Trout Unlimited, Inc. Financial Report September 30, 2015

Transcription

1 Financial Report September 30, 2015

2 Contents Independent auditor s report 1-2 Financial statements Balance sheets 3 Statements of activities 4 Statements of changes in net assets 5 Statements of cash flows 6 Notes to financial statements 7-19

3 Independent Auditor s Report To the Board of Trustees Trout Unlimited, Inc. Arlington, Virginia Report on the Financial Statements We have audited the accompanying financial statements of Trout Unlimited, Inc. (TU) which comprise the balance sheets as of September 30, 2015 and 2014, and the related statements of activities, changes in net assets 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. Auditor s 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 and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. 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 auditor s 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. 1

4 Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Trout Unlimited, Inc. as of September 30, 2015 and 2014, 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. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our reports dated April 6, 2016, and February 24, 2015, on our consideration of TU s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements and other matters. The purpose of these reports is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. These reports are an integral part of an audit performed in accordance with Government Auditing Standards in considering TU s internal control over financial reporting and compliance. McLean, Virginia April 6,

5 Balance Sheets September 30, 2015 and 2014 Assets Current assets: Cash operating (Note 1) $ 1,692,013 $ 153,730 Cash The Stewardship Fund (Note 1) 30, ,147 Receivables, net (Note 2) 7,621,092 7,653,791 Promises to give (Note 1) 2,152, ,928 Prepaid and other assets 969, ,156 Total current assets 12,464,990 10,548,752 Investments (Note 3) 12,085,235 12,417,419 Property and equipment, net (Note 4) 2,871,143 2,875,620 $ 27,421,368 $ 25,841,791 Liabilities and Net Assets Current liabilities: Accounts payable and accrued expenses $ 6,124,733 $ 3,771,248 Line of credit (Note 5) 2,000,000 - Refundable advances federal grants 120,658 34,939 Total current liabilities 8,245,391 3,806,187 Commitments and contingencies (Note 10) Net assets: Unrestricted (Note 1) 352,221 1,822,396 Temporarily restricted (Note 7) 12,748,728 13,950,807 Permanently restricted (Note 8) 6,075,028 6,262,401 19,175,977 22,035,604 See notes to financial statements. $ 27,421,368 $ 25,841,791 3

6 Statements of Activities Years Ended September 30, 2015 and Change in unrestricted net assets: Revenue and support: Grants and other contributions $ 12,134,344 $ 11,254,365 Membership contributions 4,671,334 4,620,187 Events revenue 778, ,538 Investment (losses) gains (22,175) 150,543 Other income 222, ,920 Net assets released from restrictions 29,671,956 26,479,688 Total revenue and support 47,456,798 43,310,241 Expenses: Program services: Conservation operations 34,985,489 31,249,791 Volunteer operations and chapter support 5,273,151 5,267,053 Communications 2,589,611 1,773,366 Government affairs 741, ,094 Total program services 43,589,920 38,853,304 Supporting services: Fundraising 3,598,985 3,313,074 Administration 1,738,068 1,582,499 Total supporting services 5,337,053 4,895,573 Total expenses 48,926,973 43,748,877 Change in unrestricted net assets (1,470,175) (438,636) Change in temporarily restricted net assets: Contributions 27,202,632 24,129,307 Landowner projects 1,285,850 1,031,443 Investment (losses) gains (240,242) 742,381 Events revenue 34,264 30,910 Net assets released from restrictions (29,484,583) (26,479,688) Change in temporarily restricted net assets (1,202,079) (545,647) Change in permanently restricted net assets: Contributions - 92,555 Net assets released from restrictions (187,373) - (187,373) 92,555 Change in net assets (2,859,627) (891,728) Net assets: Beginning 22,035,604 22,927,332 Ending $ 19,175,977 $ 22,035,604 See notes to financial statements. 4

7 Statements of Changes in Net Assets Years Ended September 30, 2015 and 2014 Unrestricted Temporarily Permanently Undesignated Designated Total Restricted Restricted Total Net assets, September 30, 2013 $ 250,593 $ 2,010,439 $ 2,261,032 $ 14,496,454 $ 6,169,846 $ 22,927,332 Change in net assets (438,636) - (438,636) (545,647) 92,555 (891,728) Net assets, September 30, 2014 (188,043) 2,010,439 1,822,396 13,950,807 6,262,401 22,035,604 Change in net assets (1,470,175) - (1,470,175) (1,202,079) (187,373) (2,859,627) Net assets, September 30, 2015 $ (1,658,218) $ 2,010,439 $ 352,221 $ 12,748,728 $ 6,075,028 $ 19,175,977 See notes to financial statements. 5

8 Statements of Cash Flows Years Ended September 30, 2015 and Cash flows from operating activities: Change in net assets $ (2,859,627) $ (891,728) Adjustments to reconcile change in net assets to net cash used in operating activities: Depreciation 935, ,804 (Gain) loss on disposal of property and equipment - 7,603 Unrealized and realized losses (gains) on investments, net 264,262 (885,901) Contribution permanently restricted 187,373 (92,555) (Increase) decrease in: Receivables 32, ,871 Promises to give (1,172,382) 4,203 Prepaid and other assets (88,256) 86,540 Increase (decrease) in: Accounts payable and accrued expenses 2,353, ,678 Refundable advances federal grants 85,719 (11,510) Net cash used in operating activities (261,285) (113,995) Cash flows from investing activities: Proceeds from sales of investments 2,728, ,977 Purchases of investments (2,660,742) (647,343) Purchases of property and equipment (930,965) (1,194,834) Net cash used in investing activities (863,043) (1,409,200) Cash flows from financing activities: Principal payments on line of credit (500,000) - Draw downs on line of credit 2,500,000 - Contribution permanently restricted (187,373) 92,555 Net cash provided by financing activities 1,812,627 92,555 Net increase (decrease) in cash 688,299 (1,430,640) Cash operating and the Stewardship Fund Beginning 1,033,877 2,464,517 Ending $ 1,722,176 $ 1,033,877 See notes to financial statements. 6

9 Note 1. Nature of Activities and Significant Accounting Policies Nature of activities: Trout Unlimited, Inc. (TU) protects, reconnects and restores North America s trout and salmon and their watersheds. TU is a not-for-profit organization with approximately 140,000 members and supporters in over 400 chapters and councils nationwide. TU also receives government grants that are subject to audit by its oversight agency (largest government funder), the U.S. Department of Interior. The following program and supporting services are included in the accompanying statements of activities: Conservation operations: Conservation operations include TU s network of regional offices that conduct regionally-based conservation initiatives. The top three programs in terms of total expenses for the years ended September 30, 2015 and 2014, are as follows: Western Water Strives to ensure that coldwater streams in the West have flows sufficient for the survival of trout and other wildlife. Total expenses: $11,688,260 and $7,068,392, respectively. Sportsman s Conservation Project Organizes the 50 million Americans who hunt and fish to conserve, protect and restore America s publicly-owned landscapes. Total expenses: $2,877,046 and $2,490,034, respectively. North Coast Coho Restoration A regional fisheries restoration program that focuses on improving habitat and populations of endangered Coho salmon and threatened steelhead trout along the north coast of California. Total expenses: $1,088,921 and $2,372,669, respectively. Volunteer operations and chapter support: Volunteer operations is the department responsible for coordinating the activities of chapter operations; providing leadership training and guidance to state councils; and identifying, assessing and responding to the needs of the various states volunteer conservation efforts. This department also provides support to the individual members and chapters. This support takes the form of member/chapter database maintenance, providing mailing labels, providing rosters, fulfilling premiums and supporting chapter and council leaders in performing their duties. Communications: The communications department is responsible for educating the public on the importance of trout and salmon watershed conservation. It publishes the quarterly TROUT magazine, the monthly Lines to Leaders newsletter and TU s annual report. The communications department is also responsible for other publications, maintaining TU s website, generating press releases, conducting press conferences and other public relations. Government affairs: Government affairs deals with legislative and regulatory affairs on both the federal and state levels. During the years ended September 30, 2015 and 2014, efforts to safeguard trout and salmon from climate change impacts and to reduce the negative effects of energy development on trout habitat were areas of focus for the government affairs department. The department also worked to build support for the National Fish Habitat Action Plan and appropriations for trout and salmon programs. Fundraising: This supporting service category includes expenditures that provide the structure necessary to encourage and secure private financial support. Administration: This supporting service category includes the functions necessary to secure the proper administrative functioning of TU s governing board, maintain an appropriate working environment and manage the financial responsibilities of TU. 7

10 Note 1. Nature of Activities and Significant Accounting Policies (Continued) A summary of TU s significant accounting policies follows: Basis of accounting: The accompanying financial statements are presented in accordance with the accrual basis of accounting, whereby revenue is recognized when earned, unconditional support is recognized when received, and expenses are recognized when incurred. Basis of presentation: The financial statement presentation follows the recommendations of the Financial Accounting Standards Board Accounting Standards Codification (the Codification). As required by the Not-for-Profit Entities topics of the Codification, Balance Sheet and Income Statement, TU 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. The Stewardship Fund: The Stewardship Fund consists of cash donated by a third party to use on watershed restoration projects. This fund had a balance of $30,163 and $880,147 at September 30, 2015 and 2014, respectively. Financial risk: TU maintains its cash in bank accounts which, at times, may exceed federally insured limits. TU has not experienced any losses on such accounts and believes it is not exposed to any significant credit risk on cash. Cash held in the investment portfolio is reported with investments. Receivables: Receivables are carried at original invoice amount less an estimate made for doubtful receivables based on a review of all outstanding amounts on a quarterly basis. Management determines the allowance for doubtful accounts by identifying troubled accounts and by using the historical experience applied to an aging of accounts. Receivables are allowed for and recorded as bad debt expense when deemed doubtful of collection, and written off when deemed uncollectible. Recoveries of receivables previously written off are recorded when received. Provision for doubtful accounts was $2,282 at September 30, 2015 and All receivables are expected to be collected in the year ending September 30, Promises to give: Unconditional promises to give are recognized as support or gains in the period acknowledged. Conditional promises to give are only recognized when the conditions on which they depend are substantially met. Unconditional promises to give are initially recorded at fair value less an estimate made for doubtful promises based on a review of all outstanding promises on a quarterly basis. Management determines the allowance for doubtful promises by using the historical experience applied to an aging of promises. Promises are written off when deemed uncollectible. There was no provision for doubtful promises based on management s evaluation of the collection of promises at September 30, 2015 and All promises are expected to be collected in the year ending September 30, Investments: Investments are reflected at fair value, which is based on quoted market rates. To adjust the carrying value of investments, unrealized and realized gains and losses are included in the accompanying statements of activities as part of investment (losses) gains. TU invests in a professionally managed portfolio that contains fixed income and equity mutual funds and money market funds. Such investments are exposed to various risks such as interest, market, and credit. Due to the level of risk associated with such investments and the level of uncertainty related to changes in the value of such investments, it is at least reasonably possible that changes in risks in the near term could materially affect investment balances and the amounts reported in the financial statements. 8

11 Note 1. Nature of Activities and Significant Accounting Policies (Continued) Property and equipment: Property and equipment is recorded at cost or at estimated fair value at the date of gift. Donated property is reported as unrestricted support, unless the donor has restricted the donated asset to a specific purpose. Property and equipment costing/valued at greater than $2,500 are capitalized. Depreciable items are on a straight-line basis over their estimated useful lives. Net assets: Net assets at September 30, 2015 and 2014, are as follows: Unrestricted net assets: Represents unrestricted resources that are available for the support of general operating activities. At September 30, 2015 and 2014, $2,010,439 was considered board designated for use as a future reserve to assist in covering program costs for the watershed restoration projects. Temporarily restricted net assets: Represents resources unavailable for unrestricted use at fiscal yearend because of the existence of time and/or purpose donor-imposed restrictions that remain unsatisfied at year-end. Permanently restricted net assets: Represents resources whose use is limited by donor-imposed restrictions that neither expire by the passage of time nor can be fulfilled or otherwise removed by actions of TU. Earnings on the endowment funds are either temporarily restricted for program and fundraising purposes or are available for operations as specified by the donor. Restricted and unrestricted revenue and support: Conditional grant revenue is recognized as costs qualified under the grants are incurred. Grant funds received in excess of costs incurred are recorded as refundable advances until earned. Reimbursable grant costs incurred in excess of funds received are recorded as receivables. All donor-restricted contributions and grants are reported as an increase in temporarily or permanently restricted net assets, depending on the nature of the restriction. When a restriction expires (that is, when a stipulated time restriction ends or purpose of restriction is accomplished), temporarily restricted net assets are reclassified to unrestricted net assets and reported in the accompanying statements of activities as net assets released from restrictions. Unconditional promises to give are recognized as support or gains in the period received as assets, decreases of liabilities, or expenses, depending on the form of the benefits received. Conditional promises to give are recognized when the conditions on which they depend are substantially met. Membership contributions are recorded when received as unrestricted. Events revenue is recognized when the events take place. Funds received in advance of events are deferred until the event occurs. Restricted events revenue stem from commitments to support future events where the funds have not yet been received. Functional allocation of expenses: The costs of providing TU s various programs and supporting services have been summarized on a functional basis in the accompanying statements of activities. Accordingly, certain costs have been allocated among the programs and supporting services benefited. 9

12 Note 1. Nature of Activities and Significant Accounting Policies (Continued) Joint cost allocation: TU regularly communicates to the public and TU members via mailings regarding key issues critical to conserving, protecting and restoring coldwater fishery habitats. These mailings also include requests for contributions. Included in the costs of the packages that were mailed during the years ended September 30, 2015 and 2014, were $1,095,511 and $1,150,416, respectively, of joint costs that are not directly attributable to either the program component or the fundraising component of the mailing. Those joint costs are allocated as follows: Program $ 261,057 $ 277,902 Fundraising 834, ,514 $ 1,095,511 $ 1,150,416 Income taxes: TU is generally exempt from federal income tax under the provisions of Section 501(c)(3) of the Internal Revenue Code (IRC). In addition, TU qualifies for charitable contribution deductions and has been classified as an organization that is not a private foundation. Income that is not related to exempt purposes, less applicable deductions, is subject to federal and state corporate income taxes. TU had no unrelated business income tax liability for the years ended September 30, 2015 and 2014, since TU did not have significant unrelated business income. Management evaluated TU s tax positions and concluded that TU had taken no uncertain tax positions that require adjustment to the financial statements. Use of estimates: The preparation of the financial statements requires management to make estimates and assumptions that affect certain reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and support and expenses during the reporting period. Actual results could differ from those estimates. Subsequent events: TU evaluated subsequent events through April 6, 2016, which is the date the financial statements were available to be issued (see Note 5). 10

13 Note 2. Receivables Receivables at September 30, 2015 and 2014, are as follows: State grants $ 3,748,991 $ 4,955,652 Federal grants 3,409,096 2,455,345 Other 465, ,076 7,623,374 7,656,073 Less provision for doubtful accounts 2,282 2,282 $ 7,621,092 $ 7,653,791 TU has approximately $2,000,000 of conditional receivables outstanding at September 30, Note 3. Investments and Fair Value Measurements TU follows the Codification topic, Fair Value Measurement. The Codification applies to all assets and liabilities that are being measured and reported on a fair value basis. The Codification establishes a framework for measuring fair value in accordance with generally accepted accounting principles and expands disclosure about fair value measurements. The Codification enables the reader of the financial statements to assess the inputs used to develop those measurements by establishing a hierarchy for ranking the quality and reliability of the information used to determine fair values. The Codification requires that assets and liabilities carried at fair value will be classified and disclosed in one of the following three categories: Level 1: Level 2: Level 3: Quoted market prices in active markets for identical assets or liabilities Observable market-based inputs or unobservable inputs corroborated by market data Unobservable inputs that are not corroborated by market data In determining the appropriate levels, TU performs a detailed analysis of the assets and liabilities that are subject to the Codification topic, Fair Value Measurement. At each reporting period, any assets and liabilities for which the fair value measurement is based on significant unobservable inputs are classified as Level 3. 11

14 Note 3. Investments and Fair Value Measurements (Continued) The tables below present the balances of assets measured at fair value on a recurring basis by level within the hierarchy at September 30, 2015 and 2014: 2015 Level 1 Level 2 Level 3 Fixed income mutual funds: Short-term bond $ 3,537,657 $ - $ - Tactical allocation 1,507, Multi-sector bond 1,131, Short-term government 112, Intermediate-term bond 88, Total fixed income mutual funds 6,378, Equity mutual funds: Large blend 4,090, Foreign large blend 843, Other 15, Total equity mutual funds 4,948, Money market funds 757, $ 12,085,235 $ - $ Level 1 Level 2 Level 3 Fixed income mutual funds: Short-term bond $ 2,597,671 $ - $ - Tactical allocation 1,899, Multi-sector bond 1,354, Short-term government 110, Intermediate-term bond 82, Total fixed income mutual funds 6,044, Equity mutual funds: Large blend 4,189, Foreign large blend 944, Other 19, Total equity mutual funds 5,153, Money market funds 1,219, $ 12,417,419 $ - $ - TU s fixed income and equity mutual funds and money market funds are classified as Level 1 instruments as they are actively traded with identical assets. 12

15 Note 3. Investments and Fair Value Measurements (Continued) Investment (losses) gains for the years ended September 30, 2015 and 2014, are as follows: Unrealized and realized (losses) gains on investments, net $ (264,262) $ 885,901 Interest and dividend income 1,845 7,023 $ (262,417) $ 892,924 Note 4. Property and Equipment Property and equipment and accumulated depreciation at September 30, 2015 and 2014, and depreciation expense for the years ended September 30, 2015 and 2014, are as follows: 2015 Estimated Accumulated Depreciation Asset Category Lives Cost Depreciation Net Expense Furniture and equipment 5-10 years $ 5,059,493 $ 2,252,780 $ 2,806,713 $ 928,831 Leasehold improvements 10 years 65,566 8,937 56,629 6,611 Land 7,801-7,801 - $ 5,132,860 $ 2,261,717 $ 2,871,143 $ 935, Estimated Accumulated Depreciation Asset Category Lives Cost Depreciation Net Expense Furniture and equipment 5-10 years $ 4,252,730 $ 1,448,151 $ 2,804,579 $ 746,478 Leasehold improvements 10 years 65,566 2,326 63,240 2,326 Land 7,801-7,801 - $ 4,326,097 $ 1,450,477 $ 2,875,620 $ 748,804 Note 5. Line of Credit As of September 30, 2015, TU maintained a $2,000,000, revolving line-of-credit with a bank, with interest based on London Inter-Bank Offered Rate (LIBOR) plus 1.50 percent. The line of credit is secured by the cash and investments of TU. The outstanding balances were $2,000,000 and $0 at September 30, 2015 and 2014, respectively. Subsequent to September 30, 2015, TU increased its revolving line of credit with the bank to $5,000,000. The line accrues interest based on LIBOR plus 1.50 percent. There are no financial covenants related to the line-of-credit. The new agreement calls for financial reporting requirements of 180 days after fiscal year-end. The LOC is secured by deposits and investments maintained at the bank. 13

16 Note 6. Lease Commitments TU has commitments under operating leases for office space and equipment expiring at various times through TU has a lease for office space that will expire in April Rent expense relating to the office operating leases for the years ended September 30, 2015 and 2014, was $790,079 and $687,981, respectively. Future minimum rental payments by year under the operating leases, including payments for the new lease, are as follows: Years ending September 30: 2016 $ 558, , , , , $ 1,308,877 3,543,865 14

17 Note 7. Temporarily Restricted Net Assets Temporarily restricted net assets include donor restricted funds which are only available for program activities or general support designated for future years. Changes in temporarily restricted net assets for the years ended September 30, 2015 and 2014, consist of the following by program: 2015 Balance Balance September 30, September 30, 2014 Additions Change In Value Releases 2015 Western Water Project $ 2,929,266 $ 11,995,789 $ - $ 11,688,260 $ 3,236,795 Sportsman's Conservation Project 3,602,886 2,328,480-2,877,046 3,054,320 Youth Education 1,186, , ,012 1,281,382 West Branch of Susquahanna Restoration 884, , , ,824 Chapter Activity 510, , , ,549 Abandon Mine Remediation 198,935 1,233,447-1,007, ,894 Endowment Investment Activity 1,060, , , ,546 Salmon Conservation 354, , , ,571 North Coast Coho Restoration 88,512 1,338,662-1,088, ,253 Renewable Energy 216, , , ,180 Bear River Project 546,492 97, , ,857 Eastern Culvert Replacement Project 212, , , ,288 California Water Project 338,624 1,445,192-1,585, ,234 Upper Connecticut River 289, , , ,374 Klamath Dam Removal 49, ,233-77, ,760 Eastern Land Protection 157, , , ,845 Rogue River Restoration 72, , , ,207 Alaska Initiative 616,904 1,402,115-1,914, ,964 California Roadless Initiative 96, , , ,248 Blackfoot Creek Restoration 23, , ,199 95,912 Driftless Area Project 64,130 1,818,503-1,793,604 89,029 Public Outreach - 132,670-59,055 73,615 Lahontan Cutthroat Trout 75,001 8,630-18,768 64,863 CCF Board Fund - 64, ,641 Musconetcong Restoration 127, , ,794 50,959 Nash Stream 18,561 85,072-63,264 40,369 Oregon Watershed Restoration - 342, ,605 19,856 Eastern Water Project 35, , ,388 17,927 Eastern Energy Project 92, , ,477 17,144 Veteran's Service Project - 240, ,524 16,014 Shenandoah Restoration 6, , ,010 15,338 EASTERN - 14,000-2,376 11,624 Maine Brook Trout Restoration 9,597 28,840-32,453 5,984 Embrace-a-Stream 45, , ,654 5,975 Conservation Success Index 4, , ,592 4,492 Organizational Development 3, ,892 Salter Brook Trout Restoration Deschutes River Restoration 18,553 84, ,911 - Potomac Headwaters 14, , ,332 - $ 13,950,807 $ 28,522,746 $ 240,242 $ 29,484,583 $ 12,748,728 15

18 Note 7. Temporarily Restricted Net Assets (Continued) 2014 Balance Balance September 30, September 30, 2013 Additions Change In Value Releases 2014 Sportsman s Conservation Project $ 3,527,845 $ 2,565,075 $ - $ 2,490,034 $ 3,602,886 Western Water Project 3,424,833 6,572,825-7,068,392 2,929,266 Youth Education 1,243, , ,332 1,186,213 Endowment Investment Activity 843, , ,558 1,060,075 West Branch of Susquahanna Restoration 646, , , ,654 Alaska Initiative 398,961 2,436,498-2,218, ,904 Bear River Project 530, , , ,492 Chapter Activity 551, , , ,671 Salmon Conservation 323, , , ,378 California Water Project 499, , , ,624 Upper Connecticut River 344,750 58, , ,967 Renewable Energy 284, , , ,561 Eastern Culvert Replacement Project 251, , , ,052 Abandon Mine Remediation 211, , , ,935 Eastern Land Protection 99, , , ,099 Musconetcong Restoration 84, ,900-79, ,332 California Roadless Initiative 47, , ,135 96,994 Eastern Energy Project 64, , ,567 92,603 North Coast Coho Restoration 364,668 2,096,513-2,372,669 88,512 Lahontan Cutthroat Trout 46,758 97,776-69,533 75,001 Rogue River Restoration 69, , ,679 72,206 Driftless Area Project 55,245 1,878,951-1,870,066 64,130 Klamath Dam Removal 33, , ,619 49,808 Embrace-a-Stream 44, , ,205 45,408 Eastern Water Project 72, , ,823 35,187 Blackfoot Creek Restoration 17, , ,014 23,372 Nash Stream 21,601 56,837-59,877 18,561 Deschutes River Restoration 40,677 62,367-84,491 18,553 Potomac Headwaters 125, , ,991 14,656 Maine Brook Trout Restoration 66,803 88, ,771 9,597 Shenandoah Restoration 31,577 85, ,382 6,440 Conservation Success Index 75, , ,326 4,667 Organizational Development - 65,471-62,471 3,000 Salter Brook Trout Restoration 15,694 9,800-25,491 3 Oregon Watershed Restoration 5,148 28,256-33,404 - Public Outreach , ,631 - Penosbscott Dam Removal - 932, ,979 - Veteran s Service Project 30, , ,771 - $ 14,496,454 $ 25,191,660 $ 742,381 $ 26,479,688 $ 13,950,807 As programs grow and expand, funds may be presented separately in the above tables in future fiscal periods. The total temporarily restricted net asset balance will remain unchanged. 16

19 Note 8. Endowments Interpretation of relevant law: The Board of Trustees of TU has interpreted the Michigan enacted version of the 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. As a result of this interpretation, TU classifies as permanently restricted net assets (a) the original value of gifts donated to the permanent endowment, (b) the original value of subsequent gifts to the permanent endowment, and (c) accumulations to the permanent endowment made in accordance with the direction of the applicable donor gift instrument at the time the accumulation is added to the fund. The remaining portion of the donor-restricted endowment fund that is not classified in permanently restricted net assets is classified as temporarily restricted net assets, until those amounts are appropriated for expenditure by TU in a manner consistent with the standard of prudence prescribed by UPMIFA. In accordance with UPMIFA, TU considers the following factors in making a determination to appropriate or accumulate donor-restricted endowment funds: The duration and preservation of the fund The purposes of TU and the donor-restricted endowment fund General economic conditions The possible effects of inflation and deflation The expected total return from income and the appreciation of investments Other resources of TU The investment policies of TU Return objective and risk parameters: TU s objective is to earn a respectable, long-term, risk-adjusted total rate of return to support the designated programs. TU recognizes and accepts that pursuing a respectable rate of return involves risk and potential volatility. Over complete market cycles, the goal is to have TU s assets generate a return, net of fees, greater than the benchmark index consisting of a combination of appropriate capital market indexes weighted in the same proportions as TU s asset allocation. To minimize the administrative costs and burdens, TU is currently only invested in publiclytraded fixed income and equity mutual funds and money market funds. Spending policies: CCF Endowment: This endowment is expected by the donors to produce annual investment income that is to be spent to cover the salaries, benefits, and operating budget for TU s Senior Scientist and CCF Director. Given that these expenses exceed a reasonable earnings rate for the size of this endowment, the spending rate of 10 percent and 4 percent was set for fiscal years ended September 30, 2015 and 2014, respectively. Other Endowments: The earnings from these endowments are available in support of the general operations of TU. The Board of Trustees determines annually the spending rate for these endowments. Due to the current market conditions, as of September 30, 2015 and 2014, the Board of Trustees authorized spending rate of 10 percent and 8 percent, respectively. Funds with deficiencies: From time to time, the fair value of assets associated with individual donorrestricted endowment funds may fall below the level that the donor or UPMIFA requires TU to retain as a fund of perpetual duration. In accordance with generally accepted accounting principles, there were no deficiencies of this nature that need to be reported in unrestricted net assets as of September 30, 2015 and

20 Note 8. Endowments (Continued) TU s endowment funds consist of the following at September 30, 2015 and 2014: 2015 Balance Balance September 30, September 30, 2014 Additions Releases 2015 CCF Endowment $ 4,826,217 $ - $ 187,373 $ 4,638,844 Russell Endowment 569, ,375 Living Brightwater Endowment 447, ,292 E.T. Teller Endowment 413, ,717 Restricted Property 5, ,800 $ 6,262,401 $ - $ 187,373 $ 6,075, Balance Balance September 30, September 30, 2013 Additions 2014 CCF Endowment $ 4,733,662 $ 92,555 $ - $ 4,826,217 Russell Endowment 569, ,375 Living Brightwater Endowment 447, ,292 E.T. Teller Endowment 413, ,717 Restricted Property 5, ,800 $ 6,169,846 $ 92,555 $ - $ 6,262,401 18

21 Note 8. Endowments (Continued) Endowment fund activity for the years ended September 30, 2015 and 2014, consists of the following: Temporarily Permanently Restricted Restricted Total Endowment net assets, as of September 30, 2013 $ 843,252 $ 6,169,846 $ 7,013,098 Investment return: Investment income 237, ,294 Net appreciation (realized and unrealized) 505, ,087 Total investment return 742, ,381 Contributions - 92,555 92,555 Appropriation of endowment assets for expenditure (525,558) - (525,558) Endowment net assets, as of September 30, ,060,075 6,262,401 7,322,476 Investment return: Investment income 283, ,335 Net appreciation (realized and unrealized) (523,577) - (523,577) Total investment return (240,242) - (240,242) Contributions Appropriation of endowment assets for expenditure (438,287) (187,373) (625,660) Endowment net assets, as of September 30, 2015 $ 381,546 $ 6,075,028 $ 6,456,574 Note 9. Employee Retirement Plans and Self-Insurance Plan TU maintains a 403(b) Plan (the Plan) for eligible employees. All employees with at least one year of service are eligible for the Plan. TU is required to contribute 4 percent of each eligible employee s gross salary to the Plan. TU s pension expense was $456,522 and $418,330 for the years ended September 30, 2015 and 2014, respectively. TU has a self-insured health benefit plan for its employees. Under the plan, TU has a coverage maximum of $50,000 per diagnosis. TU is insured for claims in excess of that coverage. At September 30, 2015 and 2014, TU had accruals of $127,755 and $132,336, respectively, for health benefits payable under the plan, which are included in accounts payable and accrued expenses on the balance sheets. Note 10. Contingencies Federal awards: TU participates in a number of federally-assisted grant programs, which are subject to financial and compliance audits by the federal agencies or their representatives. As such, there exists a contingent liability for potential questioned costs that may result from such audits. Management does not anticipate any significant adjustments as a result of such audits. Note 11. Concentration of Revenue During the years ended September 30, 2015 and 2014, 16 percent and 17 percent, respectively, of TU s revenue was derived from grants from the U.S. Government. 19