GIRL SCOUTS OF SOUTHERN ILLINOIS COUNCIL GIRL SCOUTS OF SOUTHERN ILLINOIS COUNCIL TRUST FUND

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1 GIRL SCOUTS OF SOUTHERN ILLINOIS COUNCIL GIRL SCOUTS OF SOUTHERN ILLINOIS COUNCIL TRUST FUND COMBINED FINANCIAL STATEMENTS AND INDEPENDENT AUDITORS' REPORT FOR THE YEARS ENDED SEPTEMBER 30, 2017 AND 2016

2 CONTENTS INDEPENDENT AUDITORS' REPORT COMBINED FINANCIAL STATEMENTS Combined Statements of Financial Position... 3 Combined Statements of Activities... 4 Combined Statements of Functional Expenses Combined Statements of Cash Flows... 7 Notes to Combined Financial Statements

3 Independent Auditors' Report To the Board of Directors of Girl Scouts of Southern Illinois Council Glen Carbon, Illinois We have audited the accompanying combined financial statements of Girl Scouts of Southern Illinois Council ( the "Organization") and (the "Trust Fund") which comprise the combined statements of financial position as of, and the related combined statements of activities, functional expenses, and cash flows for the years then ended, and the related notes to the combined financial statements. Management's Responsibility for the Combined Financial Statements Management is responsible for the preparation and fair presentation of these combined 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 combined financial statements that are free from material misstatement, whether due to fraud or error. Auditors' Responsibility Our responsibility is to express an opinion on these combined 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 combined financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the combined financial statements. The procedures selected depend on the auditors' judgment, including the assessment of the risks of material misstatement of the combined 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 combined 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 combined financial statements. {314) fax (314) Sunset Office Drive, Suite 400 St. Louis, MO 63127

4 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 combined financial statements referred to above present fairly, in all material respects, the financial position of Girl Scouts of Southern Illinois Council and Girl Scouts of Southern Illinois Council Trust Fund as of, and the changes in its net assets, functional expenses and its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America. St. Louis, Missouri December 20, 2017 (2)

5 COMBINED FINANCIAL STATEMENTS

6 COMBINED STATEMENTS OF FINANCIAL POSITION CURRENT ASSETS Cash and cash equivalents United Way receivable Other receivables, net of allowance Inventories Prepaid expenses ASSETS September 30, $ 335,923 80,647 69, ,317 53,014 $ 167,277 95,666 78, ,501 17,800 Total Current Assets PROPERTY AND EQUIPMENT HELD FOR SALE PROPERTY AND EQUIPMENT, net of accumulated depreciation INVESTMENTS 721,413 75,908 1,479,868 2,498, , ,347 1,613,806 2,192,435 Total Assets $ 4,775,617 $ 4,488,516 LIABILITIES AND NET ASSETS CURRENT LIABILITIES Line of credit Mortgage payable, current portion Accounts payable Accrued expenses Due to Girl Scouts of the United States of America (GSUSA) Deferred revenue $ 37,600 64, ,536 12,666 65,265 $ 70,346 36,411 25, ,101 11,851 58,785 Total Current Liabilities 396, ,047 LONG-TERM LIABILITIES Mortgage payable 130, ,140 Total Liabilities 526, ,187 NET ASSETS Unrestricted Available for general activities Net investment in property and equipment Board designated - self-insurance Temporarily restricted Permanently restricted 1,872,388 1,311,764 30,000 1,023,264 11,500 1,436,389 1,409,255 30, ,185 11,500 Total Net Assets 4,248,916 3,848,329 Total Liabilities and Net Assets $ 4,775,617 $ 4,488,516 See accompanying notes to combined fmancial statements (3)

7 COMBINED STATEMENTS OF ACTIVITIES Year Ended Seetember 30, 2017 Temporarily Permanently Unrestricted Restricted Restricted PUBLIC SUPPORT AND REVENUE Public Support: Contributions and grants $ 88,748 $ 183,230 $ United Way allocation 187,125 73,635 Net assets released from restrictions Satisfaction of program restrictions 194, ,786) Total Public Support 470,659 62,079 Revenue: Program Related Revenue: Product sales 5,222,289 Less: direct costs of product sales 2,524,061) Gross Profit on Product Sales 2,698,228 Program service fees 198,753 Special event revenue 52,909 Miscellaneous income 60,652 Total Revenue 3,010,542 Total Public Support and Revenue 3,481,201 62,079 Total $ 271, , ,738 5,222,289 2,524,061) 2,698, ,753 52,909 60,652 3,010,542 3,543,280 EXPENSES: Program services 2,934,586 Management and general 541,508 Fundraising 192,044 Total Expenses 3,668,138 CHANGE IN NET ASSETS FROM OPERATIONS 186,937) 62,079 Gain on sale of property and equipment 280,541 Investment return, net of fees 244,904 CHANGE IN NET ASSETS 338,508 62,079 2,934, , ,044 3,668, ,858) 280, , ,587 NET ASSETS, Beginning of year 2,875, ,185 11,500 3,848,329 NET ASSETS, End of year $ 3,214,152 $ 1,023,264 $ 11,500 $ 4,248,916 See accompanying notes to combined financial statements (4)

8 Year Ended September 30, 2016 Temporarily Permanently Unrestricted Restricted Restricted Total $ 184, ,014 $ 263,234 $ 88,360 $ 447, , , ,304) 709,750 54, ,040 5,064,937 2,379,235) 5,064,937 2,379,235) 2,685,702 2,685, ,321 58,382 17, ,321 58,382 17,022 2,969,427 2,969,427 3,679,177 54,290 3,733,467 3,007, , ,373 3,007, , ,373 3,767,188 3,767,188 88,011) 54,290 33,721) 173, ,907 85,896 54, ,186 2,789, ,895 11,500 3,708,143 $ 2,875,644 $ 961,185 $ 11,500 $ 3,848,329

9 COMBINED STATEMENT OF FUNCTIONAL EXPENSES For the Year Ended September 3 0, Program Services Support Services Adult Total Girl/ Council Membership Volunteer Public Program Management Fund- Programs Development Development Relations Services and General raising Total EXPENSES Salaries $ 722,335 $ 497,139 $ 84,376 $ 158,329 $ 1,462,179 $ 295,875 $ 97,249 $ 1,855,303 Employee benefits 170, ,654 19,969 37, ,042 70,023 23, ,080 Payroll taxes 52,355 36,033 6,116 11, ,980 21,443 7, ,472 Total Salaries and Related Expenses 945, , , ,275 1,914, , ,313 2,428,855 Conferences and meetings 1,620 11, ,216 16,025 1,534 30,775 Equipment rental and maintenance 26,314 10,709 2,006 2,137 41,166 4,524 2,407 48,097 Insurance 52,399 15,230 3,036 4,375 75,040 15,132 4,331 94,503 Interest expense 7,468 4, ,015 13,548 2,183 1,053 16,784 Miscellaneous 10, ,837 54,266 1,971 67,074 Occupancy 94,480 15,529 2,103 2, ,137 4,741 6, ,465 Postage and shipping 2, ,513 1,209 3,247 7,969 Printing 9,018 3,900 12,918 3,195 1,793 17,906 Professional fees 70,916 7,270 5,395 1,439 85,020 34,374 14, ,477 Specific assistance 20,092 57,996 78,088 78,088 Supplies 248,257 37,910 9, ,780 4,107 17, ,859 Telephone 30,805 18,038 3,379 3,686 55,908 7,619 4,055 67,582 Travel 49,940 31, ,254 2,622 1,496 86,372 Unemployment compensation 2,636 1, ,336 1, ,770 Total Unrestricted Expenses 1,572, , , ,516 2,801, , ,197 3,528,576 Depreciation 108,809 17,112 3,206 3, ,624 3,091 3, ,562 Total Functional Expenses $ 1,681,767 $ 884,208 $ 141,598 $ 227,013 $ 2,934,586 $ 541,508 $ 192,044 $ 3,668,138 See accompanying notes to combined financial statements (5)

10 COMBINED STATEMENT OF FUNCTIONAL EXPENSES For the Year Ended September 30, 2016 Program Services Support Services Adult Total Girl/ Council Membership Volunteer Public Program Management Fund- Programs Development Development Relations Services and General raising Total EXPENSES Salaries $ 719,738 $ 482,856 $ 120,212 $ 161,020 $ 1,483,826 $ 288,980 $ 120,302 $ 1,893,108 Employee benefits 162, ,798 27,086 36, ,338 65,114 27, ,559 Payroll taxes 52,325 35_,103 8,740 11, ,874 21,008 8, ,628 Total Salaries and Related Expenses 934, , , ,007 1,926, , ,155 2,457,295 Conferences and meetings 6, ,175 20,996 4,092 32,263 Equipment rental and maintenance 27,717 11,671 2,805 2,312 44,505 4,739 3,274 52,518 Insurance 60,856 14,589 3,381 4,246 83,072 14,803 3, ,720 Interest expense 6,649 3, ,412 1,966 1,084 15,462 Miscellaneous 9,466 9,466 34,217 43,683 Occupancy 94,591 14,745 2,566 2, ,018 4,687 6, ,650 Postage and shipping 3, ,115 1,658 4,091 9,864 Printing 8,669 4,322 12,991 2,584 3,136 18,711 Professional fees 87,866 9,126 7,412 1, ,245 54,723 2, ,576 Specific assistance 21,370 95, , ,343 Supplies 229,068 23,409 12, ,132 28, ,385 Telephone 33,898 15,746 3,531 4,642 57,817 5,966 4,123 67,906 Travel 49,065 39, ,169 91,693 3,311 1,966 96,970 Unemployment compensation 2,281 1, , ,999 Total Unrestricted Expenses 1,574, , , ,402 2,856, , ,700 3,602,345 Depreciation 122,253 19,847 4,858 4, ,962 8,208 5, ,843 Total Functional Expenses $ 1,697,223 $ 882,479 $ 195,578 $ 232,406 $ 3,007,686 $ 562,129 $ 197,373 $ 3,767,188 See accompanying notes to combined financial statements (6)

11 COMBINED STATEMENTS OF CASH FLOWS Years Ended September 30, CASH FLOWS FROM OPERATING ACTIVITIES Change in net assets $ 400,587 $ 140,186 Adjustments to reconcile change in net assets to net change in cash and cash equivalents from operating activities: Depreciation 139, ,843 Bad debt 42,584 23,567 Gain on sale of property and equipment ( 280,541) Net realized (gains) losses on investments ( 36,968) 30,158 Net unrealized gains on investments ( 164,513) ( 158,115) (Increase) decrease in assets: United Way receivable 15,019 2,647 Other receivables, net of allowance ( 33,412) 9,710 Inventories ( 5,816) ( 14,705) Prepaid expenses ( 35,214) 17,340 In.crease (decrease) in liabilities: Accounts payable 38,577 7,542) Accrued expenses ( 52,565) 39,513 Due to Girl Scouts of the United States of America (GSUSA) 815 ( 12,514) Deferred revenue 6,480 ( 18,512) Net Change in Cash and Cash Equivalents from Operating Activities 34, ,576 CASH FLOWS FROM INVESTING ACTIVITIES Purchase of property and equipment ( 88,116) ( 31,875) Proceeds from sale of property and equipment 433,472 Purchase of investments ( 924,187) ( 4,025,639) Proceeds from sale of investments 819,675 3,919,473 Net Change in Cash and Cash Equivalents from Investing Activities 240,844 ( 138,041) CASH FLOWS FROM FINANCING ACTIVITIES Net payments on line of credit ( 70,346) ( 29,654) Principal payments on mortgage ( 36,447) ( 35,287) Net Change in Cash and Cash Equivalents from Financing Activities ( 106,793) ( 64,941) NET CHANGE IN CASH AND CASH EQUIVALENTS 168,646 13,594 CASH AND CASH EQUIVALENTS, Beginning of year 167, ,683 CASH AND CASH EQUIVALENTS, End of year $ 335,923 $ 167,277 SUPPLEMENTAL DISCLOSURES: Interest paid $ 16,784 $ 15,462 Income taxes paid $ $ See accompanying notes to combined financial statements (7)

12 A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Combination The Girl Scouts of Southern Illinois Council has elected to present combined financial statements. The accompanying combined financial statements reflect the combination of the financial statements of the Girl Scouts of Southern Illinois Council and Girl Scouts of Southern Illinois Council Trust Fund. The Trust Fund, a separate legal entity, is managed by a trustee and the investments are valued at $801,874 and $728,053 at September 30, 2017 and 2016, respectively. All interrelated transactions and balances have been eliminated in this combination. Organization Girl Scouts of Southern Illinois Council (the "Organization") is a nonprofit organization established to provide social and educational development to young girls. This purpose is to inspire girls with the highest ideals of character, conduct, patriotism, and service that they may become happy and resourceful citizens. The Organization operates in Alexander, Bond, Calhoun, Clark, Clay, Clinton, Coles, Crawford, Cumberland, Edgar, Edwards, Effingham, Fayette, Franklin, Gallatin, Hamilton, Hardin, Jackson, Jasper, Jefferson, Jersey, Johnson, Lawrence, Madison, Marion, Massac, Monroe, Perry, Pope, Pulaski, Randolph, Richland, Saline, Saint Clair, Union, Wabash, Washington, Wayne, White, and Williamson counties. It also operates in the southern half of Macoupin County. There are six program levels: Girl Scout Level Daisy Brownie Junior Cadette Senior Ambassador Grade Level K Membership options are available at all levels. Many of the girls participate through a traditional troop. There are five additional 'Pathways' for individual girls to participate in Girl Scouting. Girls can participate through camp, travel opportunities, council wide events including expanded outdoor adventures, short-term series or virtually through online troops and programs. The flexibility allows for girls to participate in Girl Scouting in the way that best suits them. The diversity and options provided in the Girl Scout program provides opportunities for girls to grow through meeting new people and learning about new things. (8)

13 A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Accounting The accompanying combined financial statements have been prepared on the accrual basis of accounting in accordance with generally accepted accounting principles. Use of Estimates The preparation of the combined financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Actual results could differ from estimates. Financial Statement Presentation The Organization's resources are classified for accounting and reporting purposes into three asset categories according to externally donor imposed restrictions. A description of the three net asset categories is as follows: Unrestricted Net Assets - Represent those net assets whose use is not restricted by donors. All contributions are considered to be available for unrestricted use unless specifically restricted by the donor. Included in unrestricted net assets are Board Designated net assets for which the governing board, rather than a donor or other outside agency, has designated net assets to be reserved. The Board is not bound by these designations and may adjust them as they deem necessary. Temporarily Restricted Net Assets - Represent those net assets whose use has been limited by donor-imposed stipulations that specify expenditures, expire by passage of time, or can be fulfilled and removed by actions of the Organization's board pursuant to those stipulations. Permanently Restricted Net Assets - Represent those net assets that must be maintained in perpetuity, the income of which is to be used by the Organization for specific programmatic uses. Revenue Recognition Revenues are recognized as products are sold and services are performed. (9)

14 A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Contributions and Grants Unconditional promises-to-give cash and other assets to the Organization are reported at fair value at the date the promise is received. Conditional promises-to-give cash are reported at fair value at the date the condition is satisfied. Indications of intentions-togive are reported at fair value at the date the gift is received. The gifts are reported as either temporarily or permanently restricted support if they are received with donor stipulations that limit the use of the donated assets. When a donor restriction expires, that is, when a stipulated time restriction ends or purpose restriction is accomplished, temporarily restricted net assets are classified as unrestricted net assets and reported in the Combined Statements of Activities as net assets released from restrictions. When restrictions are met in the same period as the contribution and grants are received, the Organization records the contribution and grant revenue as unrestricted. Cash and Equivalents Cash and equivalents typically consist of cash on hand and short-term investments that are easily converted to cash. The Organization maintains cash deposits in bank accounts which at times may exceed the federally insured limits ofup to $250,000 for each account. The Organization has not experienced any losses in such accounts and believes it is not exposed to any significant credit risk on cash. Inventories Inventories are stated at the lower of cost (first in, first out basis) or market. Inventories consist principally of Girl Scout apparel, insignia and patches. Obsolete, damaged, and otherwise unusable supplies are excluded from inventories. United Way Receivable and Other Receivables Management has determined that the United Way receivable is fully collectible. However, management deemed an allowance necessary for other receivables. The allowance for uncollectible accounts for other receivables was $25,000 at September 30, 2017 and Investments Investments in marketable securities with readily determinable fair values are valued at their fair values based on quoted prices in active markets in the Combined Statements of Financial Position. Both realized and unrealized gains and losses are recorded in the Combined Statements of Activities. (10)

15 A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Financial Instruments The carrying amounts of cash and cash equivalents, United Way receivable, other receivables, inventories, prepaid expenses, accounts payable, accrued expenses, due to GSUSA, and deferred revenue are reported in the Combined Statements of Financial Position approximates fair values due to the short-term maturities of those instruments. Advertising The Organization expenses advertising costs as they are incurred. Donated Assets and Services Donated assets and services are recorded as contributions at their estimated fair market values at the date of donation. Additionally, many individuals volunteer their time and perform a variety of tasks to assist with specific programs, campaign solicitations, and various administrative assignments. These volunteer hours have not been recorded in the Combined Statements of Activities since these services do not meet the criteria for recognition as contributed services. Property and Equipment Property and equipment is stated at cost less accumulated depreciation. Contributed property and equipment is recorded at fair value at the date of the donation. If the donors stipulate how long the assets must be used, the contributions are recorded as restricted support. In the absence of such stipulations, contributions of property and equipment are recorded as unrestricted support. Depreciation is recorded on a straight-line basis over the estimated useful life of the assets which range from three to forty years. The Organization capitalizes property and equipment with a cost over $2,500. Renewals and betterments that extend the life of the property are capitalized. Maintenance and repairs are expensed as incurred. Troop Accounts Cash held in troops and groups accounts operate under GSSI's federal identification number, but not under its control. The Council has no signature authority and will not access the funds as long as a troop or group is functioning according to Girl Scout policies and procedures. Individual troops and groups have the responsibility to use funds in their control for the purposes of Girl Scouting as determined by the members and adult volunteers. The accompanying financial statements do not include financial data for individual Girl Scouts troops and other groups such as service units, committees, and volunteer-led camps. Management is unable to estimate the total funds held in troop accounts as of. (11)

16 A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Deferred Revenue Advance payments by participants for Organization event fees to be conducted in the following fiscal year are reported as deferred revenues and subsequently reported as a component of revenue in the following year. Asset Impairment Assessments The Organization reviews long-lived assets for impairment whenever events or circumstances indicate that the carrying value of such assets may not be fully recoverable. Impairment is recognized to the extent that the sum of undiscounted estimated future cash flows expected to result from use of the asset is less than the carrying value. If impairment is recognized, the carrying value of the impaired asset is reduced to its fair value. As of, there was no indication of impairment. Compensated Absences Compensated absences accrue at different rates for the employees depending on factors such as length of service and rate of pay. The combined financial statements reflect a compensated absences payable balance of $75,977 and $104,731 at September 30, 2017 and 2016, respectively. This amount is included in accrued expenses on the combined statements of financial position. Product Sales Sales of cookies, fall product sales, which include nut, candy, and magazine sales (NCM), and scouting supplies (retail) are recorded as products are sold (See Note Q). Expense Allocation The cost of providing various programs and other activities has been summarized on a functional basis in the Combined Statements of Activities and in the Combined Statements of Functional Expenses. Accordingly, certain costs have been allocated among the programs and supporting services benefited. Income Taxes The Organization qualifies as a nonprofit organization and is exempt from Federal and State income taxes under Section 501(c)(3) of the Internal Revenue Code. The Organization does not have unrelated business income, excise taxes or activities that would threaten the Organization's tax-exempt status. Accordingly, no provision for federal or state income taxes is provided. The Organization files an information return, IRS Form 990 for the Council and a separate return for its Trust. (12)

17 A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Income Taxes Tax years 2013 and later remain subject to examination by taxing authorities. The Organization adopted the provisions relating to Accounting for Uncertainty in Income Taxes and management is not aware of any uncertain tax positions of the Organization related to the tax filings. Reclassification Certain September 30, 2016 amounts have been reclassified to conform to the September 30, 2017 combined financial statement presentation. The reclassifications had no effect on previously reported operating results or changes to net assets. Subsequent Events In preparing these combined financial statements, the Organization has evaluated events and transactions for potential recognition or disclosure through December 20, 2017, the date the combined financial statements were available to be issued. B. OTHER RECEIVABLES Other receivables consisted of the following at September 30: Product sales $29,890 $ 66,013 Pledges receivable 28,945 28,220 Cohen Farm allotments 22,993 Miscellaneous receivables 11,569 8,551 Program events 1,115 Grants receivable 900 Total Other Receivables $94,512 $103,684 Less: Allowance for doubtful accounts ( 25,000) ( 25,000) Total Other Receivables, Net of Allowance $ $ Pledges receivable are recorded as revenue when the promise is made. The Organization distinguishes between contributions for each net asset category in accordance with donorimposed restrictions. (13)

18 C. INVESTMENTS Girl Scouts of Southern Illinois Council The Council's investments are stated at fair value. Investments for the years ended are as follows: Cost September 30, 2017 Fair Value Unrealized Appreciation (Depreciation) Equity Mutual Funds $1,284,775 $1,507,927 $223,152 Alternative Investments-Exchange Traded Funds 106,190 98,378 ( 7,812) Alternative Investments-Mutual Funds 102,136 95,913 ( 6,223) Fixed Income Mutual Funds _7_9_9.._,0_9_4 7_9_6,'--2_10..._(_2_,_8_84... )_ Total $2,292,195 $2,498,428 $206,233 Cost September 30, 2016 Fair Value Unrealized Appreciation (Depreciation) Equity Mutual Funds $1,144,471 Alternative Investments-Exchange Traded Funds 106,190 Alternative Investments-Mutual Funds 109,456 Fixed Income Mutual Funds 790,598 $1,180, , , ,492 $36, ( 1,156) 5, Total $2,150,715 $2,192,435 $41,720 Included in investments are permanently restricted endowment investments of $11,500 and $11,500, and temporarily restricted endowment investments of $668,092 and $626,276 as of, respectively (See Note D). Net investment return consists of the following at September 30: Interest and dividends Less: investment fees Net realized gains (losses) Net unrealized gains on investments Investment Return, Net of Fees 2017 $ 58,012 ( 14,589) 36, ,513 $244, $ 62,173 ( 16,223) ( 30,158) 158,115 $173,907 (14)

19 D. GIRL SCOUTS OF SOUTHERN ILLINOIS COUNCIL ENDOWMENT The endowment consists of twenty individual donor-restricted funds and one board designated fund established for a variety of purposes. As required by generally accepted accounting principles, net assets associated with endowment funds, including funds designated by the Board of Directors to function as endowments, are classified and reported based on the existence or absence of donor-imposed restrictions. The Board of Directors of the Organization has interpreted the Illinois Uniform Prudent Management of Institutional Funds Act (UPMIF A) as requiring the preservation of donor restricted endowment funds, absent explicit donor stipulations to the contrary, at the greater of the fair value of the original gift as of the gift date. 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 according to the directive in 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 UPMIF A. In accordance with UPMIF A, 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 various funds, (2) the purposes of the donor-restricted endowment funds, (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, and (7) the Organization's investment policies. Spending Policy The Finance Committee has set the spending policy between 2-4%, an amount to be established and approved in the annual operating budget each year. The Committee will notify Commerce of any changes to the spending policy. Commerce will assist the Committee with setting spending policy as needed. Investment Return Objectives, Risk Parameters and Strategies The Organization has adopted a total return approach to managing the investment portfolio. The primary objective of the investment policy is to align the investment portfolio with the strategic spending policy of the Organization. The three main investment asset classes will be allocated within the following ranges: Equities 38-70%; Fixed income 20-52%; Alternative asset class 0-20%. The social responsibility of Girl Scouting must be considered and no investments in companies that manufacture or market materials or any other activity not in alignment with Girl Scout philosophy is allowed. It is the responsibility of the Finance Committee to review annually the performance of the investment account and investment policy guidelines, and report to the full board at least quarterly with updates and recommendations as needed. (15)

20 D. GIRL SCOUTS OF SOUTHERN ILLINOIS COUNCIL ENDOWMENT Donor-restricted endowment funds refer to those endowed funds that are established by donor-restricted gifts for that purpose. The term endowment fund includes cash, securities, or other assets to provide income for the maintenance of a not-for-profit organization. The endowment net asset composition by type of fund as of September 30, 2017 is as follows: Temporarily Permanently Unrestricted Restricted Restricted Total Donor-restricted endowment funds $=====$6=6=8'=09=2====$=11=,5=0=0==$=6=79='=59=2 The endowment net asset composition by type of fund as of September 30, 2016 is as follows: Temporarily Permanently Unrestricted Restricted Restricted Total Donor-restricted endowment funds $=====$6=2=6,=27=6=====$=11=,5==0=0==$=6=37=,=77=6 Changes in endowment net assets as of September 30, 2017 are as follows: Temporarily Permanently Unrestricted Restricted Restricted Total Endowment net assets, beginning of year $ $626,276 $11,500 $637,776 Contributions 56,341 56,341 Amounts appropriated for expenditure ( 14,525) ( 14,525) Endowment net assets, end of year $ $668,092 $11,500 $679,592 Changes in endowment net assets as of September 30, 2016 are as follows: Temporarily Permanently Unrestricted Restricted Restricted Total Endowment net assets, beginning of year $ $583,413 $11,500 $594,913 Contributions 59,376 59,376 Amounts appropriated for expenditure ( 16,513) ( 16,513) Endowment net assets, end of year $ $626,276 $11,500 $637,776 (16)

21 E. FAIR VALUE MEASUREMENTS The framework for measuring fair value provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1) and the lowest priority to unobservable inputs (level 3). The three levels of the fair value hierarchy under FASB ASC 820 are described as follows: Level 1 Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets. Level 2 Inputs to the valuation methodology include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in inactive markets, inputs other than quoted prices that are observable for the asset or liability, and inputs that are derived principally from or corroborated by observable market data by correlation or other means. If the asset or liability has a specified term, the level 2 input must be observable for substantially the full term of the asset or liability. Level 3 Inputs to the valuation methodology are unobservable and significant to the fair value measurement. The asset or liability's fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques maximize the use of relevant observable inputs and minimize the use of unobservable inputs. Following is a description of the valuation methodologies used for assets measured at the fair value. There have been no changes in the methodologies used at September 30, 2017 and Mutual funds: Valued at the daily closing price as reported by the fund. Mutual funds held are open-end mutual funds that are registered with the SEC. These funds are required to publish their daily net asset value (NA V) and to transact at that price. The mutual funds held are deemed to be actively traded. Exchange traded funds: Valued at the daily quoted market pnce on the active exchange in which the funds trade. The following table sets forth by level, within the fair value hierarchy, the Plan's investments at fair value as of : (17)

22 E. FAIR VALUE MEASUREMENTS Marketable Securities Equity Mutual Funds Alternative Investments-Exchange Traded Alternative Investments-Mutual Funds Fixed Income Fair Value Measurements at September 30, 2017 Quoted Prices In Active Significant Markets for Other Significant Identical Observable Unobservable Assets Inputs Inputs Fair Value (Level I) (Level 2) (Level 3) $1,507,927 98,378 95, $1,507,927 98,378 95, $ $ Total $2,498,428 $2,498,428 $ $ Marketable Securities Equity Mutual Funds Alternative Investments-Exchange Traded Alternative Investments-Mutual Funds Fixed Income Fair Value Measurements at September 30, 2016 Quoted Prices In Active Significant Markets for Other Significant Identical Observable Unobservable Assets Inputs Inputs Fair Value (Level 1) (Level 2) (Level 3) $1,180, , , $1,180, , , $ $ Total $2,192,435 $2,192,435 $ $ (18)

23 F. PROPERTY AND EQUIPMENT Property and equipment consists of the following at September 30: Land Land improvements Buildings Building improvements Leasehold improvements Furniture and equipment Less: accumulated depreciation Total Property and Equipment, Net 2017 $ 482, ,627 2,573, , , ,915 4,512,611 ( 3,032,743) $1,479, $ 515, ,175 3,116, , , ,345 5,756,807 ( 4,143,001) $1,613,806 Depreciation expense for the years ending was $139,562 and $164,843, respectively. The Organization's office building with a net book value of $363,898 and $388,994 at, respectively, in Mount Vernon, Illinois is subject to a lien according to the Organization's mortgage payable. See Note M for more detail on this mortgage payable. G. PROPERTY HELD FOR SALE As a result of a thorough review in 2015 of council held camp properties, the board approved a decision to retire three camps; Camp Whispering Oaks, Camp Cedar Point, and Camp Chan Ya Ta. During fiscal year 2017, Camp Whispering Oaks in Salem, IL was sold for $418,972, net of expenses. The amount was then offset by the assets held for sale that were sold with the property to create a gain of $272,625. During fiscal year 2017, the Board of Directors listed the Camp Chan Ya Ta for sale. The value of the camp held for sale, net of accumulated depreciation is reported as $75,908 in the Combined Statements of Financial Position as of September 30, H. RETIREMENT OF CAMP PROPERTIES Camp Cedar Point lease expired in November of 2016 and was not renewed. At that time, the net book value of the leasehold improvements at Camp Cedar Point was $21,347. A portion of leasehold improvements were transferred to other camps while remaining leasehold improvements were sold during the fiscal year (19)

24 I. EMPLOYEE BENEFITS Girl Scouts of Southern Illinois Council Employer Sponsored 403(b) Plan Effective March 1, 2011, the Organization established a 403 (b) retirement plan covering all eligible employees. The Organization makes a matching contribution for employees who make participant contributions. The match is between 4% and 8% of the participants' compensation depending on the participant contribution and years of service with the Organization. The cost of the plan was $19,437 and $22,909 for the years ended, respectively. National Girl Scout Council Retirement Plan The Council participates in the National Girl Scout Council Retirement Plan (NGSCRP), a noncontributory defined benefit pension plan sponsored by Girl Scouts of the USA. The National Board of Girl Scouts of the USA voted to freeze the plan to new entrants and to freeze future benefit accruals for all current participants under the Plan effective July 31, The plan covers substantially all of the employees of various Girl Scout councils who were eligible to participate in the plan prior to the Plan freeze. Accrued and vested benefits prior to July 31, 2010 are based on years of service and salary levels. Although net plan assets grew during the year, net plan assets available for Plan benefits continue to be less than the actuarial present value of accumulated Plan benefits as of January 1, Based on the April 18, 2014 conditional approval by the Internal Revenue Service (IRS), all existing amortization bases in the Plan's funding standard account as of January 1, 2013 were combined into one base and the resulting amortization period for that single base was extended to 10 years. Approval applies as long as at a minimum, beginning with the January 1, 2013 calendar year, $30,000,000 is remitted. The $30,000,000 calendar year minimum applies for each succeeding calendar year until the Plan is fully funded based upon the requirements of the Pension Protection Act of 2006 (PPA). In addition, on April 8, 2014, President Obama signed H.R into law, a relief package unanimously passed by Congress that gives NGSCRP the flexibility to adopt the Pension Protection Act (PPA) funding requirements immediately or not at all. NGSCRP has elected to adopt this relief and not be subject to PP A. Aggregate annual contributions made in fiscal years and 2016 were $3 3.1 million and $34.3 million, respectively. The aggregate annual contributions decreased from 2016 to due to the reduction in the Plan's total annual aggregate contributions from $34.3 million to $32.5 million effective May 1, Aggregate contributions made in fiscal 2018 are expected to continue to be $32.5 million. The Council made contributions to the Plan of $255,590 and $254,106 during the years ended, respectively. (20)

25 J. SELF-INSURANCE Girl Scouts of Southern Illinois Council The Organization is self-insured for both unemployment compensation and the first $3,500 of property insurance losses. For unemployment compensation insurance, the Organization provides for the insurance under the direct reimbursement method. This method of insurance allows the Organization to reimburse the State for the actual unemployment benefits paid by the State to claimants for which the Organization has an unemployment compensation liability. During the years ended, the Organization incurred $6,770 and $5,999, respectively, in unemployment compensation insurance claims under the direct reimbursement method. The Organization incurred no losses of property valued under $3,500 during the years ended. The Board has designated $30,000 of unrestricted funds for self-insurance of both unemployment compensation and property insurance for the years ended. K. BUSINESS AND CREDIT RISK The Organization is located in Glen Carbon, Illinois and Mt. Vernon, Illinois. The Organization receives the majority of revenues from various United Way agency grants and the proceeds from the cookie sale program. The Organization also maintains investments in stocks of publicly traded companies, which are subject to upward and downward movements of the market in each of the respective industries. For the years ended, the Organization owns $136,149 and $135,184 of leasehold improvements at Camp Wassatoga. The net book value of the leasehold improvements for the years ended, was $43,118 and $54,335, respectively. The net book value does not necessarily reflect the net realizable value of the leasehold improvements. The Council's investments are subject to various risks, such as interest rate, credit and overall market volatility risks. Further, because of the significance of the investments to the Council's financial position and the level of risk inherit in most investments, it is reasonably possible that changes in the values of these investments could occur in the near term and such changes could materially affect the amounts reported in the financial statements. Management is of the opinion that diversification of its invested assets among the various asset classes should mitigate the impact of changes in any one class. (21)

26 L. LEASE OBLIGATIONS Girl Scouts of Southern Illinois Council The Organization pays nominal amounts to rent facilities for camp and troop meeting space. Additionally, the Organization has several equipment lease agreements with varying terms accounted for as operating leases. Total rent expense for the years ended, was $9,626 and $13,770 respectively. The future minimum lease payments under these operating leases and the lease agreement are as follows at September 30: Year Ending September 30, Total Amount $ 8,617 8,617 3,128 $20,362 M. LONG-TERM DEBT The Organization's long-term debt consists of the following at September 30: Mortgage payable to Illinois Facilities Fund in monthly installments of principal and interest payments of $3,521 at an interest rate of 3.08%. This debt is collateralized by real property. The final payment is due December The mortgage was refinanced during the fiscal year $168,104 $204,551 Less: current portion Total Long-Term Debt 37,600 $130,504 36,411 $168,140 Future maturities oflong-term debt at September 30, 2017 are as follows: Year Ending September 30, Total Amount $37,600 38,775 39,986 41,235 10,508 $168,104 (22)

27 N. LINE OF CREDIT Girl Scouts of Southern Illinois Council The Organization has available a $1,400,000 line of credit for a term of one year, expiring September 19, 2018, with an initial interest rate of 3.85%. The line is secured by assets of the Organization. There was no outstanding balance at September 30, At September 30, 2016, there was $70,346 outstanding on the line of credit. 0. RELATED PARTY TRANSACTIONS The Organization enters into various transactions with Girl Scouts of the USA (GS USA). The Organization is a chartered council of GSUSA and both the Organization and GSUSA are separate legal entities. The Organization purchases most of its inventories from GSUSA. Furthermore, the Organization acts as a pass-through entity for membership dues to GSUSA. The Organization owed GSUSA $12,666 and $11,851 as of, respectively, forunremitted membership dues. P. TEMPORARILY RESTRICTED NET ASSETS Temporarily restricted net assets consist of the following at September 30: Cohen Fund Lukas United Way Trust Fund Juliette Gordon Low Society Other pro grams Total Temporarily Restricted Net Assets 2017 $ 596, ,405 80,647 71,041 13,590 83,155 $1,023, $554, ,161 95,666 71,041 19,053 65,654 $961,185 Net assets were released from restrictions by incurring expenses satisfying the restricted purposes specified or by the passage of time. Releases are as follows at September 30: United Way Cohen Fund Juliette Gordon Low Society Other programs Total 2017 $ 88,654 14,525 9,483 82,124 $194, $ 76,049 16,513 16, ,259 $297,304 (23)

28 Q. PRODUCT SALES Girl Scouts of Southern Illinois Council The following chart provides a detailed breakdown of gross profit by product. NCM represents nut candy magazines product sales. The breakdown of product sales by product as of September 30, 2017 was: Cookie NCM Retail Total Gross Sales $4,318,302 $610,193 $293,794 $5,222,289 Less: Troop/Service Unit Proceeds ( 802,022) ( 88,977) ( 890,999) Cost of Goods Sold ( 1,188,829) ( 271,508) ( 172,725) ( 1,633,062) Gross Profit of Product Sales $2,327,451 $249,708 $121,069 $2,698,228 The breakdown of product sales by product as of September 30, 2016 was: Cookie NCM Retail Total Gross Sales $4,066,114 $651,996 $346,827 $5,064,937 Less: Troop/Service Unit Proceeds ( 776,913) ( 95,020) ( 871,933) Cost of Goods Sold ( 1,011,386) ( 290,237) ( 205,679) ( 1,507,302) Gross Profit of Product Sales $2,277,815 $266,739 $141,148 $2,685,702 R. CONCENTRATIONS Approximately 74.5% and 71.6% of support and revenue was derived from net cookie, nut, magazine, and retail sales for the years ended, respectively. A significant reduction in cookie, nut, and magazine sales, if it were to occur, could have a significant effect on the Council's program and activities. (24)