OPENLANDS. Financial Report September 30, 2016

Transcription

1 OPENLANDS Financial Report September 30, 2016

2 OPENLANDS Contents Report Letter 1 Financial Statements Statement of Financial Position 2 Statement of Activities 3 Statement of Cash Flows 4 Notes to Financial Statements 5-21 Supplementary Information Schedule of Functional Expenses For the Year Ended September 30, (With Comparative Totals for 2015)

3 Independent Auditor's Report To the Audit Committee Openlands We have audited the accompanying financial statements of Openlands, which comprise the statement of financial position as of September 30, 2016 and the related statements of activities and changes in net assets 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 entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Openlands as of September 30, 2016 and 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. Other Matters Financial Information The financial statements of Openlands as of September 30, 2015 were audited by other auditors, whose report dated May 3, 2016 expressed an unqualified opinion on those statements. February 23,

4 OPENLANDS Statement of Financial Position September 30, 2016 and CURRENT ASSETS Operating cash and cash equivalents $ 2,062,833 $ 2,454,992 Accounts and grants receivable 202, ,047 Unconditional promises to give - current 558, ,827 Interest receivable 11,621 11,621 Prepaid expenses 38,233 32,776 Total Current Assets $ 2,872,838 3,709,263 OTHER ASSETS Cash and cash equivalents 3,413,875 4,469,661 Investments 11,933,320 12,158,268 Real estate held for sale 1,616,633 1,581,460 Land holdings - Lakeshore Preserve 648, ,300 Unconditional promises to give - long-term 285,044 20,354 Beneficial interest in retirement fund 173,797 - Total Other Assets $ 18,070,969 18,878,043 PROPERTY PLANT AND EQUIPMENT Land improvements and structures 1,123,358 1,119,358 Office equipment and furniture 231, ,996 Leasehold improvements 26,716 26,716 1,381,276 1,340,070 Less: Accumulated depreciation (469,092) (394,842) Net Property and Equipment 912, ,228 TOTAL ASSETS $ 21,855,991 $ 23,532,534 CURRENT LIABILITIES Accounts payable and accrued expenses $ 341,810 $ 509,616 Fiscal agent deposits 46,814 46,814 Deferred revenue 42,852 34,896 Total Current Liabilities $ 431, ,326 LONG-TERM LIABILITIES Land sale deposits 299, ,000 Deferred lease liability 137, ,047 Beneficial Interest in Retirement Fund 173,797 - Total Long-Term Liabilities 610, ,047 Total Liabilities 1,042, ,373 NET ASSETS Unrestricted: Board designated 2,316,905 2,263,528 Undesignated 402, ,852 2,719,538 2,677,380 Temporarily restricted 14,445,346 16,264,019 Permanently restricted 3,648,762 3,648,762 Total Net Assets 20,813,646 22,590,161 TOTAL LIABILITIES AND NET ASSETS $ 21,855,991 $ 23,532,534 2

5 SUPPORT AND OTHER REVENUE OPENLANDS Statement of Activities For the Years Ended September 30, 2016 and Temporarily Permanently Temporarily Permanently Unrestricted Restricted Restricted Total Unrestricted Restricted Restricted Total Foundation contributions $ 38,097 $ 2,045,228 $ - $ 2,083,325 $ 96,162 $ 1,837,840 $ - $ 1,934,002 Government contracts 298, , , ,153 Corporate and other contributions 191, , ,039 74, , ,845 Membership and individual contributions 533,770 22, , , ,459-1,035,191 Special events 335,940 15, , , ,260 Donations from board members 256,063 12, , , ,011 Program services 60,080 3,838-63,918 68, ,199 In Kind Revenue 56, , , ,015 Investment income 6, , ,022 1, , ,485 Realized gain/(loss) on investment (141) 252, , Unrealized gain/(loss) on investment 14, , , (134,051) - (133,754) Realized gains on sales - 15,002-15,002 19, ,471 Net assets released from restrictions 4,913,236 (4,913,236) - - 4,774,287 (4,774,287) TOTAL SUPPORT AND OTHER REVENUE $ 6,705,049 $ (1,818,673) - $ 4,886,376 $ 7,413,296 $ (2,052,960) - $ 5,360,336 EXPENSES Progam services Community Engagement 1,366, ,366,679 1,797, ,797,722 Land Preservation 565, , , ,829 OMMA and Wetlands Restoration 1,883, ,883,111 1,472, ,472,634 Greenways 606, , , ,713 Lakeshore Preserve 292, ,493 1,072, ,072,009 Policy 577, , , ,451 Communitations 305, , , ,659 Total Program Services 5,597, ,597,821 6,345, ,345,017 Supporting services: Fund-raising 498, , , ,311 General and administrative 566, , , ,452 Total Supporting Services 1,065, ,065, , ,763 TOTAL EXPENSES 6,662, ,662,891 7,264, ,264,780 CHANGE IN NET ASSETS 42,158 (1,818,673) - (1,776,515) 148,516 (2,052,960) - (1,904,444) NET ASSETS - BEGINNING OF YEAR 2,677,380 16,264,019 3,648,762 22,590,161 2,528,864 18,316,979 3,648,762 24,494,605 NET ASSETS - END OF YEAR $ 2,719,538 $ 14,445,346 $ 3,648,762 $ 20,813,646 $ 2,677,380 $ 16,264,019 $ 3,648,762 $ 22,590,161 3

6 CASH FLOWS FROM OPERATING ACTIVITIES OPENLANDS Statement of Cash Flows For The Years Ended September 30, 2016 and Change in net assets $ (1,776,515) $ (1,904,444) Adjustments to reconcile change in net assets to net cash (used) in operating activities: Depreciation 81,372 74,551 Write-off of real estate, property, pplant and equipment 2, Provision for impairment of land - 154,000 Realized loss/(gain) on investments (252,578) (429) Net unrealized loss/(gain) on investments (114,929) 134,183 Realized (gain) on sales of land (15,002) (19,471) Increased in deferred lease liability (10,885) (3,761) Increase (decrease) in cash due to change in: - Accounts and grants receivable 390, ,734 Unconditional promises to give (205,958) 1,515,671 Prepaid expenses and other (5,457) 1,449 Accounts payable and accrued expenses (167,806) (376,680) Deferred revenue 7, Net cash used in operating activities (2,066,430) (17,070) CASH FLOWS FROM INVESTING ACTIVITIES Purchase of property and equipment (50,708) (2,666) (Decrease) in land sale deposits 96,910 - Increase (decrease) in fiscal agent deposits - (8,710) Proceeds from sale and maturity of investments - net 592,455 3,821,227 Proceeds from sales of real estate 74, ,280 Purchase of real estate (95,011) (95,000) Net cash provided by investing activities 618,485 4,281,131 CASH FLOWS FROM FINANCING ACTIVITIES Repayment of note payable - (489,015) Repayment of line of credit - (200,000) Withdrawals from (deposits into) restricted cash and cash equivalents 1,055,786 (2,781,886) Net cash provided by (used in) financing activities 1,055,786 (3,470,901) Net (decrease) increase in cash and cash equivalents (392,159) 793,160 CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR 2,454,992 1,661,832 CASH AND CASH EQUIVALENTS - END OF YEAR $ 2,062,833 $ 2,454,992 SUPPLEMENTAL DISCLOSURES OF CASH FLOWS INFORMATION Interest Paid $ - $ 10,560 SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND FINANCING ACTIVITIES Return of land sale deposits $ - $ 247,000 Conveyeance of real estate held for sale $ - $ (247,000) 4

7 OPENLANDS Notes to Financial Statements September 30, 2016 and 2015 NOTE 1 NATURE OF THE ORGANIZATION Openlands is an Illinois non-profit corporation, incorporated on December 16, 1967, whose mission is to increase the quantity and quality of open space in the greater Chicago region for the purpose of enriching the lives of the people who live, work, and play here. NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Accounting The financial statements of Openlands have been prepared on the accrual basis of accounting in accordance to U.S. generally accepted accounting principles ( GAAP ). Cash and Cash Equivalents Openlands considers highly liquid investments with maturity of three months or less to be cash equivalents. Non-current cash and cash equivalents designated for long-term purposes or received with donor-imposed restrictions limiting their use to long-term purposes are not considered cash and cash equivalents for the purposes of the statement of cash flows. Openlands has concentrated its credit risk for cash by maintaining deposits in financial institutions which may at times exceed amounts covered by insurance provided by the U.S. Federal Deposit Insurance Corporation (FDIC). Openlands has not experienced any losses in such accounts and believes it is not exposed to any significant credit risk to cash. Accounts and Grants Receivable Accounts and grants receivable are carried at original invoice or closing statement amounts, less an allowance for doubtful accounts. Openlands follows the practice of charging uncollectible accounts and grants receivable directly against current earnings. As of September 30, 2016 and 2015, no allowance for doubtful accounts was necessary Unconditional Promises to Give Unconditional promises to give in the future, are reported as revenue when received, measured at fair value. Donor promises to give in the future are recorded at the present value of estimated future cash flows. The future discounted cash flow from promises to give, received in fiscal years 2016 and 2015 have been discounted at a risk-adjustment rate of 2.6% and 3% respectively. 5

8 Investments Investments are reported at fair value. Investment income, including net realized and unrealized gains (losses), is reflected in the statement of activities and changes in net assets. Interest and dividend income is recorded on the accrual basis. Realized gains and losses are determined based on specific identification of securities sold. Openlands investments are exposed to various risks, such as interest rates, credit, and overall market volatility. Due to these risk factors, it is reasonably possible that changed in the value of investments will occur in the near term and could materially affect the amounts reported in the statement of financial position. Donated investments are recognized initially at fair value at the date of donation. The policy of Openlands is to sell all such securities as soon as possible after receipt. Real Estate Held for Sale Real estate held for sale is comprised of real estate acquired by Openlands to assist local officials, community groups, and landowners in acquiring specific parcels of land for the purpose of preserving public open space. The assets are valued at the lower of cost or the amount expected to be received upon sale. Real estate held for sale is reviewed for impairment indicators whenever events or changes in circumstances indicate that the carry amount may not be recoverable. To the extent that an impairment provision is determined to be necessary, the excess of the carry amount of the real estate held for sale over its estimated fair value is written down. During the years ended September 30, 2016 and 2015, an impairment loss of $0 and $154,000 respectively was recorded. The impairment loss is included in Land Preservation expense in the statement of activities. Property and Equipment Acquisitions, improvements and replacements of major assets are capitalized at cost less any provisions for impairments. Maintenance, repairs and minor replacements are expensed. Depreciation is computed using the straight-line method over the estimated useful lives, except for leasehold improvements which are amortized over the remaining lease term. The estimated lives used are as follows: Land improvements and structures Office equipment and furniture Leasehold improvements 20 years 4-10 years 12 years 6

9 Recoverability of long-lived assets to be held and used is measured by comparing the carry amount of the asset to the estimated undiscounted cash flows expected to be generated by the assets. If the carry amount of an asset exceeds its estimated future cash flows, an impairment loss will be recognized in the amount by which the carry amount exceeds the fair value of the asset. Assets to be disposed of would be presented separately in the statement of financial position, and reported at lower of the carry amount or fair value less costs to sell and are no longer depreciated. There was no impairment loss on long-lived assets held for use recognized in 2016 and Classification of Net Assets Openlands net assets have been grouped into the following three classes: Unrestricted Net assets that are not subject to donor-imposed stipulations. Unrestricted net assets may be designated for specific purposes by action of the board of trustees or may otherwise be limited by contractual agreements with outside parties. Temporarily Restricted Net assets whose use by Openlands is subject to donor-imposed stipulations that can be fulfilled by Openlands pursuant to those stipulations or that expire by the passage of time. Permanently Restricted Net assets that provide Openlands a permanent endowment. Income derived from endowment investments may be used for general operating purposes or purpose restrictions from donors. Contributions Contributions are measured at fair value. Contributions received are reported as unrestricted, temporarily restricted or permanently restricted, depending on the existence or nature of any donor restrictions. When a donor 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 restrictions. It is Openlands policy to release the restriction of the Lakeshore Preserve over the useful life of the underlying assets as depreciation is recorded. Service Fees Service fees are charged to purchasers of real estate to recover Openlands expenses in connection with the real estate transaction. These fees are recognized when earned. In-Kind Contributions Donated services and supplies are recognized as contributions if the services (a) create or enhance nonfinancial assets or (b) require specialized skills, are performed by people with those skills, and would otherwise be purchased by Openlands. Donated services and supplies are measured at fair market value. During the fiscal years 2016 and 2015, Openlands received $56,193 and $269,015 respectively of donated services and supplies. Fiscal year 2015 includes approximately $250,000 donated legal services relating to the Starved Rock litigation. The 7

10 donated services are reported as in-kind contributions and expenses in the accompanying statement of activities. Tax Status Openlands is exempt from income tax under Section 501(c)(3) of the U.S. Internal Revenue Code. GAAP requires management to evaluate tax positions taken by Openlands and recognize a tax liability if Openlands has taken an uncertain position that more likely than not, would not be sustained upon examination by the IRS or other applicable taxing authorities. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. Functional Allocation of Expenses The cost of providing the program and support services have been reported on a functional basis in the statement of activities and changes in net assets. Indirect expenses have been allocated between the various programs and support services based on estimates, as determined by management. Although the methods of allocation used are considered reasonable, other methods could be used that would produce a different amount. Reclassifications Certain reclassifications were made to amounts in the prior year financial statements to conform to classifications used in Upcoming Accounting Pronouncement Not-for- Profit Entities Financial Reporting Model. The Financial Accounting Standards Board (FASB) issued Accounting Standards Update No , Not-for-Profit Entities (Topic 958): Presentation of Financial Statements of Not-for-Profit Entities in August ASU No requires significant changes to the financial reporting model of organizations who follow FASB not-for-profit rules, including changing from three classes of net assets to two classes, net assets with donor restrictions and net assets without donor restrictions. The ASU will also require changes in the way certain information is aggregated and reported by Openlands, including required disclosures about the liquidity and availability of resources. The new standard is effective for Openlands year ending September 30, 2019 and thereafter and must be applied on a retrospective basis. Openlands is currently evaluating the impact this standard will have on the financial statements. 8

11 Upcoming Accounting Change In May 2014, the Financial Accounting Standards Board issued Accounting Standards Update (ASU) No , Revenue from Contracts with Customers (Topic 606), which will supersede the current revenue recognition requirements in Topic 605, Revenue Recognition. The ASU is based on the principle that revenue is recognized to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The ASU also requires additional disclosure about the nature, amount, timing, and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. The new guidance will be effective for the Openlands year ending September 30, The ASU permits application of the new revenue recognition guidance to be applied using one of two retrospective application methods. Openlands has not yet determined which application method it will use or the potential effects of the new standard on the financial statements, if any. Upcoming Accounting Change In February 2016, the Financial Accounting Standards Board issued ASU , Leases, which will supersede the current lease requirements in ASC 840. The ASU requires lessees to recognize a right-of-use asset and related lease liability for all leases, with a limited exception for short-term leases. Leases will be classified as either finance or operating, with the classification affecting the pattern of expense recognition in the statement of operations. Currently, leases are classified as either capital or operating, with only capital leases recognized on the balance sheet. The reporting of lease-related expenses in the statements of operations and cash flows will be generally consistent with the current guidance. The new lease footnote guidance will be effective for Openlands year ending September 30, 2021 and will be applied using a modified retrospective transition method to the beginning of the earliest period presented. The new lease standard is expected to have a significant effect on Openlands financial statements as a result of buildings classified as operating leases. The effect of applying the new lease guidance on the financial statements has not yet been determined. Subsequent Events The financial statements and related disclosures include evaluation of events up through and including January 27, 2017, which is the date the financial statements were available to be issued. 9

12 NOTE 3 PROMISES TO GIVE Unconditional promises to give at September 30, 2016 and 2015 are as follows: Receivable in less than one year $558,095 $616,827 Receivable in one to five years 300,000 20, , ,792 Less fair value adjustment (14,956) (611) $843,139 $637,181 NOTE 4 - LAND HOLDINGS LAKESHORE PRESERVE As part of the United States Navy s desire to redevelop portions of its holdings at Fort Sheridan, it transferred, via its private partner Midwest Family Housing (MFH), three ravines, a mile of bluff and beach, and adjoining portions of the uplands (Lakeshore Preserve) to Openlands in 2007 and The transfers included various deed restrictions including that Openlands would restore and preserve the 77-acre property for use as a public open space conservation area and nature preserve for passive, low impact recreation. The Lakeshore Preserve was conveyed in three phases. The first phase, consisting of acres was transferred on March 7, The second and third phases, consisting of acres and acres, respectively, were transferred in July The Navy and MFH acknowledge that the Lakeshore Preserve may be transferred to a public body or not-for-profit organization deemed appropriate upon prior notice of such transfer to the Navy, MFH and others. The Lakeshore Preserve property has been recorded as a temporary restricted contribution at its fair value in July 2010 of $648,300. Subsequent to acquiring the property, physical improvements including a parking lot, bridge and overlooks and trails amounting to $1,123,358 were capitalized. The improvements are being depreciated over a period of 20 years and were paid for with restricted contributions. NOTE 5 - DEBT Line of Credit During November 2013, Openlands entered into a line of credit with a bank which provides borrowings up to $500,000. Advances bear interest at 2.58% above the London Interbank Offered Rate (LIBOR) and are collateralized by a deposit of $250,000 and accounts receivable. The line is renewed annually and is due on demand. Outstanding borrowings are $0 at September 30, 2016 and

13 NOTE 6 - BOARD DESIGNATED NET ASSETS Board Designated Net Assets consist of the following at September 30, 2016 and 2015: Land Preservation Revolving Loan Fund $1,324,430 $1,324,431 Chicago Open Space Legacy Fund 178, ,584 Conservation Easement Stewardship Fund 521, ,867 Lakeshore Preserve Fund 204, ,383 Planned Giving Fund 88,324 61,263 $2,316,905 $2,263,528 The Land Preservation Revolving Loan Fund will be used to provide assistance to local governments in connection with parks and open space acquisitions as an interim landholder in some cases. The Chicago Open Space Legacy Fund will be used exclusively for the acquisition of property for public open space in the City of Chicago, and in some circumstances, Cook County. As properties are purchased and later sold to a government entity, the funds borrowed will be returned. The Conservation Easement Stewardship Fund will be used exclusively for stewardship and defense responsibilities associated with holding conservation easements. Bequest gifts received with no donor restrictions are allocated at the board's discretion to the Planned Giving Fund. It is the board's intention that the earnings generated from these funds will be allocated to undesignated/unrestricted net assets. These designations are based on board actions, which can be altered or revoked at a future time by the board. NOTE 7 LEASE COMMITMENTS During June 2011, Openlands entered into a fourth amendment to its lease agreement, which was originally entered into in The fourth amendment expires January 31, 2021, and requires minimum monthly lease payments ranging from $16,926 to $23,181 over the lease term. Openlands is liable for their proportionate share of operating expenses as defined in the agreement. The future minimum rentals under the fourth amendment for the years ended September 30, 2016 are as follows: 2017 $ 251, , , , ,724 $1,147,008 11

14 The lease provides for a rent credit during the first six months as well as scheduled rent increases, all of which are required to be recognized ratably over the lease term in accordance with generally accepted accounting principles. Accordingly, the amount of rent expense does not coincide with cash payments. This gives rise to a deferred lease benefit liability which is being amortized over the term of the lease. The deferred lease benefit liability at September 30, 2016 and 2015, amounted to $137,162 and $148,047 respectively. Annual rental expense under all operating leases for the years ended September 30, 2016 and 2015, amounted to approximately $262,213 and $239,741, respectively. NOTE 8 TEMPORARILY RESTRICTED NET ASSETS Temporarily restricted net assets at September 30, 2016, are available for the following purposes or periods: Lakeshore Preserve $ 1,623,559 $ 1,851,758 Land holdings Lakeshore Preserve 648, ,300 O Hare Modernization Program 4,410,986 9,984,701 Wetlands Fund 3,899, ,574 Corwith Hamill Legacy Fund 1,000,000 1,000,270 Hackmatack Opportunity Fund 563,837 24,000 Unappropriated endowment earnings General 818, ,832 Lakeshore Preserve 243, ,118 Time-restricted 1,236,939 1,701,466 $ 14,445,646 $ 16,264,019 The Lakeshore Preserve relates to funds raised to preserve and restore land conveyed to Openlands (see Note 4). 12

15 Under the terms of the O'Hare Modernization Program, Openlands received funds from the City of Chicago ("City") to satisfy the requirements for permits from the United States Army Corps of Engineers ("Corps"). The City is seeking to expand and implement a series of improvements at O'Hare International Airport for the purpose of increasing air traffic efficiency. In the process of implementing this plan, the City has proposed impacts to 153 acres of wetlands within the Des Plaines River watershed in Cook and DuPage Counties of Illinois. To mitigate for the proposed impacts, the City needs to secure 453 acres of mitigation within the Des Plaines River watershed. As a part of providing the required mitigation, the City contracted with Openlands to create the O'Hare Modernization Mitigation Account ("OMMA"). Through the OMMA, Openlands shall be responsible for providing a minimum of acres of mitigation in that part of the Des Plaines River Watershed located within the boundaries of the Chicago District of the U.S. Army Corps of Engineers. Funds received under this program are required to be maintained in separate cash and investment accounts. Under the terms of the Wetlands Fund program, Openlands receives funds collected from enforcement and/or compliance resolutions initiated by the Corps and other governmental agencies. The funds in the Wetlands program are to be used to fund projects within the boundaries of the Chicago District of the Corps or its successor. Projects funded by this program will be under the following categories: Projects to enhance, restore, manage, acquire and/or preserve existing and/or potential wetlands and associated buffer areas; or Projects to acquire, preserve, and/or restore land with exceptional ecological or strategic value, such as buffer properties or properties that create a link between existing projects; or Projects for off-site mitigation for District permitted wetland impacts and wetland restoration and conservation resulting from District-determined wetland violations. Funds received under the Wetlands Program are required to be maintained in separate cash and investment accounts. During the year ended September 30, 2016 and 2015, net assets released from restrictions, by incurring expenses satisfying the restricted purposes or the passage of time were as follows: Lakeshore Preserve $250,856 $ 1,155,550 O Hare Modernization Program 1,365,855 1,338,801 Wetlands Fund 620, ,070 Appropriated endowment earnings-general 145, ,301 Appropriated endowment earnings-lakeshore Preserve 44,549 Hackmatack Opportunity Fund 36,990 2,000 Other purpose and time restrictions met 2,449,762 1,833,565 $ 4,913,236 $ 4,774,287 13

16 NOTE 9 FAIR VALUE MEASUREMENTS Accounting standards require certain assets and liabilities be reported at fair value on the financial statements and provides a framework for establishing that fair value. The framework for determining fair value is based on hierarchy that prioritizes the inputs used in measuring the fair value. The following table presents information about Openlands assets and liabilities measured at fair value on a recurring basis at September 30, 2016 and the valuation techniques used by Openlands to determine those fair values. Fair value determined by Level 1 inputs use quoted prices in active markets for identical assets that Openlands has the ability to access. Fair value determined by Level 2 inputs use other inputs that are observable, either directly or indirectly. These Level 2 inputs include quoted prices for similar assets and liabilities in active markets, and other inputs such as interest rates and yield curves that are observable at commonly quoted intervals. Level 3 inputs are unobservable inputs, including inputs that are available in situations where there is little, if any, market activity for the related asset. These level 3 fair value measurements are based primarily on management s own estimates using pricing models, discounted cash flow methodologies, or similar techniques taking into consideration the characteristics of the asset. In instances where inputs used to measure fair value fall into different levels in the above fair value hierarchy, fair value measurements in their entirety are categorized based on the lowest level input that is significant to the valuation. Openlands assessment of the significance of particular inputs to these fair value measurements requires judgment and considers factors specific to each asset or liability. Note 2 impairment section above includes a discussion of an impairment recognized during the year ended September 30, 2015, which was based on Level 2 inputs. 14

17 The following table sets forth Openlands investments measured at fair value on a recurring basis and the basis of measurement at September 30, 2016 and 2015: Assets and Liabilities Measured at Fair Value on a Recurring Basis at September 30, 2016 Level 1 Level 2 Level 3 Balance at September 30, 2016 Certificates of deposit $ - $ 6,674,117 $ - $ 6,674,117 Mutual index funds: Stock market 1,849, ,849,245 Bond market 2,175, ,175,390 International stock 1,234, ,234,568 Exchange traded - - Total investments $ 5,259,203 $ 6,674,117 $ - $ 11,933,320 Assets and Liabilities Measured at Fair Value on a Recurring Basis at September 30, 2015 Level 1 Level 2 Level 3 Balance at September 30, 2015 Certificates of deposit $ - $ 7,736,043 $ - $ 7,736,043 Mutual index funds: Stock market 2,046, ,046,104 Bond market 1,653, ,653,077 International stock 321, ,161 Exchange traded 401, ,883 Total investments $ 4,422,225 $ 7,736,043 $ - $ 12,158,268 15

18 NOTE 10 RETIREMENT PLAN Openlands has a 403(b) retirement plan (the Plan ). Effective January 1, 2001, Openlands amended its retirement plan, which was established under Section 403(b) of the Internal Revenue Code, to provide employer contributions. All employees are able to participate in the plan by deferring a portion of their salary or wages up to the amount set by Federal law. Employees who "normally" work 21 or more hours per week are eligible for a discretionary matching employer contribution equal to 25% of employee contributions for participants with 5 or less years of service or 50% for participants with more than 5 years of service. The employer contribution is limited to 5% of employee's compensation. Both employer and employee contributions automatically become 100% vested. Openlands contribution to the plan amounted to $60,186 and $54,871 for the years ended September 30, 2016 and NOTE 11 - ENDOWMENT FUND Openlands endowment consists of two donor-restricted funds: General Endowment Established to provide income for general operating purposes. Lakeshore Preserve Endowment Established to provide income to support operations of the Lakeshore Preserve. As required by GAAP, net assets associated with endowment funds are classified and reported based on the existence or absence of donor-imposed restrictions. Temporarily restricted endowment assets are appropriated for expenditure by the Board of Directors through the annual budget. 16

19 Interpretation of Relevant Law The Board of Trustees of Openlands has interpreted 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, Openlands 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 the organization in a manner consistent with the standard of prudence prescribed by UPMIFA. In accordance with UPMIFA, the organization considers the following factors in making a determination to appropriate or accumulate donor-restricted endowment funds: (1) The duration and preservation of the fund (2) The purposes of the organization and the donor-restricted endowment fund (3) General economic conditions (4) The possible effect of inflation and deflation (5) The expected total return from income and the appreciation of investments (6) Other resources of the organization (7) The investment policies of the organization. 17

20 Endowment Net Asset composition consists of the following as of September 30, 2016: September 30, 2016 Temporarily Permanently Total Net Restricted Restricted Endowment Assets General Endowment $ 818,687 $ 2,740,662 $ 3,559,349 Lakeshore Preservation 243, ,100 1,151,594 1,062,181 3,648,762 4,710,943 Donor-restricted endowment funds Beginning of year $ 797,950 $ 3,648,762 $ 4,446,712 Interest and dividends 99,244 99,244 Net appreciation realized and unrealized 354, ,677 Amounts appropriated for expenditure (189,690) (189,690) Donor-restricted endowment funds, End of year $ 1,062,181 $ 3,648,762 $ 4,710,943 Endowment Net Asset composition consists of the following as of September 30, 2015: September 30, 2015 Temporarily Permanently Total Net Restricted Restricted Endowment Assets General Endowment $ 620,832 $ 2,740,662 $ 3,361,494 Lakeshore Preservation 177, ,100 1,085, ,950 3,648,762 4,446,712 Donor-restricted endowment funds Beginning of year $ 982,576 $ 3,648,762 $ 4,631,338 Interest and dividends 104, ,009 Net loss realized and unrealized (165,334) (165,334) Amounts appropriated for expenditure (123,301) (123,301) Donor-restricted endowment funds, End of year $ 797,950 $ 3,648,762 $ 4,446,712 18

21 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 UPMIFA requires Openlands to retain as a fund of perpetual duration. As of September 30, 2016 and 2015, Openlands had no deficiencies for donor-restricted endowment funds in which the fair value of the assets was less than the level required by donor stipulations or law. Return Objectives and Risk Parameters Openlands has adopted investment and spending policies, approved by the Board of Directors, for endowment assets that attempt to provide a predictable stream of funding to programs support by its endowment while also maintaining the purchasing power of those endowment assets. Accordingly, the investment process seeks to achieve an after-cost total real rate of return, including investment income as well as capital appreciation, which exceeds the annual distribution with acceptable levels of risk. Endowment assets are invested in a welldiversified asset mix, which includes equity and debt securities, that is intended to result in a consistent inflation-protected rate of return that has sufficient liquidity to make an annual distribution of 4%, while growing the funds if possible. Investment risk is measured in terms of the total endowment fund; investment assets and allocation between asset classes and strategies are managed to not expose the fund to unacceptable levels of risk. Actual returns in any given year may vary from this amount. Strategies Employed for Achieving Objective To satisfy its long-term rate-of-return objectives, Openlands 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). Openlands targets a diversified asset allocation that places a greater emphasis on equity-based investments to achieve its long-term return objectives within prudent risk constraints. Spending Policy and How the Investment Objectives Relate to Spending Policy Openlands has a policy of appropriating for distribution each year 4% of its endowment fund's weighted average fair value of the prior three calendar years through the calendar year ending within the fiscal year in which the distribution is planned. In establishing this policy, the Openlands considered the long-term expected return on its endowment. Accordingly, over the long term, Openlands expects the current spending policy to allow its endowment to grow at an average of 4 percent annually. This is consistent with Openlands objective to provide additional growth through new gifts and investment return. 19

22 NOTE 12 INVESTMENTS The cost and market value of investments at September 30, 2016, were as follows: Fair RESTRICTED FOR OMMA PROGRAM Cost Value Certificates of deposit $ 6,701,000 $ 6,674,117 GENERAL ENDOWMENT Mutual Index Funds Stock market 795,501 1,425,803 Bond market 1,660,115 1,724,854 International stock 885, ,668 3,340,756 4,102,325 LAKESHORE PRESERVE ENDOWMENT Mutual Index Funds Stock market 280, ,442 Bond market 439, ,536 International stock 261, , ,568 1,156,878 TOTAL INVESTMENTS $ 11,023,324 $ 11,933,320 20

23 The historical cost and market value of investments at September 30, 2015, were as follows: Fair RESTRICTED FOR OMMA PROGRAM Cost Value Certificates of deposit $ 7,666,000 $ 7,641,112 GENERAL ENDOWMENT Mutual Index Funds Stock market 853,955 1,554,655 Bond market 1,188,802 1,218,519 International stock 247, ,579 Exchange traded 382, ,069 2,672,889 3,331,822 LAKESHORE PRESERVE ENDOWMENT Mutual Index Funds Stock market 361, ,449 Bond market 447, ,558 International stock 75,614 72,581 Exchange traded 109,953 91, ,184 1,090,403 OTHER INVESTMENTS Certificates of deposit 95,000 94,931 TOTAL INVESTMENTS $ 11,428,073 $ 12,158,268 21

24 Supplementary Information

25 OPENLANDS Schedule of Functional Expenses For the Year Ended September 30, 2016 With Comparative Totals for the Year Ended September 30, 2015 PROGRAM SERVICES OMMA And Community Land Wetlands Lakeshore Supporting Total Engagement Preservation Restoration Greenways Preserve Policy Communications Services Salaries $ 486,427 $ 202,850 $ 67,229 $ 140,842 $ 27,444 $ 279,015 $ 139,407 $ 611,437 $ 1,954,651 $ 1,830,500 Payroll taxes and benefits 119,852 46,520 13,441 27,872 5,036 57,989 29, , , ,022 Consultants 39,499 21,445 1, ,625 16,358 76,110 3,382 11, , ,612 Rent and Utilities 70,537 35,269-27,130 1,800 37,982 27,130 62, , ,741 Payroll service and bank charges ,274 9,979 10,565 Equipment rental, maintenance and supplies 1, , ,068 11,351 9,364 Insurance 2, ,025 23,121 19,178 Interest ,697 Postage ,803 5,341 21,914 17,288 Publications 7,821 1, ,956 1,817 81,461 73,737 Telephone 4,194 1, ,077 14,208 15,662 Dues and subscriptions 6,593 3, , ,287 3,622 9,251 33,776 22,567 Travel, conference and meals 23,295 9,294 1,259 3, ,567 3,165 26,951 77,739 96,138 Special events , , ,503 Information technology 3, , ,655 10,111 10,683 Depreciation 10,809 2, ,504 56,636 2,510 1,664 5,484 81,372 74,551 Landscape materials 165,815 18,891 1,796, , ,500 2,134,185 3,023,794 Program Supplies 40, ,726 31,041 2, , ,591 85,403 Mini-grants 9, , , ,495 Sub-grantees 371, ,109-65,000 10, , ,903 Nonreimburseable expenses - 3, ,488 9,487 33,147 Office supplies 3,369 1, , ,938 11,190 10,602 Audit and financial ,141 20,141 18,000 Legal - 8, , , ,428 Investment management fees , ,805 7,692 Provision for bad debt ,200 Provision for asset impairment ,000 - Total Expenses $ 1,366,679 $ 565,504 $ 1,883,111 $ 606,543 $ 292,493 $ 577,661 $ 305,830 $ 1,065,070 $ 6,662,891 Total Expenses $ 1,797,722 $ 691,829 $ 1,472,634 $ 270,713 $ 1,072,009 $ 759,451 $ 280,659 $ 919,763 $ 7,264,780 22

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