The Volunteers in Medicine Clinic

Transcription

1 Financial Statements Years Ended June 30, 2015 and 2014

2 Table of Contents Independent Auditors Report... 1 Financial Statements: Statements of Financial Position... 2 Statements of Activities and Changes in Net Assets... 3 Statements of Functional Expenses Statements of Cash Flows

3 Independent Auditors Report Board of Directors of The Volunteers In Medicine Clinic Hilton Head, South Carolina We have audited the accompanying financial statements of The Volunteers in Medicine Clinic (the Clinic ), which comprise the statements of financial position as of June 30, 2015 and 2014, and the related statements of activities and changes in net assets, functional expenses, 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 these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditors Responsibility Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the 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 financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of The Volunteers in Medicine Clinic as of June 30, 2015 and 2014, and the results of its activities and its cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America. Greenville, South Carolina January 25,

4 Statements of Financial Position June 30, 2015 and 2014 ASSETS Assets: Cash and cash equivalents: Cash in deposit accounts $ 858,621 $ 334,139 Cash in brokerage accounts 292, ,376 1,150, ,515 Receivables 14,804 - Prepaid expenses 57,146 41,497 Investments 4,948,809 5,769,234 Investments held by other entity 385, ,058 Property and equipment, net 1,843,433 1,961,503 Total assets $ 8,400,075 $ 8,662,807 LIABILITIES AND NET ASSETS Liabilities: Accounts payable and accrued expenses $ 52,428 $ 75,001 Compensation and related benefits and taxes 63,019 48,459 Deposits and amounts held for others 9,335 7,015 Charitable trust liabilities - 16,841 Total liabilities 124, ,316 Net assets: Unrestricted - undesignated 1,682,019 1,624,461 Unrestricted - board designated 3,781,273 3,891,135 Temporarily restricted 1,018,111 1,206,005 Permanently restricted 1,793,890 1,793,890 Total net assets 8,275,293 8,515,491 Total liabilities and net assets $ 8,400,075 $ 8,662,807 The accompanying notes are an integral part of these financial statements. 2

5 Statements of Activities and Changes in Net Assets For the Years Ended June 30, 2015 and 2014 Support and revenues: Contributed support: Temporarily Permanently Temporarily Permanently Unrestricted Restricted Restricted Total Unrestricted Restricted Restricted Total Contributions and grants $ 970,508 $ 423,660 $ - $ 1,394,168 $ 814,709 $ 784,414 $ - $ 1,599,123 Services and materials donated 3,080, ,080,200 2,912, ,912,952 Benefit events, net 221, , , ,830 Total contributed support 4,272, ,660-4,695,879 3,946, ,414-4,730,905 Interest and dividend income, net of expenses 89,717 41, ,572 75,618 39, ,328 Realized and unrealized (losses) gains on investments (28,249) (13,178) - (41,427) 429, , ,600 Rental income 70, ,400 59, ,626 Administrative fees 256, , , ,256 Miscellaneous income 25, ,243 13, ,406 Net assets released from restrictions 640,231 (640,231) ,460 (516,460) - - Expenses: Total support and revenues 5,325,773 (187,894) - 5,137,879 5,283, ,404-5,817,121 Program services 4,745, ,745,152 4,699, ,699,501 Support services: Administrative and general 214, , , ,733 Fundraising 361, , , ,396 Building rental 56, ,988 36, ,762 Total expenses 5,378, ,378,077 5,256, ,256,392 Change in net assets (52,304) (187,894) - (240,198) 27, , ,729 Net assets at beginning of year 5,515,596 1,206,005 1,793,890 8,515,491 5,488, ,601 1,793,890 7,954,762 Net assets at end of year $ 5,463,292 $ 1,018,111 $ 1,793,890 $ 8,275,293 $ 5,515,596 $ 1,206,005 $ 1,793,890 $ 8,515,491 The accompanying notes are an integral part of these financial statements. 3

6 Statements of Functional Expenses For the Years Ended June 30, 2015 and 2014 Program Services Admin and General June 30, 2015 June 30, 2014 Fundraising Building Rental Total Program Services Admin and General Fundraising Building Rental Total Compensation and related costs: Contributed professional services $ 1,835,088 $ - $ - $ - $ 1,835,088 $ 1,721,038 $ - $ - $ - $ 1,721,038 Salaries and wages 881, , ,791-1,216, , , ,300-1,034,546 Payroll taxes 78,721 12,680 12, ,916 68,033 8,995 10,575-87,603 Contract labor 12, ,248 48,156 2,739 3,710-54,605 Employee benefits 5,176 1, ,402 4, ,001 Insurance 47,615 2, ,654 56,182 2, ,146 Education and training + travel 5, ,140-7,214 6, ,211-11,242 Recruiting and recognition 6,633 1, ,991 7, ,202-9,500 Total compensation and related costs 2,873, , ,499-3,241,059 2,707, , ,217-2,982,681 Administrative and development costs: Advertising, printing and promotional , , , ,190 Board expenses - 1,677 1,464-3, ,308-2,863 Computer repairs and software 12,328 1,666 2,481-16,475 20,159 7,249 12,523-39,931 Credit card processing fees 5, ,712 1, ,638-4,707 Copier lease and usage 8, ,855 5, ,132 Donations to other organizations General office supplies 26,500 6,031 2,287-34,818 26, ,348-30,738 Postage and delivery 3, ,463-5,389 4, ,060-8,419 Professional fees 13,903 4,683 13,891-32,477 13, ,029-14,700 Overhead Allocated to WHHI program (6,619) (6,619) Total administrative and development costs 70,848 14, , ,247 64,492 10, , ,061 4

7 Statements of Functional Expenses (continued) For the Years Ended June 30, 2015 and 2014 Program Services Admin and General June 30, 2015 June 30, 2014 Fundraising Building Rental Total Program Services Admin and General Fundraising Building Rental Total Program costs: Medical supplies and services $ 34,768 $ - $ - $ - $ 34,768 $ 36,917 $ - $ - $ - $ 36,917 Medical lab costs 115, , , ,254 Diabetes clinic 256, , , ,683 Electronic medical records 12, ,728 20, ,155 Gynocology Clinic 55, ,359 55, ,232 Hypertension clinic 442, , , ,469 Mammography clinic 54, ,411 66, ,211 Mental health clinic , ,569 Pharmacy 406, , , ,113 Pulmonary 33, ,795 42, ,796 Surgical contract services 76, , , ,960 WellnessCenter 27, ,732 24, ,348 Adult dental clinic 35, ,553 38, ,231 Pediatric dental clinic 20, ,825 17, ,308 Total program costs 1,573, ,573,614 1,661, ,661,246 Occupancy costs: Intern housing 4, ,000 15,105 14, ,996 24,396 Rent/storage 4, ,365 3,870 1, ,401 Utilities 38,423 1,146 2, ,277 32,964 8,073 3,271-44,308 Telephone and communications 8,764 1,722 1,118-11,604 9,441 1,327 1,340-12,108 Janitorial , ,229 Landscaping 8,241 1, ,017 1,353 13,979 15,409-30,741 Building repairs and maintenance 8, ,707 26,056 9, (126) 9,630 Insurance 27, ,342 9,368 40,006 25,550 (46) 2,254 9,018 36,776 Property taxes , ,162 Management fee ,747 2, ,475 2,475 Total occupancy costs: 101,700 5,033 7,853 41, ,113 99,465 24,914 23,205 21, ,226 Depreciation 125,918 1,770 4,895 15, , ,153 2,490 6,415 15, ,178 Total expenses $ 4,745,152 $ 214,104 $ 361,833 $ 56,988 $ 5,378,077 $ 4,699,501 $ 166,733 $ 353,396 $ 36,762 $ 5,256,392 The accompanying notes are an integral part of these financial statements. 5

8 Statements of Cash Flows For the Years Ended June 30, 2015 and Cash flows from operating activities: Change in net assets $ (240,198) $ 560,729 Adjustments to reconcile change in net assets to net cash (used in) provided by operating activities: Depreciation 148, ,178 Realized and unrealized losses (gains) on investments 41,427 (655,600) Restricted contributions and charitable trusts - 7,599 In-kind donations of investments (5,080) (30,216) In-kind donations of property and equipment - (17,096) Net changes in operating assets and liabilities: Receivables (14,804) 72,311 Prepaid expenses (15,649) 7,839 Accounts payable and accrued expenses (22,573) 28,560 Compensation and related benefits and taxes 14,560 14,593 Deposits and amounts held for others 2,320 (818) Net cash (used in) provided by operating activities (91,953) 179,079 Cash flows from investing activities: Sales of investments 4,100,866 1,872,834 Purchases of investments (3,291,765) (1,965,282) Purchases of property and equipment (29,974) (96,025) Net cash provided by (used in) investing activities 779,127 (188,473) Cash flows from financing activities: Payments on charitable trust liabilities (16,841) - Net cash used by financing activities (16,841) - Net increase (decrease) in cash and cash equivalents 670,333 (9,394) Cash and cash equivalents at beginning of year 480, ,909 Cash and cash equivalents at end of year $ 1,150,848 $ 480,515 Supplemental disclosure of noncash investing activities: In-kind donations of investments $ 5,080 $ 30,216 In-kind donations of property and equipment $ - $ 17,096 The accompanying notes are an integral part of these financial statements. 6

9 1. Summary of Significant Accounting Policies The Volunteers in Medicine Clinic (the Clinic ) is a not-for-profit healthcare organization, whose purpose is to serve the families of the medically indigent who live and/or work on Hilton Head and Daufuskie Islands in South Carolina. The Clinic is supported primarily by contributions and grants. Basis of Accounting The financial statements of the Clinic have been prepared utilizing the accrual basis of accounting. Income Taxes The Clinic has been recognized by the Internal Revenue Service as exempt from income taxes under IRC Section 501(c)(3) and, consequently, also is recognized as a tax exempt organization by the South Carolina Tax Commission. Accordingly, the accompanying financial statements do not reflect a provision or liability for federal and state income taxes. The Clinic determined that there are no material unrecognized tax benefits or obligations as of June 30, Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Restricted and Unrestricted Revenue and Support Contributions received are recorded as unrestricted, temporarily restricted, or permanently restricted support, depending on the existence and/or nature of any donor restrictions. 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 Statements of Activities as net assets released from restrictions. Net Assets Net assets and revenues, expenses, gains and losses are classified based on the existence or absence of donorimposed restrictions. Accordingly, net assets of the Clinic and changes therein are classified and reported as follows: Permanently Restricted Net assets subject to donor-imposed stipulations that they be maintained by the Clinic. Temporarily Restricted Net assets whose use by the Clinic is subject to donor-imposed stipulations that can be fulfilled by actions of the Clinic pursuant to those stipulations or that expire by the passage of time. 7

10 Unrestricted Net assets that are not subject to donor-imposed restrictions. Unrestricted net assets may be designated for specific purposes by the Clinic or may otherwise be limited by contractual agreements with outside parties. Cash and Cash Equivalents Cash and cash equivalents presented in the Statement of Cash Flows represent cash on hand and demand deposits at financial institutions with a maturity of three months or less when purchased. At times throughout the year, the Clinic may maintain bank balances in excess of FDIC insured limits. Donated Assets Donated marketable securities and other noncash donations are recorded as contributions at their estimated fair values at the date of donation. Donated Services and Supplies Donated services and supplies are recognized as contributions. In accordance with accounting standards, the donated services of physicians, dentists and support staff of approximately $1,835,000 and $1,721,000 for the years ended June 30, 2015 and 2014, respectively, require specialized skills and would otherwise need to be purchased by the Clinic. In addition, approximately $1,245,000 and $1,192,000 for the years ended June 30, 2015 and 2014, was recorded in the statements for specific supplies or other assets donated to the Clinic. Many individuals volunteer their time and perform a variety of tasks that assist the organization that are not recognized as contributions in the financial statements since the recognition criteria under accounting standards were not met. Assets Held By Others This asset represents permanently restricted endowment amounts transferred to Community Foundation of the Lowcountry, Inc. (the Foundation ) to be held in an irrevocable trust. Income from assets held in co-mingled funds at the Foundation is recorded when earned. At the discretion of the Clinic, 5% of the average of the fair market values of these assets held by the Foundation can be distributed to be used in operations provided the principal endowment is not distributed. Contributions to the Foundation which are for the exclusive benefit of the Clinic are recorded as investments held by other entity unless the Foundation has variance power over such assets. Variance power is the unilateral power to redirect the use of assets to an entity other than the specified beneficiary. Investments Investments consist of equity securities, mutual funds and debt securities. Investments in equity securities, mutual funds and debt securities are measured at fair value based on quoted market prices. Net realized and unrealized gains and losses on investments are reflected in the Statements of Activities. 8

11 Property and Equipment Property and equipment are recorded at cost, if purchased, or fair value at date of donation. Additions with a value of $500 or greater are capitalized and expenditures for repairs and maintenance are expensed when incurred. Depreciation is calculated primarily by use of straightline methods over the estimated useful lives of the assets, generally ranging from 3 to 25 years. Impaired assets are adjusted to realizable or other values, depending on the nature of expected future use or disposition. Reclassifications Certain 2014 revenue and expense accounts were reclassified to conform with the 2015 financial statement presentation. There was no impact on the changes in net assets as of June 30, Investments Investments were comprised of the following at June 30: Carried at fair value: Equity securities $ 2,715,521 $ 2,129,553 Mutual funds 1,491,209 2,657,852 U.S. Government and corporate bonds 742, ,829 Total investments $ 4,948,809 $ 5,769,234 Interest and dividends shown on the Statements of Activities are net of investment expenses of approximately $28,000 and $40,000 for the years ended June 30, 2015 and 2014, respectively. 3. Fair Value Measurements Fair value as defined under generally accepted accounting principles is an exit price, representing the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Generally accepted accounting principles establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include: Level 1: Observable inputs such as quoted prices in active markets. Level 2: Inputs other than quoted prices in active markets that are either directly or indirectly observable. Level 3: Unobservable inputs about which little or no market data exists, therefore requiring an entity to develop its own assumptions. Assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The Clinic s assessment of the significance of a particular input to the fair value measurement requires judgment, and may affect the valuation of fair value assets and liabilities and their placement within the fair value hierarchy levels. 9

12 Following are descriptions of the valuation methodologies used for assets measured at fair value. There have been no changes in the methodologies used at June 30, 2015 and Equity securities These investments are valued at the closing price reported on the active market on which the individual securities are traded. These are classified within Level 1 of the valuation hierarchy. Bonds These investments are valued at the closing price reported on the active market on which the individual bonds are traded. These are classified within Level 1 of the valuation hierarchy. Mutual funds These investments are public investment vehicles valued using the Net Asset Value (NAV) provided by the administrator of the fund. The NAV is based on the value of the underlining assets owned by the fund, minus its liabilities, and then divided by the number of shares outstanding. The NAV is a quoted price in an active market and classified within Level 1 of the valuation hierarchy. Investment held by other entity This asset is held in perpetual trust by an outside entity and is invested by the other entity in a co-mingled fund which utilizes multiple managers and strategies. As the Clinic does not know the precise allocation of the underlying assets on an ongoing basis, the asset is classified as Level 3 within the valuation hierarchy based on the asset s fair value as represented by the fund s management. The preceding methods described may produce a fair value calculation that may not be indicative of net realizable value or reflective of future values. Furthermore, although the Clinic believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date. 10

13 The following tables set forth by level, within the fair value hierarchy, the Clinic s assets at fair value as of June 30, 2015 and 2014: Fair Value as of June 30, 2015 Level 1 Level 2 Level 3 Total Equity securities: Consumer discretionary $ 396, $ 396,926 Consumer staples 273, ,661 Energy 267, ,303 Financials 440, ,720 Healthcare 490, ,932 Industrials 307, ,469 Information technology 412, ,969 Materials 77, ,999 Telecommunications 47, ,542 Total equity securities 2,715, ,715,521 Bonds: Corporate bonds 736, ,115 Government bonds 5, ,964 Total bonds 742, ,079 Mutual funds: Bond funds 270, ,142 Stock funds 590, ,644 International funds 630, ,423 Total mutual funds 1,491, ,491,209 Investments held by other entity , ,035 Total assets $ 4,948,809 $ - $ 385,035 $ 5,333,847 11

14 Fair Value as of June 30, 2014 Level 1 Level 2 Level 3 Total Equity securities: Consumer discretionary $ 200, $ 200,035 Consumer staples 250, ,211 Energy 339, ,418 Financials 483, ,425 Healthcare 312, ,342 Industrials 207, ,791 Information technology 236, ,232 Materials 49, ,640 Other Telecommunications 49, ,909 Total equity securities 2,129, ,129,553 Bonds: Corporate bonds 975, ,921 Government bonds 5, ,908 Total bonds 981, ,829 Mutual funds: Bond funds 630, ,807 Stock funds 1,235, ,235,853 International funds 446, ,255 Real estate funds 344, ,937 Total mutual funds 2,657, ,657,852 Investments held by other entity , ,058 Total assets $ 5,769,234 $ - $ 410,058 $ 6,179,292 The table below sets forth a summary of changes in the fair value of the Clinic s Level 3 assets for the years ended June 30, 2015 and 2014: Investments Held by Other Entity Balance, June 30, 2013 $ 371,731 Unrealized gains 57,807 Sales and distributions (19,480) Balance, June 30, ,058 Unrealized losses (3,089) Sales and distributions (21,934) Balance, June 30, 2015 $ 385,035 Total net gains (losses) for level 3 assets for the periods above are included in net realized and unrealized gains (losses) on investments in the Statement of Activities. There were no transfers in or out of Level 3 for the years ended June 30, 2015 and

15 4. Property and Equipment Property and equipment consist of the following at June 30: Land $ 781,240 $ 781,240 Buildings 1,585,674 1,569,451 Computers 272, ,259 Software 87,808 87,808 Medical furniture, fixtures and equipment 503, ,350 Office furniture, fixtures and equipment 482, ,948 Total costs 3,713,030 3,683,056 Accumulated depreciation (1,869,597) (1,721,553) Net property and equipment $ 1,843,433 $ 1,961, Net Assets Unrestricted net assets have been designated for the following purposes by the Board of the Clinic at June 30: Board endowed funds $ 3,754,305 $ 3,845,295 McConnell fund 26,968 45,840 Total Board designated funds 3,781,273 3,891,135 Undesignated 1,682,019 1,624,461 Total $ 5,463,292 $ 5,515,596 The Clinic has received various contributions which were restricted as to use. Temporarily restricted net assets are available for the following purposes at June 30: Adult dental clinic $ - $ 18,989 Electronic medical records - 22,878 Healing spaces 15,916 23,773 Mammography clinic 48, ,586 Other restricted programs 28,555 17,500 Surgical program 93,857 37,500 Wellness center 207, ,918 Endowment available for appropriations 624, ,861 Total temporarily restricted net assets $ 1,018,111 $ 1,206,005 13

16 6. Endowment Funds The Clinic s endowment campaign was organized to provide for the long term financial stability of the Clinic. The Clinic's endowment funds include both donor-restricted endowment funds classified as permanently restricted, and funds designated by the Board of Directors to function as endowments. The purpose of these endowment funds is to provide long term growth while protecting capital and controlling risk. As required by generally accepted accounting principles in the United States of America, 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 donor-imposed restrictions. Interpretation of Relevant Law The Board of Directors of the Clinic has interpreted the South Carolina Uniform Prudent Management of Institutional Funds Act (the Act) 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, the Clinic has classified 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 the applicable donor gift instrument at the time the accumulated 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 expenditure by the Clinic in a manner consistent with the standard of prudence prescribed by the Act. In accordance with the Act, the Clinic considers 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) The investment policies of the Clinic 14

17 The following presents donor-restricted endowment net asset composition by type of fund as of June 30, 2015: Unrestricted Board Designated Temporarily Restricted Permanently Restricted Donor-restricted endowment funds $ - $ 624,413 $ 1,793,890 $ 2,418,303 Board-designated endowment funds 3,754, ,754,305 Total funds $ 3,754,305 $ 624,413 $ 1,793,890 $ 6,172,608 Changes in endowment net asset for the year ended June 30, 2015 are as follows: Total Unrestricted Board Designated Temporarily Restricted Permanently Restricted Total Endowment net assets, June 30, 2014 $ 3,845,295 $ 666,861 $ 1,793,890 $ 6,306,046 Investment income, net 89,717 41, ,572 Net realized and unrealized investment losses (28,249) (13,178) - (41,427) Appropriation of assets for expenditure (152,458) (71,125) - (223,583) Endowment net assets, June 30, 2015 $ 3,754,305 $ 624,413 $ 1,793,890 $ 6,172,608 The following presents donor-restricted endowment net asset composition by type of fund as of June 30, 2014: Unrestricted Board Designated Temporarily Restricted Permanently Restricted Total Donor-restricted endowment funds $ - $ 666,861 $ 1,793,890 $ 2,460,751 Board-designated endowment funds 3,845, ,845,295 Total funds $ 3,845,295 $ 666,861 $ 1,793,890 $ 6,306,046 Changes in endowment net asset for the year ended June 30, 2014 are as follows: Unrestricted Board Designated Temporarily Restricted Permanently Restricted Total Endowment net assets, June 30, 2013 $ 3,415,969 $ 441,401 $ 1,793,890 $ 5,651,260 Investment income, net 75,618 39, ,328 Net realized and unrealized investment gains 429, , ,600 Appropriation of assets for expenditure (76,152) (39,990) - (116,142) Endowment net assets, June 30, 2014 $ 3,845,295 $ 666,861 $ 1,793,890 $ 6,306,046 15

18 Return Objectives and Risk Parameters The Clinic has adopted investment and spending policies for endowment assets that are intended to provide an ongoing stream of funding to programs supported by the endowment. Endowment assets include assets of donor-restricted funds that the organization must hold in perpetuity as well as board-designated funds. Under this policy, as approved by the Board, the endowment assets are invested in a manner that is intended to produce a high level of total investment return consistent with a prudent level of portfolio risk. The Clinic expects its endowment funds, over time, to provide an average rate of return of approximately 4.5% percent annually. Actual returns in any given year may vary from this amount. Strategies Employed for Achieving Objectives To satisfy its long-term rate-of-return objectives, the Clinic 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 Clinic targets a diversified asset allocation that places a greater emphasis on equity-based investments to achieve its long-term return objectives within prudent risk constraints. Spending Policy and How the Investment Objectives Related to the Spending Policy The Clinic s policy is to appropriate for distribution each year up to 4.5% percent of its endowment fund's average fair value over the prior 12 quarters through the calendar year-end preceding the fiscal year in which the distribution is planned. In establishing this policy, the Clinic considered the longterm expected return on its endowment. Accordingly, over the long term, the Clinic expects the current spending policy to allow its endowment to grow at an average of 1.5% percent annually. This is consistent with the Clinic 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. 7. Rental Income The Clinic has non-cancelable lease agreements for the rental of a portion of the Clinic s facilities. The lease income is approximately $4,600 per month through fiscal year As of June 30, 2015, the total cost and accumulated depreciation of the facility and improvements which a portion is leased is approximately $1,184,000 and $358,000, respectively. As of June 30, 2014, the total cost and accumulated depreciation of the facility and improvements which a portion is leased is approximately $1,171,000 and $325,000, respectively. The lease income under this lease was approximately $54,000 and $56,000 for the years ended June 30, 2015 and 2014, respectively. Future minimum lease income under these leases is as follows: 2016 $ 36, , , Subsequent Events $ 51,599 On August 12, 2015, the Clinic signed a contract to purchase information technology equipment for approximately $132,000. The Clinic expects to fund this project through various grants. The Clinic evaluated the effect subsequent events would have on the financial statements through January 25, 2016, which is the date the financial statements were available to be issued. 16