American Psychological Foundation, Inc. Audited Financial Statements. Years ended December 31, 2014 and 2013 with Report of Independent Auditors

Transcription

1 Audited Financial Statements Years ended December 31, 2014 and 2013 with Report of Independent Auditors

2 Audited Financial Statements Years ended December 31, 2014 and 2013 Contents Report of Independent Auditors...1 Audited Financial Statements Statements of Financial Position...2 Statements of Activities...3 Statements of Functional Expenses Statements of Cash Flows...6 Notes to Financial Statements

3 Report of Independent Auditors Board of Trustees American Psychological Foundation, Inc. Washington, D.C. We have audited the accompanying financial statements of American Psychological Foundation, Inc. (the Foundation) which comprise the statements of financial position as of December 31, 2014 and 2013 and the related statements of activities, functional expenses and cash flows for the years then ended and the related notes to the financial statements. Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor's Responsibility Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control over financial reporting. 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 American Psychological Foundation, Inc. as of December 31, 2014 and 2013 and the changes in its net assets and its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America. Falls Church, Virginia April 23, 2015

4 Statements of Financial Position December 31, Assets Cash and cash equivalents $ 611,785 $ 483,437 Investments 16,594,983 16,664,478 Contributions receivable, net 573, ,294 Contribution receivable - Trust - 87,628 Fixed assets, net 5,056 - Other assets 4,471 10,039 Total assets $ 17,790,223 $ 17,951,876 Liabilities and net assets Liabilities: Accounts payable and accrued liabilities $ 18,311 $ 17,280 Grants, awards and scholarships payable 199, ,245 Accounts payable to APA 284,214 24,202 Total liabilities 502, ,727 Net assets: Unrestricted 5,236,858 5,101,086 Temporarily restricted 12,051,008 12,653,063 Total net assets 17,287,866 17,754,149 Total liabilities and net assets $ 17,790,223 $ 17,951,876 See accompanying notes to the financial statements. 2

5 Statements of Activities Years ended December 31, 2014 and 2013 Temporarily Restricted Permanently Temporarily Restricted Total Unrestricted Restricted Permanently Restricted Unrestricted Total Revenue and support Contributions $ 428,205 $ 425,745 $ - $ 853,950 $ 634,751 $ 601,402 $ - $ 1,236,153 Royalties and permissions 46,265 1,016-47,281 36,733 1,879-38,612 Net investment income 121, , , ,314 1,604,284-2,263,598 Total revenue 596, ,598-1,306,729 1,330,798 2,207,565-3,538,363 Net assets released from restrictions: Scholarships, lectures and grants 1,312,653 (1,312,653) - - 1,230,924 (1,230,924) - - Reclassification (79,214) 621,707 (542,493) - Total revenue and support 1,908,784 (602,055) - 1,306,729 2,482,508 1,598,348 (542,493) 3,538,363 Grant expenses Scholarships and other student funding 225, , , ,612 Grants 453, , , ,135 Lectures, awards and prizes for achievement 78, ,358 39, ,094 Plaques and awards 4, ,763 5, ,242 Operating expenses Staff costs 707, , , ,068 Travel 31, ,744 44, ,076 Office administration 183, , , ,251 Communications and fundraising 61, ,407 71, ,140 Meetings and events 27, ,302 45, ,552 Total expenses 1,773, ,773,012 1,689, ,689,170 Change in net assets 135,772 (602,055) - (466,283) 793,338 1,598,348 (542,493) 1,849,193 Net assets, beginning of year 5,101,086 12,653,063-17,754,149 4,307,748 11,054, ,493 15,904,956 Net assets, end of year $ 5,236,858 $12,051,008 $ - $17,287,866 $ 5,101,086 $12,653,063 $ - $17,754,149 See accompanying notes to the financial statements. 3

6 Statement of Functional Expenses Year ended December 31, 2014 Program Services General and Administrative Fundraising Total Grant expenses Scholarships and other student funding $ 225,474 $ - $ - $ 225,474 Grants 453, ,064 Lectures, awards and prizes for achievement 78, ,358 Plaques and awards 4, ,763 Operating expenses Staff costs: Salaries and benefits 368,357 74, , ,340 Professional development 2, ,561 4,252 Travel: Staff travel 6,702 1,339 4,662 12,703 Trustee travel 7,422 1,484 5,164 14,070 Campaign Leadership Cabinet travel 2, ,824 4,971 Office administration: Office equipment and software 4, ,426 9,336 Office supplies 1, ,158 3,155 Asset management fees 38,307 7,656 26,650 72,613 Miscellaneous 2, ,954 5,324 Consultants ,500 Professional services (audit/tax/accounting) 40,310 8,057 28,044 76,411 Bank fees 2, ,659 4,520 Delivery Depreciation ,444 Overhead charges paid to APA 4, ,079 8,389 Communications and fundraising: Newsletters, annual report and marketing materials 12,901 2,578 8,975 24,454 Fundraising consulting 13,770 2,752 9,579 26,101 Fundraising activities ,405 Direct mailings 4, ,467 9,447 Meetings and events: Trustee and committee meetings 2, ,490 4,059 Friends of the Foundation reception and gala 12,261 2,451 8,531 23,243 Total expenses $ 1,292,507 $ 107,236 $ 373,269 $ 1,773,012 See accompanying notes to the financial statements. 4

7 Statement of Functional Expenses Year ended December 31, 2013 Program Services General and Administrative Fundraising Total Grant expenses Scholarships and other student funding $ 334,612 $ - $ - $ 334,612 Grants 337, ,135 Lectures, awards and prizes for achievement 39, ,094 Plaques and awards 5, ,242 Operating expenses Staff costs: Salaries and benefits 356,339 68, , ,102 Professional development ,684 Agency temporaries Travel: Staff travel 16,374 3,398 11,121 30,893 Trustee travel 6,171 1,281 4,191 11,643 Campaign Leadership Cabinet travel ,540 Office administration: Office equipment and software 3, ,245 6,237 Office supplies Asset management fees 32,378 6,720 21,993 61,091 Miscellaneous ,422 Consultants 1, ,000 Professional services (audit/tax/accounting) 32,565 6,759 22,120 61,444 Bank fees 2, ,534 4,262 Delivery Overhead charges paid to APA 4,963 1,030 3,371 9,364 Communications and fundraising: Newsletters, annual report and marketing materials 17,078 3,544 11,600 32,222 Fundraising consulting 13,884 2,882 9,431 26,197 Fundraising activities 3, ,111 5,865 Direct mailings 3, ,468 6,856 Meetings and events: Trustee and committee meetings 1, ,183 3,287 Friends of the Foundation reception and gala 22,401 4,649 15,215 42,265 Total expenses $ 1,236,717 $ 102,440 $ 350,013 $ 1,689,170 See accompanying notes to the financial statements. 5

8 Statements of Cash Flows Years ended December 31, Cash flow from operating activities Change in net assets $ (466,283) $ 1,849,193 Adjustments to reconcile change in net assets to net cash provided by (used in) operating activities: Net realized and unrealized losses (gains) on investments 303,167 (1,769,911) Change in allowance for doubtful accounts and discount to present value (1,847) 4,102 Depreciation expense 1,444 - Changes in assets and liabilities: Contribution receivable - trust 87,628 (29,991) Contributions receivable 134,213 (189,361) Other assets 5,568 (6,094) Accounts payable and accrued liabilities 1,031 9,779 Grants, awards and scholarships payable 43,587 8,925 Accounts payable to APA 260,012 (50,987) Net cash provided by (used in) operating activities 368,520 (174,345) Cash flow from investing activities Purchase of fixed assets (6,500) - Purchase of investments (2,701,667) (2,743,622) Proceeds from sale of investments 2,467,995 3,285,210 Net cash (used in) provided by investing activities (240,172) 541,588 Net change in cash and cash equivalents 128, ,243 Cash and cash equivalents, beginning of year 483, ,194 Cash and cash equivalents, end of year $ 611,785 $ 483,437 See accompanying notes to the financial statements. 6

9 Notes to Financial Statements Years ended December 31, 2014 and 2013 Note A - Organization The American Psychological Foundation, Inc. (the Foundation) is a nonprofit, philanthropic organization incorporated in Delaware that provides financial support for innovative research and programs that enhance the power of psychology to elevate the human condition and advance human potential, both now and in generations to come. These activities are funded primarily through contributions and investment income. The Foundation is an independent organization separately incorporated from the American Psychological Association (APA). APA makes an annual financial contribution to the Foundation and donates human resources, office space, technology and other services. The Foundation s offices are located in the APA headquarters building. Note B - Significant Accounting Policies Basis of Accounting The Foundation prepares its financial statements on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America (GAAP). Accordingly, revenue is recognized when earned, and expenses are recognized when obligations are incurred. Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates. Subsequent Events The Foundation has performed an evaluation of subsequent events through April 23, 2015, which is the date the financial statements were available to be issued, and has considered any relevant matters in the preparation of the financial statements and footnotes. Income Tax Status The Foundation is exempt from the payment of income taxes on income other than unrelated business income under Section 501(c)(3) of the Internal Revenue Code (the Code) and has been designated by the Internal Revenue Service as a publicly supported organization under Section 509 (a)(l) of the Code. The Foundation is not considered to be a private foundation within the meaning of Section 509(a) of the Code. The Foundation does not have any unrelated business income. Management has concluded that the Foundation has properly maintained its exempt status, and there are no uncertain tax positions as of December 31,

10 Notes to Financial Statements (Continued) Note B - Significant Accounting Policies (Continued) Cash and Cash Equivalents For financial reporting purposes, the Foundation considers investments with original maturities of three months or less to be cash equivalents except cash held by an investment custodian for investment purposes. The Federal Deposit Insurance Corporation (FDIC) insures amounts on deposit with each financial institution up to limits as prescribed by law. The Foundation holds funds at various times throughout the year with financial institutions in excess of the FDIC insured amount, however, the Foundation has not experienced any losses in such accounts, and management believes it is not exposed to any significant credit risk on cash and cash equivalents. Investments and Fair Value Measurements Investments, consisting of equity securities, mutual funds and money market funds, are presented in the financial statements at fair value based on quoted market prices. Gains and losses arising from the sale, maturity or other disposition of investments are accounted for on a specific identification basis calculated as of the trade date. Interest, dividends, unrealized and realized gains and losses are reported as net investment income on the accompanying statements of activities. Unrestricted and restricted funds are pooled together into common investment accounts and net investment income is allocated among unrestricted and temporarily restricted net assets based on the ending individual net asset balances as a percentage of total net assets. In 2014 and 2013, the net investment income allocated to the temporarily restricted funds was $283,837 and $1,604,284, respectively, and is included within net investment income on the accompanying statements of activities. The Foundation s estimates of fair value are based on the framework established in the fair value measurements and disclosures accounting guidance. The framework is based on the inputs used in valuation and requires that observable inputs be used in the valuations when available. The disclosure of fair value estimates in the fair value accounting guidance includes a hierarchy based on whether significant valuation inputs are observable. In determining the level of the hierarchy in which the estimate is disclosed, the highest priority is given to unadjusted quoted prices in active markets and the lowest priority to unobservable inputs that reflect the Foundation's significant market assumptions. 8

11 Notes to Financial Statements (Continued) Note B - Significant Accounting Policies (Continued) Investments and Fair Value Measurements (continued) The three levels of the hierarchy are as follows: Level 1 Inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities traded in active markets that the Foundation has the ability to access. 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 markets that are not active, inputs other than quoted prices that are observable for substantially the full period for the asset or liability and market-corroborated inputs. Level 3 Inputs to the valuation methodology are unobservable for the asset or liability and are significant to the fair value measurement. Market Risk The Foundation invests in money market funds and professionally managed mutual funds that contain various types of marketable securities. Such investments are exposed to various risks, such as fluctuations in fair value and credit risk. Thus, it is at least reasonably possible that changes in these risks in the near term could materially affect the amounts reported in the statements of financial position. Contributions Receivable Unconditional promises to give are recorded as contributions in the period the promise is made. Contributions receivable that are expected to be collected within one year are reported net of any estimated uncollectible amounts. Contributions receivable expected to be collected beyond one year are discounted to present value using the United States Treasury obligations risk-adjusted rates according to their corresponding terms. Net Assets The Foundation's net assets have been grouped into the following three classes: Unrestricted - Unrestricted net assets generally result from revenues derived from providing services and receiving unrestricted contributions, less expenses incurred in providing services, raising contributions and performing administrative functions. Temporarily restricted - Temporarily restricted net assets generally result from contributions and other inflows of assets whose use by the Foundation is limited by donor-imposed stipulations that either expire by passage of time or can be fulfilled by meeting the purpose of the donation. 9

12 Notes to Financial Statements (Continued) Note B - Significant Accounting Policies (Continued) Net Assets (continued) Permanently restricted - Permanently restricted net assets are funds whose use is restricted by donors to create a permanent endowment. Interest, dividends, and unrealized and realized gains and losses from investing in income producing assets may be included in any of these net asset classifications, depending on donor restrictions. During 2013, the endowment fund, which consisted of a gift received from one donor in 2009, was reclassified from permanently restricted to temporarily restricted based on the approval of the donor's estate executor. Earnings from the fund are still available to support the Jacquelin Goldman Congressional Fellowship for postdoctoral psychologists trained in developmental and/or clinical psychology. Revenue Recognition The Foundation's operations are supported primarily by contributions, including bequests. Additional sources include contributions received through a check-off option on the APA dues and dues-exempt statements, the assignment of royalties and a portion of the reprint revenue from the sale of certain APA copyrighted publications. The Foundation reports gifts of cash and other assets as restricted revenue 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 a purpose restriction is accomplished, temporarily restricted net assets are released to unrestricted net assets. Wills are recorded as contribution revenue when the probate courts declare the wills valid and the proceeds are measurable. Grant, Award and Scholarship Expenses Grant, award and scholarship expenses of the Foundation are recorded in the accompanying financial statements as payables and as expenses at the time that the grant, award or scholarship has been both approved by the Board of Trustees and accepted by the recipient. Allocation of Costs The Foundation allocates salaries and benefits to the various programs and supporting services benefited based on the amount of personnel time worked in each area. Reclassifications Certain prior year amounts have been reclassified to conform with the current year presentation. 10

13 Notes to Financial Statements (Continued) Note C - Contributions Receivable As of December 31, 2014 and 2013, the Foundation has received unconditional promises to give that are due as follows: Less than one year $ 279,279 $ 308,355 One to five years 314, ,848 Subtotal 593, ,203 Less: present value discount (15,062) (21,909) Total contributions receivable 578, ,294 Less: allowance for uncollectible receivables (5,000) - Contributions receivable, net $ 573,928 $ 706,294 Discount rates ranging from 1.80% to 3.25% were used to determine the present value discount. Contribution Receivable - Trust In 2003, the Foundation was named the beneficiary of an irrevocable charitable remainder trust (the Trust). Under the trust agreement, a third-party trustee paid the donor a unitrust amount of 6.5% of the net fair market value of the assets of the Trust at the valuation date (as defined). The unitrust amount was paid in quarterly installments over the lifetime of the donor. At December 31, 2013, upon the death of the donor in 2013, the fair value of the Trust was $87,628, which was measured at the undiscounted fair value of the underlying assets of the Trust at December 31, Subsequent to the death of the donor in 2013, the Foundation received the remaining assets of the Trust in Note D - Conditional Pledges In addition to funds already received and recognized as revenue by the Foundation, there are approximately $35,000 and $135,000 in conditional pledges outstanding December 31, 2014 and 2013, respectively. Conditions related to these pledges have not been met. As such, these pledges are not recorded on the Foundation s financial statements for the years ended December 31, 2014 and

14 Notes to Financial Statements (Continued) Note E - Investments and Fair Value Measurements Investments consist of mutual funds, equity securities and money market funds, which are all classified as Level 1 securities in accordance with the GAAP fair value hierarchy, and consist of the following as of December 31: Equity mutual funds: Large cap U.S. equities $ 5,791,469 $ 5,662,315 Small/mid cap U.S. equities 1,947,859 1,906,446 International equities 3,120,474 3,308,492 Fixed income mutual funds: Core fixed income 3,603,145 3,484,193 Opportunistic fixed income 1,559,967 1,520,065 Real assets - commodities 535, ,118 Money market funds 36,568 14,849 Total investments $ 16,594,983 $ 16,664,478 The Foundation's Level 1 securities are valued based on quoted market prices. The Foundation recognizes transfers between levels of the fair value hierarchy at the end of the period in which the events occur causing changes in the availability of fair value inputs. There were no transfers in or out of Level 1 during the years ended December 31, 2014 and Investment income, net consists of the following for the years ended December 31, 2014 and 2013, respectively: Dividends and interest $ 708,665 $ 493,687 Net unrealized and realized (losses) gains (303,167) 1,769, ,498 2,263,598 Investment fees (72,613) (61,091) Investment income, net $ 332,885 $ 2,202,507 Spending Policy The earnings were temporarily restricted when earned and released from restricted funds when used in accordance with donor stipulations. 12

15 Notes to Financial Statements (Continued) Note F - Temporarily Restricted Net Assets Temporarily restricted net assets consist of the following at December 31: Scholarship and other student funding $ 6,271,930 $ 6,803,728 Lectures, awards and prizes 518, ,761 Grants 3,681,451 3,984,190 Other 1,579,423 1,289,384 Total temporarily restricted net assets $ 12,051,008 $ 12,653,063 During 2014 and 2013, the following expenses were incurred once the time restrictions and/or purpose of donor-imposed restrictions on contributions were met. Accordingly, the related temporarily restricted net assets were released to unrestricted net assets in the accompanying statements of activities Grant, award and scholarship expenses Prizes and awards $ 63,000 $ 18,500 Lectures 7,500 7,500 Scholarships and fellowships 142, ,767 Grants 395, ,408 Subtotal 608, ,175 Operational expenses and release from time restrictions Salaries and benefits 492, ,801 Asset management fees 50,829 43,375 Consulting/contractual services 18,271 18,600 Other expenses and transfers, net 142, ,973 Subtotal 704, ,749 Total net assets released from restrictions $ 1,312,653 $ 1,230,924 Note G - Related Party Transactions APA provides shared resources and pays for certain expenses on behalf of the Foundation for which the Foundation reimburses APA. These amounts consist primarily of direct salaries and benefits and other general and administrative expenses of the Foundation. During 2014 and 2013, APA incurred $703,340 and $663,102, respectively, of reimbursable expenses on behalf of the Foundation. In addition, the Foundation receives an annual contribution from APA. The contribution was $100,000 in 2014 and 2013 and is included in contributions in the accompanying statements of activities. In 2014 and 2013, the Foundation used office space provided by APA at no charge. 13

16 Notes to Financial Statements (Continued) Note G - Related Party Transactions (Continued) As of December 31, 2014 and 2013, the net amount due from the Foundation to APA was $284,214 and $24,202, respectively. The total amount of contributions gifted from board members represents $87,360 and $353,400 for the years ended December 31, 2014 and 2013, respectively. Contributions receivable from members of the Board of Trustees at December 31, 2014 and 2013 represented 7% and 26%, respectively, of contributions receivable. Note H - Line of Credit During the year ended December 31, 2009, the Foundation obtained a $500,000 revolving line of credit with a local bank for its use to finance short-term working capital needs. The line of credit is renewed annually, and the current line expires June 1, The line of credit is unsecured and has no collateral requirements. Amounts drawn down are due on demand with interest payable monthly. The line of credit has an interest rate equal to the thirty-day LIBOR rate plus 2%, reset monthly, and not less than 3% per annum. There were no funds drawn on the line of credit as of or during the years ended December 31, 2014 and