THE ROYAL OAK FOUNDATION, INC. FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION DECEMBER 31, 2011

Transcription

1 FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION

2 TABLE OF CONTENTS Page Independent Auditors Report... 1 Financial Statements Statement of Financial Position... 2 Statement of Activities... 3 Statement of Cash Flows... 4 Notes to Financial Statements Supplementary Information Independent Auditors Report on Supplementary Information Schedule of Functional Expenses... 13

3 INDEPENDENT AUDITORS REPORT To the Board of Directors of The Royal Oak Foundation, Inc. We have audited the accompanying statement of financial position of The Royal Oak Foundation, Inc. (a not-for-profit corporation) as of December 31, 2011, and the related statements of activities and cash flows for the year then ended. These financial statements are the responsibility of the Organization's management. 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 of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of The Royal Oak Foundation, Inc. as of December 31, 2011, and the changes in its net assets and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America. New York, New York May 16, 2012

4 2 STATEMENT OF FINANCIAL POSITION Assets Cash and cash equivalents (Notes 1b and 3) $ 669,228 Investments (Notes 1d and 4) 3,547,031 Accounts receivable 25,350 Unconditional promises to give (Notes 1e and 5) Unrestricted 44,354 Temporarily restricted 75,000 Charitable remainder trusts receivable (Notes 1f and 6) 565,721 Prepaid expenses and other assets 53,310 Cash surrender value (Note 7) 31,235 Security deposit 29,108 Property and equipment, at cost, net of accumulated depreciation (Notes 1g and 8) 50,302 Total Assets $5,090,639 Liabilities and Net Assets Liabilities Accounts payable and other current liabilities $ 43,483 Commitments and contingencies (Note 9) Net Assets Unrestricted Operating 3,972,362 Board designated (Note 2a) 293,442 Total Unrestricted 4,265,804 Temporarily restricted (Note 2b) 781,352 Total Net Assets 5,047,156 Total Liabilities and Net Assets $5,090,639 See notes to financial statements.

5 3 STATEMENT OF ACTIVITIES YEAR ENDED Temporarily Unrestricted Restricted Total Changes in Net Assets Revenues, Gains and Support Contributions (Note 1e) $ 452,476 $ 638,585 $1,091,061 Membership dues 530, ,970 Fundraising benefit 178, ,383 Less: Direct expenses (46,127) - (46,127) Charitable remainder trusts 126, ,923 Educational programs 277, ,708 Royalty Income 78,033-78,033 Less: Royalty expenses (20,180) - (20,180) Net investment loss (Note 4) (48,351) - (48,351) Income on cash surrender value 2,025-2,025 Miscellaneous income 2,285-2,285 1,534, ,585 2,172,730 Net assets released from restrictions 75,000 (75,000) - Total Revenues, Gains and Support 1,609, ,585 2,172,730 Expenses Program Services Grants and scholarships 394, ,523 Membership 417, ,463 Programs 576, ,861 Total Program Services 1,388,847-1,388,847 Supporting Services Management and general 221, ,667 Fundraising 176, ,879 Total Supporting Services 398, ,546 Total Expenses 1,787,393-1,787,393 Increase (decrease) in net assets (178,248) 563, ,337 Net assets, beginning of year 4,444, ,767 4,661,819 Net Assets, End of Year $ 4,265,804 $ 781,352 $5,047,156 See notes to financial statements.

6 4 STATEMENT OF CASH FLOWS YEAR ENDED Cash Flows From Operating Activities Increase in net assets $ 385,337 Adjustments to reconcile increase in net assets to net cash provided by operating activities: Depreciation 24,450 Net realized and unrealized loss on investments 110,141 Donated securities (55,754) (Increase) decrease in: Accounts receivable 11,501 Unconditional promises to give 109,672 Prepaid expenses and other assets (32,938) Charitable remainder trusts receivable (12,640) Cash surrender value (2,025) Decrease in: Accounts payable and other current liabilities (30,125) Grants payable (242,300) Net Cash Provided By Operating Activities 265,319 Cash Flows From Investing Activities Purchase of investments (7,241,575) Proceeds from sale of investments 6,690,436 Purchase of property and equipment (29,868) Net Cash Used By Investing Activities (581,007) Net decrease in cash and cash equivalents (315,688) Cash and cash equivalents, beginning of year 984,916 Cash and Cash Equivalents, End of Year $ 669,228 See notes to financial statements.

7 5 NOTES TO FINANCIAL STATEMENTS Note 1 - Organization and Summary of Significant Accounting Policies a - Organization The Royal Oak Foundation, Inc. (the Foundation ) is incorporated under New York State Law as a not-for-profit organization. The Foundation works closely with the National Trust of England, Wales and Northern Ireland (the National Trust ). The Foundation raises funds for the conservation of areas of natural beauty and the preservation of historic properties, including houses and gardens in Britain and elsewhere, and sponsors educational programs which address issues in conservation and preservation. b - Cash and Cash Equivalents For purposes of the statement of cash flows, the Foundation considers all highly liquid debt instruments, purchased with a maturity of three months or less, other than those held as investments, to be cash equivalents. c - Fair Value Measurements Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date and establishes a framework for measuring fair values. A three-level valuation hierarchy is used for fair value measurements. These valuation techniques are based upon observable and unobservable inputs. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect market assumptions. These two types of inputs create the following fair value hierarchy: Level 1 - quoted prices for identical instruments in active markets; Level 2 - quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations the significant inputs of which are observable; and Level 3 - Instruments the significant inputs of which are unobservable. The Foundation s investments in equities, mutual funds, money market funds and cash are classified within Level 1 of the fair value hierarchy. Fair value is determined using quoted market values. Investments are classified within Level 3 of the fair value hierarchy because they trade infrequently (or not at all) and therefore have little or no readily available pricing. Unobservable inputs are used to measure fair value to the extent that observable inputs are not available. The charitable remainder trusts receivable is classified within Level 3 of the fair value hierarchy.

8 6 NOTES TO FINANCIAL STATEMENTS Note 1 - Organization and Summary of Significant Accounting Policies (continued) c - Fair Value Measurements (continued) The values assigned to these investments and any unrealized gains or losses reported are based on available information and do not necessarily represent amounts that might be realized if a ready market existed and such differences could be material. The ultimate realization of such amounts depends on future events and circumstances and therefore, valuation estimates may differ from the value realized upon disposition of individual positions. d - Investments The Foundation reflects investments at fair value in the statement of financial position. Interest, dividends and gains and losses on investments are reflected in the statement of activities as increases and decreases in unrestricted net assets unless their use is temporarily or permanently restricted by explicit donor stipulations or by law. Gains and other investment income that are limited to specific uses by donor-imposed restrictions are reported as increases in temporarily or permanently restricted net assets depending on the nature of the restrictions. When a restriction expires, temporarily restricted net assets are reclassified to unrestricted net assets. e - Unconditional Promises to Give and Contributions Contributions are recognized when the donor makes a promise to give to the Foundation, that is, in substance, unconditional. Contributions that are restricted by the donor are reported as increases in unrestricted net assets if the restrictions expire in the fiscal year in which the contributions are recognized. All other donorrestricted contributions are reported as increases in temporarily or permanently restricted net assets depending on the nature of the restrictions. When a restriction expires, temporarily restricted net assets are reclassified to unrestricted net assets. The Foundation uses the allowance method to determine uncollectible promises to give. The allowance is based on prior years experience and management s analysis of specific promises made. f - Charitable Remainder Trusts Receivable The Foundation accepts gifts subject to split-interest agreements. These gifts are generally in the form of charitable remainder unitrusts and charitable remainder annuity trusts. At the time of receipt, a gift is recorded based upon the fair value of the assets donated less the present value of any applicable liabilities for projected distributions to third parties. The discount rate used to value the beneficiary liability is fixed at the gift date. Charitable remainder unitrusts are revalued annually and the beneficiary payments are adjusted accordingly. The Foundation is the beneficiary of four externally managed charitable remainder trusts. These trusts are recorded at the present value of the estimated future cash receipts from the assets of the trust.

9 7 NOTES TO FINANCIAL STATEMENTS Note 1 - Organization and Summary of Significant Accounting Policies (continued) g - Property and Equipment Property and equipment acquired are recorded at cost and are depreciated using the straight-line method over the estimated useful life of the related asset. h - Financial Statement Presentation The Foundation reports 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. i - Tax Status The Royal Oak Foundation, Inc. is a not-for-profit corporation exempt from federal income taxes under Section 501(c)(3) of the Internal Revenue Code and has been designated as an organization which is not a private foundation. Management has evaluated all income tax positions and concluded that no disclosures relating to uncertain tax positions are required in the financial statements. Generally, the Foundation s tax returns for years prior to 2008 are no longer subject to examination by taxing authorities. j - Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Actual results could differ from those estimates. k - Subsequent Events The Foundation has evaluated subsequent events through May 16, 2012, the date that the financial statements are considered available to be issued. Note 2 - Net Assets a - The Board designated net assets consists of all monies or assets contributed to the Foundation, which have been designated by the Board for future activities. b - Temporarily restricted net assets at December 31, 2011 consist of: Restoration of the Knole House in Britain $638,585 Drue Heinz Lecture Series 75,000 Damaris Horan Prize 67,767 $781,352 Temporarily restricted net assets of $75,000 were released in 2011 from the Drue Heinz Lecture Series by incurring expenses satisfying the restricted purpose.

10 8 NOTES TO FINANCIAL STATEMENTS Note 3 - Concentration of Credit Risk The Foundation maintains cash accounts in financial institutions. Certain balances are insured by the Federal Deposit Insurance Corporation. Note 4 - Investments Investments consist of the following at December 31, 2011: Market Value Cost Cash and cash equivalents $ 483 $ 483 Mutual funds - equities 2,596,519 2,736,627 Mutual funds - fixed income 950, ,769 $3,547,031 $3,691,879 Net investment loss for the year ended December 31, 2011 is summarized as follows: Interest and dividends $ 91,506 Net realized gains 763,478 Net unrealized losses/reversal of unrealized gains (873,619) (18,635) Less: Management fees (29,716) Total $ (48,351) Note 5 - Unconditional Promises to Give Unconditional promises to give are all due within one year. Uncollectible promises to give are expected to be insignificant.

11 9 NOTES TO FINANCIAL STATEMENTS Note 6 - Charitable Remainder Trusts Receivable Charitable Remainder Trusts were recorded naming the Foundation as the recipient of remainder assets after the death of the respective donors and/or their beneficiaries ( the life tenants ). Each donor put certain assets in trust from which the trustee remits annuity payments to the life tenants, until such time that the life tenants are deceased. Upon the death of the life tenants, all principal and income of the trusts designated for the Foundation will be distributed to the Foundation. The trusts are held in various investment accounts administered by independent third parties. As of December 31, 2011, the present value of net assets held for charitable remainder trusts, less the present value of expected annuity payments, amounted to $565,721. The following summarizes changes in fair values of the Foundation s Level 3 asset, charitable remainder trusts receivable, for the year ended December 31, 2011: Fair Value Balance, beginning of year $553,081 Change in present value 12,640 Balance, End of Year $565,721 Note 7 - Cash Surrender Value The Foundation received a contribution from a donor in which the Foundation is the beneficiary of a whole life insurance policy. The face value of the policy is $75,000 and the premiums are being paid by the donor. The cash surrender value as of December 31, 2011 was $31,235. Note 8 - Property and Equipment Property and equipment at December 31, 2011 consist of the following: Life Amount Furniture and fixtures 10 years $ 15,551 Equipment 5 years 73,846 Software development 5 years 83, ,146 Less: Accumulated depreciation (122,844) $ 50,302

12 10 NOTES TO FINANCIAL STATEMENTS Note 8 - Property and Equipment (continued) Depreciation expense for the year ended December 31, 2011 was $24,450. Note 9 - Commitments and Contingencies a - The Foundation rents office space pursuant to an operating lease that expires January 31, 2015 and provides for future minimum rental payments as follows: Year Ending December 31, 2012 $126, , , ,248 Total rent expense, including other operating expenses, for the year ended December 31, 2011 was $132,040. b - The Foundation has a line of credit in the amount of $25,000, borrowings of which bear interest at the bank s prime rate plus 3%. There is no expiration date on the line of credit. There were no borrowings outstanding as of December 31, Note 10 - Functional Allocation of Expenses The cost of providing the various program and supporting services has been summarized on a functional basis in the statement of activities. Accordingly, certain costs have been allocated among the programs and supporting services benefited.

13 SUPPLEMENTARY INFORMATION

14 INDEPENDENT AUDITORS REPORT ON SUPPLEMENTARY INFORMATION To the Board of Directors of The Royal Oak Foundation, Inc. We have audited the financial statements of The Royal Oak Foundation, Inc. as of and for the year ended December 31, 2011, and have issued our report thereon dated May 16, 2012, which contained an unqualified opinion on those financial statements. Our audit was performed for the purpose of forming an opinion on the financial statements as a whole. The Schedule of Functional Expenses for the year ended December 31, 2011 is presented for the purposes of additional analysis and is not a required part of the 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 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 financial statements as a whole. New York, New York May 16, 2012

15 13 SCHEDULE OF FUNCTIONAL EXPENSES YEAR ENDED Program Services Supporting Services Grants and Management Total Scholarships Membership Programs Total and General Fundraising Total Expenses Salaries $ 22,409 $ 174,249 $193,670 $ 390,328 $ 84,543 $ 69,902 $154,445 $ 544,773 Payroll taxes and benefits 5,104 39,688 44,111 88,903 19,256 15,921 35, ,080 Grants and scholarships 360, , ,050 Mission related marketing 82 10, , ,836 29,145 39,966 Member services - 134,343 19, , ,410 Lectures and tours , , ,798 Telephone and internet 386 3,002 3,337 6,725 1,457 1,204 2,661 9,386 Insurance ,858-5,858 5,858 Equipment expenses ,675-16,675 16,675 Occupancy 5,431 42,234 46,941 94,606 20,492 16,942 37, ,040 Professional fees ,942-37,942 37,942 Office supplies ,379-12,379 12,379 Travel and meetings ,585 13,313 20,898 20,898 Merchant service fees - 5,668 5,061 10,729 3,658 8,691 12,349 23,078 Miscellaneous , ,891 8,849 Indirect gala expenses ,761 18,761 18,761 Total expenses before depreciation 393, , ,169 1,371, , , ,615 1,762,943 Depreciation 1,006 7,821 8,692 17,519 3,794 3,137 6,931 24,450 Total Expenses $ 394,523 $ 417,463 $576,861 $1,388,847 $ 221,667 $ 176,879 $398,546 $1,787,393 See independent auditors' report on supplementary information.