CHIEF SEATTLE COUNCIL BOY SCOUTS OF AMERICA

Transcription

1 CHIEF SEATTLE COUNCIL BOY SCOUTS OF AMERICA Consolidated Financial Statements

2 Table of Contents Independent Auditor s Report 1-2 Consolidated Financial Statements: Consolidated Statements of Financial Position 3 Consolidated Statements of Activities and Changes in Net Assets 4-5 Consolidated Statements of Cash Flows 6 Consolidated Statement of Functional Expenses Consolidated Statement of Functional Expenses Page

3 10900 NE 4th Street Suite 1700 Bellevue WA tel fax clarknuber.com Independent Auditor s Report Certified Public Accountants and Consultants Board of Directors Chief Seattle Council, Boy Scouts of America Seattle, Washington We have audited the accompanying consolidated financial statements of Chief Seattle Council, Boy Scouts of America and the Chief Seattle Council Scoutreach Foundation (the Council), which comprise the consolidated statements of financial position as of December 31, 2013 and 2012, and the related statements of activities and changes in net assets, cash flows and functional expenses 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. Those standards require that we plan and perform the audits 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.

4 Opinion Certified Public Accountants and Consultants In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Council as of December 31, 2013 and 2012, and the changes in its net assets and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America. Report on Supplementary Information Our audit was conducted for the purpose of forming an opinion on the financial statements as a whole. The fund-level information in the consolidated statements of financial position, statements of activities, and cash flows are presented for purposes of additional analysis and are not a required part of the basic consolidated financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the financial statements. The information has been subjected to the auditing procedures applied in the audit of the consolidated financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated in all material respects in relation to the consolidated financial statements as a whole. Certified Public Accountants May 15,

5 FINANCIAL STATEMENTS

6 Consolidated Statements of Financial Position December 31, 2013 and 2012 Assets Operating Fund Current Assets: Cash and cash equivalents $ 925,797 $ 973,003 Short-term investments (Note 5) 379, ,615 Accounts, grants and pledges receivable, net of allowance for doubtful accounts of $10,548 and $12,910 for 2013 and 2012, respectively (Note 3) 427, ,603 Prepaid expenses 98,292 64,785 Deferred activity expenses 7, ,534 Due (to) from other funds (61,297) 427,267 Merchandise inventories 143, ,876 Total Current Assets 1,920,329 2,926,683 Long-term investments (Note 5) 144, ,449 Long-term accounts, grants and pledges receivable (Note 3) 14,000 28,000 Interfund promissory note (Note 8) (254,086) (321,528) Contributed land held for sale (Note 15) Cash designated or restricted for improvement of long-term assets (Note 4) Receivables designated or restricted for improvement of long-term assets net of allowance for doubtful accounts of $24,166 and $0 for 2013 and 2012, respectively (Note 4) Investments designated or restricted for improvement of long-term assets (Note 4) Land, buildings, equipment, and construction in progress, net (Note 6) Beneficial interests in trusts (Note 7) Other noncurrent assets Total Assets $ 1,824,611 $ 2,785,604 Liabilities and Net Assets Current Liabilities: Accounts payable and accrued liabilities $ 241,930 $ 381,666 Custodial funds held for others 444, ,224 Deferred income 206, ,827 Total Current Liabilities 893,442 1,171,717 Total Liabilities 893,442 1,171,717 Net Assets: Unrestricted 515,400 1,187,723 Temporarily restricted (Note 11) 415, ,164 Permanently restricted (Note 12) - Total Net Assets 931,169 1,613,887 Total Liabilities and Net Assets $ 1,824,611 $ 2,785,604 See accompanying notes.

7 Capital Fund Endowment Fund Total $ - $ - $ 31,465 $ 37,160 $ 957,262 $ 1,010, , , , , ,603 98,292 64,785 7, ,534 (6,141) (825,669) 67, , , ,876 (6,141) (825,669) 98, ,562 2,013,091 2,537,576 18,081,432 15,799,734 18,225,800 15,952,183 14,000 28, , ,528-33, ,874 33, ,874 4,815, ,909 4,815, ,909-2,578,814 73,828 2,578,814 73,828 4,741,041 4,741,041-10,738,353 9,661,473 10,738,353 9,661, , , , ,765 77,000 78,358 77,000 78,358 $ 18,126,029 $ 14,065,582 $ 19,049,370 $ 17,234,821 $ 39,000,010 $ 34,086,007 $ - $ - $ - $ - $ 241,930 $ 381, , , , , ,442 1,171, ,442 1,171,717 10,825,025 8,835,807 11,415,517 10,483,961 22,755,942 20,507,491 7,301,004 5,229,775 2,148,649 1,648,032 9,865,422 7,303,971-5,485,204 5,102,828 5,485,204 5,102,828 18,126,029 14,065,582 19,049,370 17,234,821 38,106,568 32,914,290 $ 18,126,029 $ 14,065,582 $ 19,049,370 $ 17,234,821 $ 39,000,010 $ 34,086,

8 Consolidated Statements of Activities and Changes in Net Assets Changes in Unrestricted Net Assets Operating Capital Endowment Fund Fund Fund Total Total Total support 2,058,487 8,099-2,066,586 2,506,538 Support, Revenues and Reclassifications: Support- Friends of Scouting contributions $ 1,534,735 $ - $ - $ 1,534,735 $ 1,798,355 United Way 264, , ,984 Special events, net of expenses of $160,305 and $150,673 for 2013 and 2012, respectively 133, , ,872 Other contributions 125,920 8, , ,327 Revenues- Sales of product to the public: Gross sales 1,493,231 1,493,231 1,544,082 Less cost of goods sold (391,358) (391,358) (443,171) Less commissions paid to scout units (534,842) (534,842) (547,552) Net sales of product to the public 567, , ,359 Camp fees 1,885,514 43,012 1,928,526 1,799,208 Scouting activities 878, , ,151 Investment income (Note 5) 394,533 46, , ,723 Trading Post and BSA stores (Note 9) 107, , ,276 Realized and unrealized (losses) gains on investments (Note 5) 192,188 30,121 1,253,974 1,476, ,000 Miscellaneous 46,336 (11,853) 34,483 6,018 Total revenues 4,071, ,968 1,254,113 5,433,598 3,800,735 Net assets released from restrictions- Expiration of time restrictions 195, , ,788 Satisfaction of use restrictions 230,250 1,708,606 1,938,856 1,268,188 Total assets released from restrictions 426,164 1,708,606-2,134,770 1,469,976 Total Support, Revenues and Reclassifications 6,556,168 1,824,673 1,254,113 9,634,954 7,777,249 Expenses: Program services 5,333, , ,090,827 5,188,779 Supporting services- Management and general 645,293 28, , ,488 Fundraising 449,493 91, , ,058 Total supporting services 1,094, , ,215,062 1,177,546 Charter and national service fee 80,614 80,614 77,213 Total Expenses 6,509, , ,386,503 6,443,538 Change in Unrestricted Net Assets $ 46,829 $ 947,563 $ 1,254,059 $ 2,248,451 $ 1,333,711 See accompanying notes

9 Consolidated Statements of Activities and Changes in Net Assets (Continued) Operating Capital Endowment Fund Fund Fund Total Total Change in Unrestricted Net Assets $ 46,829 $ 947,563 $ 1,254,059 $ 2,248,451 $ 1,333,711 Changes in Temporarily Restricted Net Assets: Friends of Scouting contributions 256,644 $ - $ - 256, ,887 United Way 34,425 34,425 34,425 Other contributions 124,700 3,737,324 3,862, ,370 Realized and unrealized gains on investments and interest (Note 5) 42, , , ,849 Net assets released from restrictions (426,164) (1,708,606) - (2,134,770) (1,469,976) Change in Temporarily Restricted Net Assets (10,395) 2,071, ,617 2,561,451 (32,445) Changes in Permanently Restricted Net Assets: Contributions 443, , ,565 Loss on contributed land held for sale (Note 15) (81,201) (81,201) Change in value of beneficial interests in trusts 20,512 20,512 22,338 Change in Permanently Restricted Net Assets 382, , ,903 Change in Net Assets 36,434 3,018,792 2,137,052 5,192,278 1,433,169 Net Assets, Beginning of Year: Unrestricted 1,187,723 8,835,807 10,483,961 20,507,491 19,173,780 Temporarily restricted 426,164 5,229,775 1,648,032 7,303,971 7,336,416 Permanently restricted 5,102,828 5,102,828 4,970,925 Total Net Assets, Beginning of Year 1,613,887 14,065,582 17,234,821 32,914,290 31,481,121 Transfers (Note 17) (719,152) 1,041,655 (322,503) - - Net Assets, End of Year: Unrestricted 515,400 10,825,025 11,415,517 22,755,942 20,507,491 Temporarily restricted 415,769 7,301,004 2,148,649 9,865,422 7,303,971 Permanently restricted - - 5,485,204 5,485,204 5,102,828 Total Net Assets, End of Year $ 931,169 $ 18,126,029 $ 19,049,370 $ 38,106,568 $ 32,914,290 See accompanying notes

10 Consolidated Statements of Cash Flows Operating Capital Endowment Fund Fund Fund Total Total Cash Flows from Operating Activities: Change in net assets $ 36,434 $ 3,018,792 $ 2,137,052 $ 5,192,278 $ 1,433,169 Adjustments to reconcile change in net assets to net cash provided (used) by operating activities- Depreciation 706, , ,607 Decrease (increase) in accounts, grants and pledges receivable 104,567 (2,529,152) 1,000 (2,423,585) 4,783,907 Increase (decrease) in allowance for doubtful accounts (2,362) 24,166 21,804 1,049 Decrease in prepaid expenses (33,507) (33,507) (85) (Increase) decrease in deferred activity expenses 238, ,534 (235,534) (Increase) decrease in merchandise inventories (41,264) (41,264) (21,974) Change in amounts due to/from other funds 478,191 (813,387) 335, (Decrease) increase in accounts payable and accrued liabilities (139,736) (139,736) 127,237 Increase in custodial funds held for others 59,397 59,397 36,516 (Decrease) increase in deferred income (197,936) (197,936) 233,351 Decrease in cash surrender value of life endowments 1,358 1, Change in value of beneficial interests in trusts (20,511) (20,511) (22,338) Loss on contributed land held for sale 81,201 81,201 Contributions restricted for long-term assets or endowments (1,737,324) (443,065) (2,180,389) (5,362,857) Interest and dividends retained by long-term investments (42,511) (398,347) (440,858) (520,648) Loss on disposal of fixed assets 14,073 14,073 15,154 Noncash contribution of assets (4,100) (4,100) Net realized and unrealized losses (gains) on long-term investments (2,807,642) (2,807,642) (1,097,764) Net Cash (Used) Provided by Operating Activities 502,318 (1,362,668) (1,113,758) (1,974,108) 24,880 Cash Flows from Investing Activities: Purchases of buildings and equipment (1,799,628) (1,799,628) (1,428,430) Proceeds from sale of assets 6,000 6,000 0 Purchases of investments (1,030,000) 0 (10,659,942) (11,689,942) (20,729,672) Purchases of short-term investments 0 (533,294) Interest retained by long-term investments designated 0 for capital asset acquisitions (42,511) (42,511) (76,901) Proceeds from sales and maturities of investments restricted for improvement of long-term assets 4,783,552 4,783,552 Cash received restricted for improvement of long-term assets (4,400,094) (4,400,094) Proceeds from sales and maturities of investments 1,256,697 11,584,233 12,840,930 16,515,152 Net Cash Provided (Used) by Investing Activities 226,697 (1,452,681) 924,291 (301,693) (6,253,145) Cash Flows from Financing Activities: Contributions received restricted for capital asset acquisitions 1,737,324 1,737,324 5,253,292 Contributions received restricted for endowment 443, , ,565 Interest received from long-term investments designated for capital asset acquisitions 42,511 42,511 76,901 Transfers (719,152) 1,041,655 (322,503) - Advances on interfund loan 6,141 (6,141) - Payments received (made) on interfund loan (63,210) 63,210 Net Cash Provided (Used) by Financing Activities (776,221) 2,815, ,772 2,222,900 5,439,758 Net Change in Cash and Cash Equivalents (47,206) 0 (5,695) (52,901) (788,507) Cash and cash equivalents, beginning of year 973,003-37,160 1,010,163 1,798,670 Cash and Cash Equivalents, End of Year $ 925,797 $ - $ 31,465 $ 957,262 $ 1,010,163 Supplemental Disclosures of Cash Flow Information: Fixed asset acquisitions in accounts payable $ - $ - $ - $ 1,112 $ 158,839 See accompanying notes

11 Consolidated Statement of Functional Expenses For the Year Ended December 31, 2013 Supporting Services Program Management Services and General Fundraising Total 2013 Total Employee Compensation: Salaries and wages $ 2,072,171 $ 326,442 $ 230,010 $ 545,544 $ 2,617,715 Employee benefits 393,216 69,786 48, , ,817 Payroll taxes 199,460 26,476 18,489 40, ,070 Total Employee Compensation 2,664, , , ,936 3,384,783 Bank fees ,700 2,662 68,362 69,045 Conferences, conventions and meetings 231,667 6,629 4,629 11, ,925 Depreciation 669,426 21,992 15,357 37, ,775 Insurance 139,605 10,385 7,252 17, ,242 Interest 23,147 23,147 Membership and advancement 78,839 78,839 Occupancy 304,867 12,873 9,539 22, ,279 Other 26,737 2,174 1,476 3,650 30,387 Postage and shipping 11,748 1,621 8,460 10,081 21,829 Printing and publications 15, ,024 18,005 33,054 Professional fees 4,368 76,763 74, , ,427 Public relations 4, ,594 6,321 Recognition awards 120,577 4,574 59,390 63, ,541 Rental and maintenance of equipment 78,613 10,488 7,324 17,812 96,425 Scoutreach dues 70,409 70,409 Specific assistance to individuals 210, ,909 Supplies 714,545 5,395 12,191 17, ,131 Telephone 43,281 4,891 3,415 8,306 51,587 Travel 676,783 25,995 20,056 46, ,834 Total Functional Expenses $ 6,090,827 $ 674,104 $ 540,958 $ 1,215,062 $ 7,305,889 See accompanying notes

12 Consolidated Statement of Functional Expenses For the Year Ended December 31, 2012 Supporting Services Program Management Services and General Fundraising Total 2012 Total Employee Compensation: Salaries and wages $ 2,156,162 $ 341,380 $ 204,164 $ 545,544 $ 2,701,706 Employee benefits 403,058 70,554 42, , ,659 Payroll taxes 200,202 25,446 15,164 40, ,812 Total Employee Compensation 2,759, , , ,755 3,458,177 Bank fees 53,959 3,706 57,665 57,665 Conferences, conventions and meetings 52,184 6,950 4,142 11,092 63,276 Depreciation 621,518 21,360 12,729 34, ,607 Insurance 106,663 6,250 3,725 9, ,638 Interest 29,252 29,252 Membership and advancement 87,709 87,709 Occupancy 304,377 13,771 11,557 25, ,705 Other 23,181 1,642 6,790 8,432 31,613 Postage and shipping 18,449 3,149 12,043 15,192 33,641 Printing and publications 13, ,422 31,608 44,861 Professional fees 2,003 92,884 10, , ,681 Public relations 14,021 2,717 1,619 4,336 18,357 Recognition awards 86,296 3,083 82,205 85, ,584 Rental and maintenance of equipment 64,840 9,878 5,887 15,765 80,605 Scoutreach dues 86,168 86,168 Specific assistance to individuals 45,822 45,822 Supplies 653,637 4,916 15,102 20, ,655 Telephone 42,614 4,954 2,952 7,906 50,520 Travel 177,370 27,409 21,010 48, ,789 Total Functional Expenses $ 5,188,779 $ 690,488 $ 487,058 $ 1,177,546 $ 6,366,325 See accompanying notes

13 Note 1 - Summary of Significant Accounting Policies Purpose of Organization - The Chief Seattle Council, Boy Scouts of America (the Council) is chartered by the National Council of Boy Scouts of America (the National Council). The Council is a not-for-profit organization within the State of Washington s counties of King, Jefferson, Clallam, North Mason, and Kitsap. The Council has four camping facilities: Camp Parsons in Jefferson County, Camp Sheppard in Pierce County, and Camps Pigott and Brinkley in Snohomish County. The Council is devoted to preparing young people to make ethical and moral choices over their lifetimes by instilling in them the values of the Scout Oath and Law. Teaching leadership, participating citizenship, character development and self-reliance are the objectives of Scouting. The Council s programs are classified as follows: Tiger Cubs - A family-oriented program for first-grade boys and an adult partner (usually a parent). Together they search, discover and share. Tiger Cubs is the first year of the Cub Scout program. Cub Scouts - A family- and community-centered program for boys 8 to 10 years of age. Cub Scouts learn citizenship, compassion, and courage through service projects, ceremonies, games, and other activities promoting character development and physical fitness. Boy Scouts - A leadership development program for boys 11 to 18 years of age. With the Scout Oath and Scout Law as guides, and the support of parents and community and religious organizations, these youth develop an awareness and appreciation of their role in the community and become good citizens. The program teaches leadership and character development through different methods, such as, advancement, camping and training. Varsity Scouting - A program for young men 14 to 17 years of age. Varsity Scouting provides options for those who are looking for rugged high adventure or challenging sporting activities and still want to be a part of a Scouting program that offers the advancement opportunities and values of the Boy Scouts of America. There are five fields of emphasis: advancement, high adventure, personal development, service and special programs and events. Venturing - A program for young men and women 14 (or 13 with completion of the eighth grade) through 20 years of age. Venturing provides experiences to develop youth to become mature, responsible, caring adults. Each program is specific to the youth participating. There are robotic groups, high adventure groups, computer groups, and sea ship groups. The one thing that is consistent with Venturing is that the youth run the program. Learning for Life/Exploring - A co-educational mix of worksite and classroom-based programs that offer career education through role models and hands-on experiences by bringing young men and women, up to age 20, and organizations in the community together. This program gives youth an opportunity to explore careers or fields of interest

14 Note 1 - Continued These programs served: (Unaudited) (Unaudited) Youth members 24,404 26,565 Registered adult volunteers 7,200 7,532 Pack, troops, and posts The Council s website address is: SeattleBSA.org. The Chief Seattle Council Scoutreach Foundation (the Foundation) was established as a 501(c)(3) organization in 2004 to operate exclusively to support the Chief Seattle Council, Boy Scouts of America and its tax exempt mission, purposes, goals and objectives. The Foundation solicited donations for the benefit of the Council. All such donations in 2013 and 2012 were given by donors directly to the Council. The Foundation was dissolved by operation of law effective October 21, The Council s programs and membership standards are established by the National Council. In May 2013, the National Executive Committee, on behalf of the National Executive Board, wrote a resolution for consideration that would remove the restriction denying membership to youth on the basis of sexual orientation alone and this resolution was approved and became effective January 1, The ongoing impact of this change to the membership standards policy is unknown. Fund Accounting - To ensure observance of limitations and restrictions placed on the use of available resources, the accounts of the Council are maintained in accordance with the principles of fund accounting. Under such principles, resources for various purposes are classified for accounting and reporting purposes into funds that are in accordance with specified activities or objectives. Principles of Consolidation - The consolidated financial statements include the accounts of the Council and Foundation. All intercompany transactions have been eliminated. Basis of Presentation - The Council prepares the consolidated financial statements in accordance with the Financial Accounting Standards Board (FASB) standards for not-for-profit organizations (ASC and subsections). Accordingly, the Council 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. Net assets of the Council and changes therein are classified and reported as follows: Unrestricted Net Assets - Net assets that are not subject to externally imposed restrictions. Amounts designated by the Board of the Council are included in this classification. Temporarily Restricted Net Assets - Net assets subject to externally imposed restrictions that will be met by actions of the Council and/or the passage of time

15 Note 1 - Continued Permanently Restricted Net Assets - Permanently restricted net assets must be maintained by the Council in perpetuity, the income of which is expendable. Permanently restricted net assets increase when the Council receives contributions for which donor-imposed restrictions exist, which limit the Council s use of an asset for its economic benefits and neither expire with the passage of time nor can be removed by the Council meeting certain requirements. Revenues are reported as increases in unrestricted net assets unless use of the related assets is limited by restrictions imposed by donors. When donor restrictions expire, temporarily restricted net assets are reclassified to unrestricted net assets and are reported in the consolidated statements of activities as assets released from restriction. If a restriction is fulfilled in the same time period in which the contribution is received, the contribution is reported as unrestricted. Expenses are reported as decreases in unrestricted net assets. Gains and losses on investments and other assets or liabilities are reported as increases or decreases in unrestricted net assets unless their use is restricted by explicit donor restriction or by law. The Council reports gifts of land, buildings, and equipment as unrestricted support unless explicit donor stipulations specify how the donated assets must be used. Gifts of long-lived assets with explicit restrictions that specify how the assets are to be used and gifts of cash or other assets that must be used to acquire long-lived assets are reported as restricted support. Absent explicit donor stipulations about how those long-lived assets must be maintained, the Council reports expirations of donor restrictions when the donated or acquired long-lived assets are placed in service. Fair Value of Financial Instruments - The FASB Fair Value Measurement standard clarifies the definition of fair value for financial reporting, establishes a framework for measuring fair value, and requires additional disclosure about the use of fair value measurements in an effort to make the measurement of fair value more consistent and comparable. The Council has adopted this standard for its financial assets and liabilities measured on a recurring and nonrecurring basis (ASC ). Fair Value Measurement defines fair value as the amount that would be received from the sale of an asset or paid for the transfer of a liability in an orderly transaction between market participants, i.e., an exit price. Financial instruments not reflected at fair value on a recurring basis include cash, short-term investments, receivables, accounts payable, and accrued liabilities. The carrying amount of these financial instruments approximates fair value. Cash and Cash Equivalents - Cash and cash equivalents consist of deposits with financial institutions, which at times exceed federally insured limits. Short-Term Investments - Short-term investments consist of investments directed by the Council that have an original maturity of less than 90 days. Investments - Investments in securities with quoted market values are carried at fair value using Level 1 inputs. Accordingly, unrealized gains or losses due to fluctuations in the fair value are reflected in the consolidated statements of activities. The Council pools the investments of each of the funds to obtain investment flexibility with a primary goal of providing safety of principal with maximum current income to assist in the operations of the Council s activities

16 Note 1 - Continued In addition, a secondary goal is capital appreciation to offset the effects of inflation. Realized gains and losses are determined based on the specific identification method. Interfund Loans - Interfund loans result from the Operating Fund making advances of cash to the Capital Fund to provide funds for camp maintenance expenditures and purchases of fixed assets and from the Endowment Fund to the Operating Fund to extinguish a bank note (See Note 8). Merchandise Inventories - Inventories consist of items for sale through the camp stores of the Council. They are stated at the lower of cost (first-in, first-out basis) or market. Land, Buildings, and Equipment - Land, buildings, and equipment are recorded at cost, if purchased, or at fair value, if donated, if the value exceeds the Council s capitalization threshold of $1,000. Depreciation is computed using the straight-line method based upon estimated useful lives of ten to twenty-five years for buildings and three to ten years for equipment. Contributed Land - Contributed land, whether held for resale or development, is recorded at the lesser of fair value at the date of the gift or the property s current fair value. Donated Materials and Services - Donated materials and services which meet the criteria for recognition are reflected as other contributions and expenses in the accompanying consolidated statements of activities and changes in net assets to the extent fair value is objectively determinable. The value of materials and services donated in 2013 and 2012 were nominal. Some members of the Council have donated significant amounts of time to the Council to further the Council s programs and objectives. No amounts have been included in the financial statements for donated member volunteer services since they did not meet the criteria for recognition. Income Taxes - The Council and the Foundation are exempt from federal income taxes under Section 501(c)(3) of the Internal Revenue Code as charitable organizations whereby only unrelated business income, as defined by Section 509(a)(1) of the Code, is subject to federal income tax. The Council and the Foundation have no unrelated business income. Accordingly, no provision for income taxes has been recorded. The Council and Foundation are subject to income tax examinations by the U.S. government for the current year and certain prior years based on the applicable laws and regulations of each jurisdiction. The Council s and Foundation s informational returns for the years 2010, 2011, and 2012 are still open for review. The Council and Foundation recognize the financial statement effects of a tax position when it is more likely than not, based on technical merits, that the position will be sustained upon examination. The Council and Foundation do not believe there are any material uncertain tax positions and, accordingly, have not recognized any liability for unrecognized tax benefits. For 2013 and 2012, there was no income tax related interest or penalties recorded or included in the consolidated financial statements

17 Note 1 - Continued Statement of Functional Expenses - The costs of providing the various programs and other activities have been summarized on a functional basis in the consolidated statements of activities. Accordingly, certain costs have been allocated among the programs and supporting services based on the benefits derived. Administrative expenses are allocated between programs and supporting services based on personnel time studies performed periodically throughout the year, in accordance with the guidelines provided by the National Council. Direct costs are assigned to the respective programs as they are incurred. Use of Estimates - The preparation of financial statements requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. Significant estimates include collectability of pledges and accounts receivable, discounts on multi-year pledges, the value of contributed noncash assets, including land held for sale, functional allocation of expenses, and useful lives of fixed assets. Reclassifications - Certain reclassifications have been made to the 2012 financial statements to conform to the 2013 presentation. Such reclassifications had no effect on the change in net assets or net asset balances as previously reported. Subsequent Events - The Council has evaluated subsequent events through May 15, 2014, the date on which the financial statements were available to be issued. Note 2 - Capital and Endowment Campaign During 2007, the Council s Board approved a campaign to raise $12 million for capital improvements and $8 million for the endowment fund. As of December 31, 2013, the Council has received donations in excess of $11.4 million for the capital improvement campaign. Construction projects totaling $2.6 million, funded by this campaign, were placed in service as of December 31, 2013, and several other projects were in progress at year end. The Council entered into a construction contract with a general contractor for the Camp Brinkley project that has a total value of approximately $4.3 million of which there was approximately $3.4 million in commitments remaining as of December 31, Note 3 - Accounts, Grants and Pledges Receivable Operating Fund - The Operating Fund had accounts, grants and pledges receivable of $427,398 and $515,603 due within one year, and $14,000 and $28,000 due in more than one year at December 31, 2013 and 2012, respectively. The amounts due beyond one year have not been discounted as the amount was determined to be immaterial. Accounts, grants and pledges receivable are stated at unpaid balances, less an allowance for doubtful accounts. It is the Council s policy to write-off uncollectible receivables when management determines the receivable will not be collected

18 Note 4 - Assets Designated or Restricted for Improvement of Long-Term Assets Capital Fund - The Capital Fund had accounts, grants and pledges receivable of $110,380 and $0 due in more than one year at December 31, 2013 and 2012, respectively. The amounts due beyond one year have not been discounted as the amount was determined to be immaterial. A conditional grant was received in 2013 for $2,000,000. The conditions were met before year end, and therefore, the grant is reflected as a receivable at December 31, The grant payment was received in January Note 5 - Investments The following schedule summarizes the cost and market values of investments by fund: December 31, 2013 December 31, 2012 Cost Market Value Cost Market Value Operating fund $ 524,367 $ 524,367 $ 751,064 $ 751,064 Capital fund 0 4,724,564 4,741,041 Endowment fund 15,548,406 18,081,432 14,558,722 15,799,734 $ 16,072,773 $ 18,605,799 $ 20,034,350 $ 21,291,839 Investments (including short-term investments) were comprised of the following: December 31, 2013 December 31, 2012 Cost Market Value Cost Market Value Money market funds $ 1,847,324 $ 1,847,324 $ 1,789,413 $ 1,789,413 Debt securities 3,978,967 3,933,730 4,118,308 4,245,958 Equity securities 10,246,482 12,824,745 14,126,629 15,256,468 $ 16,072,773 $ 18,605,799 $ 20,034,350 $ 21,291,

19 Note 5 - Continued Valuation Techniques - The Council uses a three-level valuation hierarchy. Financial assets and liabilities valued using Level 1 inputs are based on unadjusted quoted market prices within active markets. Financial assets and liabilities valued using Level 2 inputs are based primarily on quoted prices for similar assets or liabilities in active or inactive markets. Financial assets and liabilities using Level 3 inputs are valued using management s assumptions about the assumptions market participants would utilize in pricing the asset or liability. The Council did not hold any Level 3 assets at December 31, 2013 or Valuation techniques utilized to determine fair value are consistently applied. Following is a description of the valuation methodologies used for assets measured at fair value. There have been no changes in the methodologies used at December 31, 2013 and Level 1 Money Market Funds - Includes money market funds valued at cost plus accrued interest, which approximates fair value. Marketable Securities - Valued at the closing price reported on the active market on which the securities are traded. Level 2 Debt Securities - Securities listed on a securities exchange or traded on the National Association of Securities Dealers National Market System ( NASDAQ ) are valued at their closing price or at the most recently quoted bid price if there is not a closing price. Debt securities and over-the-counter stocks not listed on the NASDAQ are valued at prices that reflect a broker/dealer-supplied valuation or are obtained from independent pricing services. If the available prices are deemed unreliable, the valuation is based on fundamental valuation methods, which may include the analysis of the effect of any restrictions on the resale of the security, industry analysis and trends, significant changes in the issuer s financial position, and any other event that could have a significant effect on the value of the security

20 Note 5 - Continued Fair Values Measured on a Recurring Basis - Fair values of assets measured on a recurring basis at December 31, 2013 and 2012 were as follows: Fair Value Measurements at December 31, 2013 Level 1 Level 2 Level 3 Total Money market funds $ 1,847,324 $ - $ - $ 1,847,324 Debt securities- Investment grade taxable 2,616,492 2,616,492 International developed bonds 282, ,949 Fixed income 336, ,477 Global high yield taxable 697, ,812 Marketable securities- Equities: US large cap 6,119,107 6,119,107 US mid cap 1,186,937 1,186,937 US small cap 725, ,914 International developed 2,146,329 2,146,329 Emerging markets 1,117,207 1,117,207 Commodities mutual funds 341, ,305 Public REITs 1,187,946 1,187,946 Total at December 31, 2013 $ 14,672,069 $ 3,933,730 $ - $ 18,605,

21 Note 5 - Continued Fair Value Measurements at December 31, 2012 Level 1 Level 2 Level 3 Total Money market funds $ 1,789,413 $ - $ - $ 1,789,413 Debt securities- Investment grade taxable 2,847,324 2,847,324 International developed bonds 364, ,581 Fixed income 385, ,244 Global high yield taxable 648, ,809 Marketable securities- Equities: US large cap 4,667,323 4,667,323 US mid cap 1,394,595 1,394,595 US small cap 699, ,657 International developed 1,358,770 1,358,770 Emerging markets 915, ,628 Bond mutual funds 4,854,041 4,854,041 Commodities mutual funds 478, ,027 Public REITs 888, ,427 Total at December 31, 2012 $ 17,045,881 $ 4,245,958 $ - $ 21,291,839 The following schedule summarizes the activity in each fund for 2013: Beginning Distributions Investment Ending Balance Contributions and Other Return Balance Operating fund $ 751,064 $ 1,030,000 $ (1,256,981) $ 284 $ 524,367 Capital fund 4,741,041 (4,783,552) 42,511 - Endowment fund 15,799, ,028 (568,822) 2,394,492 18,081,432 $ 21,291,839 $ 1,486,028 $ (6,609,355) $ 2,437,287 $ 18,605,

22 Note 5 - Continued The following schedule summarizes the activity in each fund for 2012: Beginning Distributions Investment Ending Balance Contributions and Other Return Balance Operating fund $ 217,770 $ 542,050 $ (10,529) $ 1,773 $ 751,064 Capital fund - 5,000,000 (433,000) 174,041 4,741,041 Endowment fund 14,187, ,313 (470,381) 1,536,462 15,799,734 $ 14,405,110 $ 6,088,363 $ (913,910) $ 1,712,276 $ 21,291,839 The following schedule summarizes the investment return and classification in the consolidated statement of activities: Dividends and interest on long-term investments $ 371,807 $ 515,135 Net realized and unrealized gains 2,108,659 1,097,991 Return on long-term investments 2,480,466 1,613,126 Dividends and interest on short-term investments and cash accounts ,263 Net realized and unrealized gains on short-term investments 42,511 29,411 Investment fees (86,382) (97,524) Total return on investments 2,437,287 1,712,276 Loss on land held for sale (81,201) Return on perpetual trusts held by others (Note 7) 43,996 42,634 $ 2,400,082 $ 1,754,

23 Note 6 - Land, Buildings, Equipment, and Construction in Progress Land, buildings, equipment, and construction in progress were as follows for December 31: Buildings and improvements $ 14,125,188 $ 13,067,198 Equipment 1,018,285 1,007,434 Less accumulated depreciation (8,389,963) (7,780,371) 6,753,510 6,294,261 Construction in progress 2,061,889 1,438,290 Land 1,922,954 1,928,922 $ 10,738,353 $ 9,661,473 Note 7 - Perpetual Trusts The Council is named as a 15% beneficiary of a trust held for the benefit of local nonprofit agencies, and a sole beneficiary of a trust held for its benefit. The trusts, which are held in perpetuity, are administered by financial institutions and provide for at least annual earnings distributions to the Council. The earnings are available for general operating purposes. The Council s interests in the trust agreements are included in permanently restricted net assets. The Council s interests in gains and losses in the trust value are recognized in the consolidated statements of activities as permanently restricted activities. Fair values of the Council s share of investment securities held by the trusts measured on a recurring basis at December 31, 2013 and 2012, were $504,276 and $483,765, respectively. A reconciliation of the beginning and ending balances for fair value measurements made using significant unobservable inputs (Level 3) for perpetual trusts is as follows: Beginning balance $ 483,765 $ 461,427 Investment return 43,996 42,634 Distributions (23,485) (20,296) Ending Balance $ 504,276 $ 483,

24 Note 8 - Interfund Promissory Note In 2010, the Council entered into a promissory note payable from the operating fund to the endowment fund for $633,746. The note is due in equal monthly payments over ten years plus interest at 6.5% per year on the unpaid balance. The loan had an unpaid balance of $321,523 and $384,734 at December 31, 2013 and 2012, respectively and is shown on the balance sheet as inter-fund promissory note in the operating and endowment funds. All scheduled payments were made in 2013 and The Council made an additional $100,000 payment to reduce principal in April Note 9 - Boy Scouts of America Store Revenue The National Council is responsible for managing the Boy Scouts of America stores. Under this agreement, the National Council remits 8% of store revenues to the Council for use of its facilities plus an additional 5% of store revenues on sales in excess of $750,000 in a calendar year. This agreement was extended on a month to month basis and the Council is in the process of drafting a new agreement with the National Council. Revenue received from the National Council was $107,177 and $101,648 for 2013 and 2012, respectively. Note 10 - Benefit Plans The Boy Scouts of America has a defined benefit multi-employer plan, administered by the National Council, which covers substantially all full-time employees of the national office and the local councils, including the Council. The plan name is the Boy Scouts of America Master Pension Trust - Boy Scouts of America Retirement Plan for Employees and covers all employees who have completed one year of service and who have agreed to make contributions. Eligible employees contribute 2% of compensation, and the Council contributes an additional 7% to the plan. The Council s policy is to fund accrued pension costs when incurred. The Council s pension expense, net of contributions made by employees, was $146,016 and $149,087 for 2013 and 2012, respectively, which approximated the current service cost. The actuarial information for the plan as of February 1, 2013, indicates that it is in compliance with ERISA regulations regarding funding. Because the Council participates in the plan with the Boy Scouts of America and other local councils, specific identification of the Council s portion of net plan assets or the actuarial present value of accumulated plan benefits is not determined. Additionally, the Council has a 403(b) defined contribution retirement plan available to all employees. Employees may voluntarily contribute a portion of their compensation to the plan subject to limits set by the federal tax code. The Council contributes to the plan an amount equal to 50% of the first 6% of compensation contributed by eligible employees. Employees are eligible for Council contributions upon completing one year and one thousand hours of service. The Council s contributions under the plan are fully vested with the employee after five years of service. Defined contribution retirement plan expense amounted to $56,793 and $51,268 for 2013 and 2012, respectively. It is the policy of the Council to fund retirement costs accrued currently. The Council s employees participate in a healthcare plan provided by the National Council. The Council pays a portion of the cost for employees, and the employees pay the remaining portion and the cost for any of their dependents participating in the plan. During 2013 and 2012, the Council remitted approximately $263,652 and $270,291, on behalf of its employees to the National Council related to the health care plan

25 Note 11 - Temporarily Restricted Net Assets Temporarily restricted net assets are available for the following purposes or periods: December 31, Purchase/maintenance of fixed assets $ 7,301,004 $ 5,229,775 Unappropriated earnings from permanently restricted net assets 2,148,649 1,648,032 Time restricted for future periods 415, ,164 $ 9,865,422 $ 7,303,971 Note 12 - Permanently Restricted Net Assets Permanently restricted net assets are restricted for investment in perpetuity, the income from which is available to support: December 31, General operations $ 3,469,504 $ 3,523,594 Camperships 430, ,746 Scoutreach 1,000,000 1,000,000 Camp operations 3,090 3,090 Camp maintenance 582, ,398 $ 5,485,204 $ 5,102,828 Note 13 - Endowment The Council s endowment consists of both endowment funds restricted by donors and funds designated by the Board of Directors to function as endowments (quasi-endowments). Net assets associated with endowment funds, including quasi-endowments, are classified and reported based on the existence or absence of restrictions imposed by donors. Interpretation of Relevant Law - The Council s Board of Directors has interpreted the Washington State Prudent Management of Institutional Funds Act (PMIFA) 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 Organization 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

26 Note 13 - Continued 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 Council in a manner consistent with the standard of prudence prescribed by PMIFA. In accordance with PMIFA, the Council 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 the Council and the donor-restricted endowment fund; - General economic conditions; - The possible effect of inflation and deflation; - The expected total return from income and the appreciation of investment; - Other resources of the Council; and - The investment policies of the Council. As of December 31, 2013 and 2012, endowment net assets consisted of the following: Temporarily Permanently Unrestricted Restricted Restricted 2013 Total Donor restricted endowment funds $ - $ 2,148,649 $ 5,485,204 $ 7,633,853 Board designated quasi-endowment fund 11,415,517 11,415,517 Endowment Net Assets $ 11,415,517 $ 2,148,649 $ 5,485,204 $ 19,049,370 Temporarily Permanently Unrestricted Restricted Restricted 2012 Total Donor restricted endowment funds $ - $ 1,648,032 $ 5,102,828 $ 6,750,860 Board designated quasi-endowment fund 10,483,961 10,483,961 Endowment Net Assets $ 10,483,961 $ 1,648,032 $ 5,102,828 $ 17,234,

27 Note 13 - Continued Changes to endowment net assets for 2013 were as follows: Temporarily Permanently Unrestricted Restricted Restricted Total Endowment net assets, December 31, 2012 $ 10,483,961 $ 1,648,032 $ 5,102,828 $ 17,234,821 Endowment investment return- Interest and dividends, net of fees , ,871 Realized and unrealized gains and losses 1,253, ,926 (60,689) 1,916,157 Total endowment investment return 1,254,059 1,138,658 (60,689) 2,332,028 Contributions 443, ,065 Interfund transfers (322,503) (322,503) Appropriation of assets for expenditure (638,041) (638,041) Endowment Net Assets, December 31, 2013 $ 11,415,517 $ 2,148,649 $ 5,485,204 $ 19,049,370 Changes to endowment net assets for 2012 were as follows: Temporarily Permanently Unrestricted Restricted Restricted Total Endowment net assets, December 31, 2011 $ 10,015,789 $ 1,207,223 $ 4,970,925 $ 16,193,937 Endowment investment return- Interest and dividends, net of fees , ,544 Realized and unrealized gains and losses 468, ,818 22,338 1,120,256 Total endowment investment return 468,172 1,068,290 22,338 1,558,800 Contributions 109, ,565 Appropriation of assets for expenditure (627,481) (627,481) Endowment Net Assets, December 31, 2012 $ 10,483,961 $ 1,648,032 $ 5,102,828 $ 17,234,

28 Note 13 - Continued Funds With Deficiencies - From time to time, the fair value of assets associated with individual donor restricted endowment funds may fall below the level that the donor or PMIFA requires the Council to retain as a fund of perpetual duration. Deficiencies of this nature that are reported in unrestricted net assets were $116,241 and $128,147 as of December 31, 2013 and 2012, respectively. This deficiency resulted from unfavorable market fluctuations that occurred shortly after the investment of new permanently restricted contributions. Subsequent gains that restored the fair value of the assets of the endowment fund to the required level were classified as an increase in unrestricted net assets. Return Objectives and Risk Parameters - The Council has adopted investment and spending policies for endowment assets that attempt to provide a predictable stream of funding to programs supported by its endowment while seeking to maintain the purchasing power of the endowment assets. Endowment assets include those assets of donor-restricted funds that the Council must hold in perpetuity or for a donor-specified period 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 results that are comparable to the price and yield results of a weighted average of widely followed market indexes matching the asset allocation of the endowment investments while assuming a moderate level of investment risk. The Council expects its endowment funds, over time, to provide an average rate of return of approximately 8 percent annually. Actual returns in any given year may vary from this amount. Strategies Employed for Achieving Objectives - To satisfy the long-term rate-of-return objectives, the Council 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 Council targets a diversified asset allocation that places a greater emphasis on equity-based investments to achieve the long-term return objectives within prudent risk constraints. Spending Policy and How the Investment Objectives Relate to Spending Policy - The Council has a policy of appropriating for distribution each year 4.5 percent in 2013 and 2012 of the endowment fund s average fair value over the prior 12 quarters ending one year prior to the year in which the distribution is planned. In establishing this policy, the Council considered the long-term expected return on the endowment. Accordingly, over the long term, the Council expects the current spending policy to allow the endowment to grow at an average of 3.5 percent annually. This is consistent with the Council 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. Transfers - The Council has a policy of appropriating for distribution each year 4.5 percent of the endowment fund s average fair value over the prior 12 quarters ending one year prior to the year in which the distribution is planned. In the event investment income is insufficient to meet the amount required by the spending policy, the difference is recorded as a transfer between funds in the consolidated statements of activities between the beginning net assets and the ending net assets