilities and net assets $ 14,317,969 $ 49,336,011 $ (26,650) $ 63,627,330 See accompanying independent auditors report on supplemental material. 22

27 Schedule 2 United States Statement of Activities Information Year Ended June 30, 2009 Support, revenue and gains USFS Association USFS Foundation Eliminations Total Dues, admissions, and activity fees $ 4,032,660 $ - $ - $ 4,032,660 Skating events and sponsorships 5,651, ,651,739 Broadcasting and licensing 1,883, ,883,179 Publications 303, ,954 Contributions 1,280,341 - (738,734) 541,607 USOC and PSA grants 856, ,100 Net investment (loss) return 124,545 (11,090,908) - (10,966,363) Total support, revenue and gains 14,132,518 (11,090,908) (738,734) 2,302,876 Expenses and losses Program services Membership activities and services 2,018, ,018,196 Development and support of athletes 4,017, ,017,798 Skating events 5,347, ,347,138 Governance and judging 484, ,559 Publications 415, ,132 Total program services 12,282, ,282,823 Supporting services: Management and general 1,820,222 33,207-1,853,429 Donor development 706, ,247 Support provided to USFS Association - 738,734 (738,734) - Total supporting services 2,526, ,941 (738,734) 2,559,676 Total expenses 14,809, ,941 (738,734) 14,842,499 Change in net assets (676,774) (11,862,849) - (12,539,623) Net assets, beginning of year 12,798,435 61,144,896-73,943,331 Net assets, end of year $ 12,121,661 $ 49,282,047 $ - $ 61,403,708 See accompanying independent auditors report on supplemental material. 23