The Catholic Foundation of Central Florida, Inc. Financial Statements

Transcription

1 The Catholic Foundation of Central Florida, Inc. Financial Statements For The Year Ended

2 REPORT OF INDEPENDENT AUDITORS The Board of Directors The Catholic Foundation of Central Florida, Inc. Orlando, Florida We have audited the financial statements of The Catholic Foundation of Central Florida, Inc. ( the Foundation ), which comprise the statement of financial position as of, and the related statements of activities and cash flows for the year 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 audit. 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 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 Foundation'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 Foundation'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 Catholic Foundation of Central Florida, Inc. as of, the changes in its net assets, and its cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America. B ATTS M ORRISON W ALES & L EE, P.A. Orlando, Florida December 7, 2015

3 STATEMENT OF FINANCIAL POSITION ASSETS ASSETS Cash and cash equivalents $ 198,118 Investments 3,347,033 Investments and other assets restricted for long-term purposes 10,247,680 Agency funds held 14,846,585 Unconditional promises to give, net 1,457,537 Other assets 180,843 Total assets $ 30,277,796 LIABILITIES AND NET ASSETS LIABILITIES Accounts payable and accrued expenses $ 36,413 Agency obligations 14,846,585 Due to Catholic Diocese of Orlando 218,521 Other liabilities 432,196 Total liabilities 15,533,715 NET ASSETS Unrestricted 316,161 Temporarily restricted 4,180,240 Permanently restricted 10,247,680 Total net assets 14,744,081 Total liabilities and net assets $ 30,277,796 The Accompanying Notes are an Integral Part of These Financial Statements 1

4 STATEMENT OF ACTIVITIES For The Year Ended Temporarily Permanently Unrestricted Restricted Restricted Total PUBLIC SUPPORT AND REVENUE AND NET ASSETS RELEASED FROM RESTRICTIONS Development and stewardship fees $ 1,753,908 $ $ $ 1,753,908 Fundraising fees 335, ,635 Contributions 182,867 1,414,518 1,597,385 Investment income, net 36,930 65, ,999 Net assets released from time and use restrictions 1,325,574 (1,325,574) Total public support and revenue and net assets released from time and use restrictions 3,452,047 (1,077,638) 1,414,518 3,788,927 EXPENSES Program activities Our Catholic Appeal 722, ,901 Distributions to other Diocesan and Catholic entities 714, ,259 Major and planned giving 274, ,592 Alive in Christ 270, ,303 Catholic Campus ministry 261, ,778 Offertory enhancements 233, ,564 Other 100, ,036 Educational campaign 87,637 87,637 Parish campaigns 9,110 9,110 Total program activities 2,674,180 2,674,180 Supporting activities Management and general 979, ,737 Total supporting activities 979, ,737 Total expenses 3,653,917 3,653,917 CHANGE IN NET ASSETS (201,870) (1,077,638) 1,414, ,010 NET ASSETS - Beginning of year 518,031 5,257,878 8,833,162 14,609,071 NET ASSETS - End of year $ 316,161 $ 4,180,240 $ 10,247,680 $ 14,744,081 The Accompanying Notes are an Integral Part of These Financial Statements 2

5 STATEMENT OF CASH FLOWS For The Year Ended OPERATING CASH FLOWS Cash received from fees $ 2,089,543 Cash received from contributors 707,601 Investment income received 202,623 Cash paid for operating activities and costs (3,265,058) Net operating cash flows (265,291) INVESTING CASH FLOWS Reinvested interest and dividends (202,623) Net sales of investments 15,749 Net investment in assets restricted for long-term purposes (1,562,599) Net investing cash flows (1,749,473) FINANCING CASH FLOWS Contributions restricted for long-term purposes 1,414,518 Net financing cash flows 1,414,518 NET CHANGE IN CASH AND CASH EQUIVALENTS (600,246) CASH AND CASH EQUIVALENTS - Beginning of year 798,364 CASH AND CASH EQUIVALENTS - End of year $ 198,118 RECONCILIATION OF CHANGE IN NET ASSETS TO NET OPERATING CASH FLOWS Change in net assets $ 135,010 Adjustments to reconcile change in net assets to net operating cash flows Contributions restricted for long-term purposes (1,414,518) Losses on investments, net 100,624 Change in unconditional promises to give, net 524,734 Change in other assets 233,695 Change in accounts payable and accrued expenses (40,674) Change in due to Catholic Diocese of Orlando 186,992 Change in other liabilities 8,846 Net operating cash flows $ (265,291) The Accompanying Notes are an Integral Part of These Financial Statements 3

6 NOTE A NATURE OF ACTIVITIES The Catholic Foundation of Central Florida, Inc. ( the Foundation ) is a not-for-profit corporation organized under the laws of the state of Florida. The Foundation was established under the auspices of the General Synod for the Diocese of Central Florida ( the Synod ) to raise, manage, and distribute funds to provide longterm, sustainable support for the parishes, schools, agencies, and other ministries in the Catholic Diocese of Orlando ( the Diocese ). The Foundation provides a fundraising platform for Diocesan-wide initiatives that will strengthen the people and parishes in the Diocese and secure the financial resources to achieve the vision of the Synod, to be fully Alive in Christ. The Foundation develops and administers capital campaigns, annual appeals, and other programs to further its purposes, and has developed an asset management function as further described in the following paragraphs. The Alive in Christ campaign is a multi-wave, multi-year capital campaign with a goal to raise $150 million, of which $90 million will be returned to the participating parishes for capital improvements, debt reduction, parish or school endowments, and other projects. The remaining $60 million will be used to establish capital and endowment funds to support Diocesan-wide initiatives. The Alive in Christ campaign is the platform for numerous parish and Diocesan initiatives. With the completion of the active fundraising phase of the Alive in Christ campaign, the Foundation expects to be actively engaged in a variety of fundraising activities to support the ongoing needs of the Diocese, including management of annual capital campaigns at the parishes, schools, and other Diocesan entities, and has prepared a post-campaign strategic plan to access, support, and execute the current Diocesan fundraising needs. The Foundation development staff provides continuing assistance to the Diocese and individual parishes for current and future development activities through its Diocesan Stewardship and Development services, including Our Catholic Appeal, the parish based annual collection to support the operations of the Chancery and its programs and ministries. The Chancery includes offices of the Diocese which report to the Bishop regarding education, stewardship, financial administration, missions, etc. Our Catholic Appeal is based on a schedule of assessments prepared by the Chancery in conjunction with the pastoral leadership of the Diocese. The Foundation has developed an asset management function for the Foundation s portfolio that will be used to model a Diocesan-wide investment platform that is now available for the portfolios of the parishes and Diocesan ministries within the Diocese. The Foundation expects to gain continued operating economies of scale for the investment portfolios of all the participants by reducing operating expenses and increasing expected investment returns; providing access to "best-in-class" investment strategies and managers to all Diocesan investment portfolios, regardless of individual size; and reducing operational and oversight burden of Diocesan investment operations. The investment committee developed an Investment Policy Statement that provides a general framework for the management and investment of assets, and established investment objectives to ensure that funds are financially managed in the best interest of the Foundation at the most economical cost. The committee, with the approval of the Board, has retained the services of an investment advisor as part of its strategy to further the asset management function of the Foundation. 4

7 NOTE A NATURE OF ACTIVITIES (Continued) Building a New Foundation: In June 2012, the Foundation, under the direction and with the approval of the Bishop and the Members of the Foundation (the Members include the Bishop of the Diocese of Orlando, a Vicar General of the Diocese of Orlando (or other person appointed by the Bishop), another individual appointed by the Bishop, the Chairman of the Board of Directors, and the Treasurer of the Board of Directors), rolled out a $500 million diversified and multi-step ten-year fundraising campaign referred to as the Building a New Foundation campaign with the objective of supporting the expanding needs of the parishes and ministries throughout the Diocese and Diocesan-wide initiatives. The campaign is built upon a simple premise, to reach out and realize incrementally small contributions or increases in contributions from large numbers of parishioners. The campaign includes a menu of campaigns to support the growing and diverse needs of the Diocese, including Diocesan-wide campaigns for schools, the ministries and programs of Catholic Charities, tuition assistance, offertory enhancement to meet the growing needs of the parishes, a fund to support the ongoing and changing interests of the Bishop of the Diocese, planned (estate) giving, and investment/endowment management. The campaigns will be rolled out over time in a systematic and conscientious approach to be sensitive to the donors and the needs of the Diocesan community. The Foundation s primary program activities are as follows: Our Catholic Appeal parish-based annual collection to support the operations of the Chancery and its programs and ministries; Distributions to other Diocesan and Catholic entities distributions to other Diocesan entities to support various purposes including parishes, schools, and other ministries; Major and planned giving program to advance the parishes and missions in the Diocese through major and long-term gifts; Alive in Christ campaign to raise funds for participating parishes for capital improvements, debt reduction, parish or school endowments, and other projects; Catholic Campus ministry outreach ministry to students at universities; Offertory enhancements offertory and stewardship education; Education campaign campaigns to promote Catholic schools and events to build school endowments; and Parish campaigns campaigns to promote Catholic parishes. NOTE B SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 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. Donor-restricted support is reported as an increase in temporarily or permanently restricted net assets, depending on the nature of the restriction. When a restriction expires (that is, when a stipulated time restriction ends or purpose restriction is accomplished), temporarily restricted net assets are reclassified to unrestricted net assets and reported in the statement of activities as net assets released from time and use restrictions. Revenue recognition The Foundation assesses fees for the administration of its fundraising campaigns, appeals, and programs. The Foundation recognizes fee revenue when earned. 5

8 NOTE B SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Cash and cash equivalents The Foundation considers investment instruments purchased or donated with original maturities of three months or less to be cash equivalents. Investments Investments are carried at estimated fair value. Investments and other assets restricted for long-term purposes Investments and other assets restricted for long-term purposes include mutual funds and nonpublicly traded investments carried at estimated fair value, and unconditional promises to give. These assets are primarily restricted pursuant to the endowment or pledge agreements to which they relate. Agency funds held Agency funds held consist of cash and cash equivalents and investments which are carried at estimated fair value. The Foundation holds and manages the funds primarily for the benefit of other Catholic organizations within the Diocese. Unconditional promises to give, net Unconditional promises to give (historically referred to as leadership gifts receivable ) are recognized as revenue and as assets in the period in which the related promise is made. Allowance for doubtful accounts Unconditional promises to give are stated net of an allowance for doubtful accounts. The Foundation estimates the allowance for doubtful accounts based on an analysis of specific accounts, taking into consideration the age of the past due account and an assessment of ability to pay. Accounts are considered past due when payments are not made in accordance with specified terms. Accounts are written off upon such time that management determines the amounts are uncollectible. Income taxes The Foundation is exempt from federal income tax as an organization described in Section 501(c)(3) of the Internal Revenue Code and from state income tax pursuant to Florida law. The Foundation is further classified as a public charity and not a private foundation for federal tax purposes. The Foundation has not incurred unrelated business income taxes. As a result, no income tax provision or liability has been provided for in the accompanying financial statements. The Foundation has not taken any material uncertain tax positions for which the associated tax benefits may not be recognized under accounting principles generally accepted in the United States of America. Federal and state tax authorities may generally examine the Foundation s income tax positions or (if applicable) returns for periods of approximately three to six years. Use of estimates Management uses estimates and assumptions in preparing the financial statements. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and reported revenues and expenses. Significant estimates used in preparing these financial statements include those related to the estimated fair value of investments and the collectability of unconditional promises to give. Actual results could differ from the estimates. Subsequent events The Foundation has evaluated for possible financial statement reporting and disclosure subsequent events through December 7, 2015, the date as of which the financial statements were available to be issued. 6

9 NOTE C CONCENTRATIONS The Foundation maintains its cash and cash equivalents in deposit accounts which may not be federally insured, may exceed federally insured limits, or may be insured by an entity other than an agency of the federal government. The Foundation has not experienced any losses in such accounts and believes it is not exposed to any significant credit risk related to cash and cash equivalents. 95% of the Foundation s development and stewardship fees were received from the Diocese. NOTE D INVESTMENTS The Foundation holds investments of various types both in its capacity as trustee or custodian and in its capacity as owner. Investments are carried at estimated fair value. Investments were held for the following purposes or activities: Investments held as trustee or in a similar capacity Investments held as agency funds $ 13,680,940 Investments held to satisfy charitable gift annuity obligations 425,845 Investments subject to temporary donor restrictions Investments held for temporarily restricted purposes 918,782 Investments subject to permanent donor restrictions Restricted investments held for permanent endowments 10,148,365 Net appreciation 1,993,199 Investments held for other purposes Investments held for general operations 9,207 Total investments $ 27,176,338 Investments consisted of the following: Money market and similar funds $ 2,432,317 Mutual funds 11,945,067 Nonpublicly traded investments 12,798,954 Total investments $ 27,176,338 NOTE E INVESTMENTS AND OTHER ASSETS RESTRICTED FOR LONG-TERM PURPOSES Investments and other assets restricted for long-term purposes were held for the following purposes or activities: Investments held for permanent endowments (see Note D) $ 10,148,365 Permanently restricted unconditional promises to give 99,315 Total investments and other assets restricted for long-term purposes $ 10,247,680 7

10 NOTE F AGENCY FUNDS HELD Agency funds held consisted of the following: Cash and cash equivalents $ 1,165,645 Investments (see Note D) 13,680,940 Total agency funds held $ 14,846,585 The Foundation acts as an agent for and on behalf of donors, receiving assets from the donors and agreeing to use those assets on behalf of, or transfer those assets, the return on investment of those assets, or both to the beneficiaries specified in the Alive in Christ capital campaign, Our Catholic Appeal, and other fundraising programs. The Foundation also manages the investments of certain funds for other Catholic organizations within the Diocese. The Foundation recognizes a liability to the beneficiary in an amount equal to the asset s carrying value. These assets are included in the accompanying financial statements as agency funds held and the associated liabilities are included in the accompanying financial statements as agency obligations. NOTE G FAIR VALUE MEASUREMENTS Accounting principles generally accepted in the United States ( GAAP ) defines fair value for an investment as the price an organization would receive upon selling an investment in an orderly transaction to an independent buyer in the principal or most advantageous market for the investment. Accordingly, GAAP recognizes a hierarchy of inputs an organization may use in determining or estimating fair value. The inputs are categorized into levels that relate to the extent to which an input is objectively observable and the extent to which markets exist for identical or comparable investments. In determining or estimating fair value, an organization is required to maximize the use of observable market data (to the extent available) and minimize the use of unobservable inputs. The hierarchy assigns the highest priority to unadjusted quoted prices in active markets for identical items (Level 1 inputs) and the lowest priority to unobservable inputs (Level 3 inputs). A financial instrument s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Following is a description of each of the three levels of input within the fair value hierarchy: Level 1 unadjusted quoted market prices in active markets for identical items Level 2 other significant observable inputs (such as quoted prices for similar items) Level 3 significant unobservable inputs The estimated fair value of items measured on a recurring basis at, is as follows: Total Level 1 Level 2 Level 3 Mutual funds $ 11,945,067 $ 11,945,067 $ $ Nonpublicly traded investments 12,798,954 12,798,954 Total $ 24,744,021 $ 11,945,067 $ $ 12,798,954 8

11 NOTE G FAIR VALUE MEASUREMENTS (Continued) Investments in nonpublicly traded investments listed as Level 3 investments consist of hedge funds that pursue various strategies to diversify risks and reduce volatility. There are no lock-up periods associated with these investments, and such investments can generally be liquidated at an amount approximating net asset value in the near-term with proper notice. The financial statements of the hedge funds in which such investments have been made are generally subject to annual external audits which are ordinarily conducted by nationally-recognized certified public accounting firms. The reported estimated fair values of nonpublicly traded investments are based on amounts provided by the investee. The following is a reconciliation of investments in which significant unobservable inputs (Level 3) were used in determining fair value: Balance, July 1, 2014 $ Net purchases 12,227,676 Net investment fees (23,552) Net gains 594,830 Balance, $ 12,798,954 NOTE H UNCONDITIONAL PROMISES TO GIVE, NET Unconditional promises to give consisted of the following: Gross leadership gifts $ 2,000,000 Less: Present value discount (253,148) Less: Allowance for uncollectible amounts (190,000) Net unconditional promises to give $ 1,556,852 Unconditional promises to give are due as follows: Less than one year $ 200,000 One to five years 700,000 Thereafter 1,100,000 Total $ 2,000,000 Unconditional promises to give are restricted for the following purposes: Temporarily restricted until received $ 617,569 Temporarily restricted for Parishes 490,413 Temporarily restricted for Catholic Campus ministry 349,555 Permanently restricted for general use endowment (see Note E) 99,315 Net unconditional promises to give $ 1,556,852 9

12 NOTE I TEMPORARILY RESTRICTED NET ASSETS Net assets were temporarily restricted for the following purposes during the year ended : Balance Balance July 1, Investment June 30, 2014 Contributions Activity Releases 2015 Available for general use from appreciation of endowments $ 1,045,493 $ $ 46,154 $ $ 1,091,647 Catholic Campus ministry 1,125,942 4,362 (295,586) 834,718 Unconditional promises to give - time restricted 967,106 (349,537) 617,569 Parishes 882,310 64,433 7,272 (449,456) 504,559 Catholic Charities 388,458 5,456 (75,528) 318,386 Diocesan 209, ,434 (87) (45,893) 282,425 Schools 331,069 5,150 (60,215) 276,004 Other 307,529 (3,238) (49,359) 254,932 Total $ 5,257,878 $ 182,867 $ 65,069 $ (1,325,574) $ 4,180,240 During the year ended, management of the Foundation determined that certain amounts previously treated as unrestricted net assets should have been treated as temporarily restricted net assets. Accordingly, $1,454,650 of net assets have been reclassified from unrestricted net assets to temporarily restricted net assets as of July 1, 2014, with no effect on total net assets. NOTE J - PERMANENTLY RESTRICTED NET ASSETS Permanently restricted net assets were donor-restricted for the following purposes: General use $ 5,157,483 Support of Catholic Charities 1,500,000 Scholarships 1,386,793 Support for Needy in Polk County 1,024,539 Other 502,260 Support of Catholic Campus ministry 500,000 Priest retirements 176,605 Total permanently restricted endowments $ 10,247,680 The Foundation preserves the estimated fair value of all original endowment gifts as of the gift date, which management deems is in compliance with state law. Accordingly, the Foundation classifies as permanently restricted net assets (a) the original value of gifts donated to the permanent endowment and (b) the original value of subsequent gifts to the permanent endowment. The Foundation has adopted an investment policy for endowment assets that attempts to provide a predictable stream of funding to supported programs while seeking to maintain the purchasing power of the endowment assets and to preserve the invested capital. The Foundation seeks the advice of investment counsel, as well as management and certain committees of the Board, when determining amounts to be spent on supported programs. The Foundation s current spending policy stipulates that between 3% and 5% of the estimated fair value of the funds, estimated at June 30 each year, may be distributed annually. During the year ended, management of the Foundation determined that certain amounts previously treated as unrestricted net assets should have been treated as permanently restricted net assets. Accordingly, $82,747 of net assets have been reclassified from unrestricted net assets to permanently restricted net assets as of July 1, 2014, with no effect on total net assets. 10

13 NOTE K RELATED PARTY TRANSACTIONS The Diocese provides facilities, personnel, and other resources to the Foundation. Personnel and other resources include back-office support services, including human resources, pension administration, payroll and accounts payable processing, building and mailroom services, information technology, communications, public relations, and administration. During the year ended, the Foundation recognized expenses totaling approximately $1,858,000 for the aforementioned services, of which approximately $71,000 related to overhead costs charged by the Diocese. The Foundation also provides various programs and services to the Diocese, including developing and administering capital campaigns, annual appeals, and other programs. The Foundation recognized approximately $1,671,000 of revenue from the Diocese during the year ended related to these services, which is included within development and stewardship fees in the accompanying statement of activities. As of, $218,521 was due to the Diocese related to the above transactions and is included in due to Catholic Diocese of Orlando in the accompanying statement of financial position. Additionally, the Foundation collected and distributed approximately $3,893,000 to the Diocese related to funds raised for the Alive in Christ campaign. 11