COMBINED FINANCIAL STATEMENTS AND REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

Transcription

1 COMBINED FINANCIAL STATEMENTS AND REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS UNITED WAY OF METROPOLITAN CHICAGO, INC. AND MEMBER UNITED WAYS

2 C O N T E N T S Page REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS 3 COMBINED FINANCIAL STATEMENTS STATEMENTS OF FINANCIAL POSITION 5 STATEMENTS OF ACTIVITIES 6 STATEMENTS OF CASH FLOWS 8 STATEMENTS OF FUNCTIONAL EXPENSES 9 NOTES TO COMBINED FINANCIAL STATEMENTS 10 SUPPLEMENTARY INFORMATION SUPPLEMENTAL CAMPAIGN AND OTHER INFORMATION 35 COMBINING STATEMENT OF FINANCIAL POSITION 36 COMBINING STATEMENT OF ACTIVITIES 37

3 REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS Grant Thornton LLP 175 W Jackson Boulevard, 20th Floor Chicago, IL T F GrantThornton.com linkd.in/grantthorntonus twitter.com/grantthorntonus Management s responsibility for the financial statements Auditor s responsibility Grant Thornton LLP U.S. member firm of Grant Thornton International Ltd

4 Opinion Other matters Supplementary information Grant Thornton LLP U.S. member firm of Grant Thornton International Ltd

5 COMBINED STATEMENTS OF FINANCIAL POSITION June 30 ASSETS CURRENT ASSETS Cash and cash equivalents $ 12,785.0 $ 13,701.6 Short-term investments Pledges receivable, net 14, ,544.2 Other receivables and prepaid expenses Assets classified as held for sale 4,867.3 Total current assets 29, ,653.5 INVESTMENTS 4, ,835.9 PROPERTY AND EQUIPMENT, NET 3, TOTAL ASSETS $ 36,620.3 $ 40,784.4 LIABILITIES AND NET ASSETS LIABILITIES Current liabilities Accounts payable and accrued expenses $ $ Designation and pledge processing payables 4, ,908.9 Bonds payable 2,675.0 Total current liabilities 5, ,374.7 Non-current liabilities Other long term liabilities, net of current portion Deferred rent, net of current portion 2,213.6 Asset retirement obligation Obligations for retirement benefits 5, ,362.6 Obligation under capital lease 11.9 Total non-current liabilities 8, ,374.5 Total liabilities 13, ,749.2 NET ASSETS Unrestricted - undesignated Unrestricted - Board designated 1, ,895.3 Unrestricted - total 2, ,165.8 Temporarily restricted 17, ,553.2 Permanently restricted 3, ,316.2 Total net assets 23, ,035.2 TOTAL LIABILITIES AND NET ASSETS $ 36,620.3 $ 40,784.4 The accompanying notes are an integral part of these statements. 5

6 COMBINED STATEMENT OF ACTIVITIES Year Ended June 30, 2013 Unrestricted Temporarily Restricted Permanently Restricted Total Public support and other revenue Public support Current year campaign $ 31,464.5 $ 16,876.8 $ $ 48,341.3 Special events Amounts designated to other organizations (14,981.7) (14,981.7) Provision for uncollectible pledges (2,270.1) (2,270.1) Net from current campaign 16, , ,155.6 Contributions received for future campaigns Collections from, and adjustments to, prior years' campaigns 1, ,046.7 Net assets released from restrictions Contributions received in prior years for current campaign (317.4) Prior-year UWMC campaign 16,437.7 (16,437.7) Net campaign revenue 34,350.7 (1,838.1) 32,512.6 Other public support Gifts in-kind and contributed services 1, ,522.8 Designations from other United Ways Grants and other contributions ,247.4 Endowment contributions Other (0.2) (0.2) Net assets released from restrictions (458.7) Total other public support 3, ,321.3 Total public support 37,417.3 (1,631.2) ,833.9 Other revenue Interest and other income Administrative fees (pledge and designations processing) Total other revenue Total public support and other revenue 37,917.6 (1,312.9) ,652.5 Distributions, allocations and expenses Program services Allocations to agencies 21, ,727.5 Grants and other distributions 3, ,526.2 Other program services 3, ,002.2 Total program services 28, ,255.9 Support services Management and general 5, ,569.4 Fundraising 6, ,447.3 Total support services 12, ,016.7 Total distributions, allocations and expenses 40, ,272.6 Change in net assets before pension-related change (2,355.0) (1,312.9) 47.8 (3,620.1) Pension-related change other than net periodic pension cost 2, ,856.7 Change in net assets (1,312.9) 47.8 (763.4) Net assets, beginning of year 2, , , ,035.2 Net assets, end of year $ 2,667.5 $ 17,240.3 $ 3,364.0 $ 23,271.8 The accompanying notes are an integral part of this statement. 6

7 COMBINED STATEMENT OF ACTIVITIES Year Ended June 30, 2012 Unrestricted Temporarily Restricted Permanently Restricted Total Public support and other revenue Public support Current year campaign $ 31,579.7 $ 18,991.7 $ $ 50,571.4 Special events Amounts designated to other organizations (13,117.8) (13,117.8) Provision for uncollectible pledges (2,556.3) (2,556.3) Net from current campaign 18, , ,973.4 Contributions received for future campaigns Collections from, and adjustments to, prior years' campaigns Net assets released from restrictions Contributions received in prior years for current campaign (229.8) Prior-year UWMC campaign 16,314.3 (16,314.3) Net campaign revenue 35, ,046.6 Other public support Gifts in-kind and contributed services Designations from other United Ways Grants and other contributions Endowment contributions Net assets released from restrictions (685.8) Total other public support 2,284.0 (318.6) ,074.5 Total public support 38,121.9 (109.9) ,121.1 Other revenue Interest and other income Administrative fees (pledge and designations processing) Total other revenue Total public support and other revenue 38,776.2 (72.1) ,813.2 Distributions, allocations and expenses Program services Allocations to agencies 21, ,955.3 Grants and other distributions 3, ,309.0 Other program services 3, ,178.0 Total program services 28, ,442.3 Support services Management and general 5, ,041.6 Fundraising 5, ,010.7 Total support services 10, ,052.3 Total distributions, allocations and expenses 38, ,494.6 Change in net assets before pension-related change and impairment loss (72.1) Pension-related change other than net periodic pension cost (5,326.3) (5,326.3) Impairment loss on assets held for sale (1,370.3) (1,370.3) Change in net assets (6,415.0) (72.1) (6,378.0) Net assets, beginning of year 8, , , ,413.2 Net assets, end of year $ 2,165.8 $ 18,553.2 $ 3,316.2 $ 24,035.2 The accompanying notes are an integral part of this statement. 7

8 COMBINED STATEMENTS OF CASH FLOWS Years Ended June Cash flows from operating activities Change in net assets $ (763.4) $ (6,378.0) Adjustments to reconcile change in net assets to net cash used in operating activities Depreciation and amortization A Impairment loss on assets held for sale 1,370.3 Realized and unrealized investment (gains) losses (254.6) B 25.8 Contributions restricted for long-term purposes (47.8) C (109.1) Provision for uncollectible pledges 1,473.7 D 2,887.4 Changes in operating assets and liabilities Pledges receivable 59.7 E (2,817.3) Other receivables and prepaid expenses (10.2) F (74.4) Designation and pledge processing payables G (571.0) Accounts payable and accrued expenses 67.2 H Obligations for retirement benefits (3,699.3) I 4,192.1 Other long term liabilities 2,378.0 J Net cash used in operating activities (40.0) (851.2) Cash flows from investing activities Redemptions of short-term investments K Purchases of short-term investments L (15.2) Purchases of property and equipment (2,885.0) M (97.8) Sales of property and equipment 4,867.3 N Sales of investments O Purchases of investments (760.7) P (843.5) Net cash provided by (used in) investing activities 1,712.9 (91.8) Cash flows from financing activities Contributions restricted for long-term purposes 97.4 C Repayment of long-term bonds payable (2,675.0) Q (175.0) Principal payments under capital lease obligation (11.9) R (24.6) Net cash (used in) provided by financing activities (2,589.5) 97.1 Net change in cash and cash equivalents (916.6) (845.9) Cash and cash equivalents, beginning of year 13, ,547.5 Cash and cash equivalents, end of year $ 12,785.0 $ 13,701.6 Supplemental data: interest paid $ 5.3 S $ 15.0 The accompanying notes are an integral part of these statements. 8

9 COMBINED STATEMENTS OF FUNCTIONAL EXPENSES Years Ended June 30 Support Services Other Program Services Management and General Fundraising Total Support Services Total Salaries $ 1,818.9 $ 1,882.4 $ 2,660.5 $ 2,834.6 $ 3,053.5 $ 2,744.9 $ 5,714.0 $ 5,579.5 $ 7,532.9 $ 7,461.9 Defined contribution plan Defined benefit plan (frozen) Other employee benefits ,003.3 Payroll taxes Total salaries and related expenses 2, , , , , , , , , ,245.0 Staff development Professional fees , , , ,438.9 Office supplies and expenses Telephone Postage and related expenses Occupancy Equipment rental and maintenance Printing and publications , , , Employee business expenses Meetings and events Memberships Dues - United Way Worldwide Interest Insurance and miscellaneous Total expenses before provision for depreciation and amortization 2, , , , , , , , , ,891.1 Depreciation and amortization Total functional expenses $ 3,002.2 $ 3,178.0 $ 5,569.4 $ 5,041.6 $ 6,447.3 $ 5,010.7 $ 12,016.7 $ 10,052.3 $ 15,018.9 $ 13,230.3 The accompanying notes are an integral part of these statements. 9

10 NOTES TO COMBINED FINANCIAL STATEMENTS NOTE A - NATURE OF ORGANIZATION AND RELATED-PARTY TRANSACTIONS United Way of Metropolitan Chicago, Inc. ( UWMC ) is an Illinois non-profit philanthropic corporation whose mission is to improve lives in the metropolitan Chicago area by mobilizing caring people to invest in the community where their resources are needed the most. UWMC and the following four Member United Ways ( MUWs ) are collectively referred to as the Organization : South-Southwest Suburban United Way ( South-Southwest ) Northwest Suburban United Way ( Northwest ) North Shore United Way ( North Shore ) United Way of DuPage/West Cook ( DuPage/West Cook ) In May 2013, the Northwest Suburban United Way and North Shore United Way Board of Directors agreed to merge the two organizations, effective July 1, The new organization will be known as United Way North-Northwest. The Organization serves as a key entity in the metropolitan Chicago region generating, convening and coordinating resources across donors, service providers, government and civic leaders to deliver large-scale, measurable and sustainable impact across the region. The vision of the Organization is that metropolitan Chicago is a region of thriving communities where all individuals and families are able to achieve their fullest potential. The Organization implements region-wide strategies and neighborhood-specific solutions to transform 41 suburban and 17 city communities in the areas of education, income, health and basic needs. The target funding strategy approved by the Board of Directors is 40% for education and 20% each for income, health and basic needs. To raise support for its work, the Organization conducts a campaign each year beginning in late summer and lasting approximately eighteen months through the end of the subsequent calendar year. The Organization also receives grants and other contributions directly from private foundations and other organizations that are invested in various projects that serve the needs of the community. These funds are reflected as Grants and other contributions. The level of contributions to the Organization can be affected by economic conditions. The Organization also raises and distributes resources to additional designated agencies at the specific request of its donors, thus acting as a fiscal agent on behalf of its donors. A decrease in undesignated contributions from corporate and individual donors may adversely affect the Organization s ability to execute its mission and achieve its vision for the metropolitan Chicago region. Several companies managed by members of the Organization s Boards of Directors traditionally conduct campaigns in the ordinary course of business. In addition, the Organization receives contributions directly from members of the UWMC Board of Directors as well as directors of the MUWs. Such amounts, received from the directors, totaled $707.8 and $556.1 at June 30, 2013 and

11 NOTE A - NATURE OF ORGANIZATION AND RELATED-PARTY TRANSACTIONS Continued UWMC, South-Southwest, Northwest, North Shore and DuPage/West Cook have received favorable determination letters from the Internal Revenue Service, stating that they are exempt from Federal income taxes under the provisions of 501(c)(3) of the Internal Revenue Code of 1986, except for income taxes pertaining to unrelated business income. Accounting guidance requires tax effects from uncertain tax positions to be recognized in the financial statements only if the position is more likely than not to be sustained if the position was to be challenged by a taxing authority. Management has determined that there are no material uncertain positions that require recognition in the financial statements. Additionally, no provision for income taxes is reflected in these financial statements. There is no interest or penalties recognized in the financial statements. The tax years ending 2009, 2010, 2011 and 2012 are still open to audit for both Federal and state purposes. UWMC provides community building, fundraising, marketing, finance, accounting, information systems, and human resources support to the MUWs. UWMC acts as an agent for the MUWs in processing pledges, receiving cash on pledges, and paying MUW agency allocations and expenses. In exchange for this support, UWMC receives reimbursement from each MUW. UWMC received $387.0 from the MUWs to reimburse UWMC for its support during fiscal years 2013 and Cash receipt and payment activities and the support reimbursement arrangement together result in intercompany receivables and payables throughout each fiscal year. UWMC had the following amounts receivable from and payable to the MUWs at June 30: Intercompany receivables from MUWs $ 1,003.8 $ Intercompany payables to MUWs (88.0) (442.6) $ $ (442.6) All intercompany transactions have been eliminated in the combined financial statements. 11

12 NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Principles of Combination The combined financial statements include the accounts of UWMC and the MUWs. All significant intercompany balances and transactions have been eliminated. Use of Estimates The preparation of the 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, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Prior Year Reclassifications Certain amounts in the 2012 combined financial statements have been reclassified to conform to the 2013 presentation. Credit Risk Concentration Financial instruments, which potentially subject the Organization to concentrations of credit risk, consist primarily of cash and cash equivalents, short-term investments and pledges receivable. The Organization s investment policy is intended to limit its exposure to credit risk. The Organization maintains cash in bank deposit accounts, which at times may exceed federally insured limits. The Organization has not experienced any losses in such accounts and believes it is not exposed to any significant financial risk therein. Fair Value Disclosures Cash and cash equivalents approximate fair value. The carrying amounts of short-term investments, pledges receivable, net, other receivables and prepaid expenses, accounts payable and accrued expenses, designation and pledge processing payables and bonds payable approximate fair value due to their short-term nature. Revenue Recognition Donors generally pledge or give a majority of their contributions during the first six to nine months of each annual campaign. The Organization recognizes revenue at fair value in the period the pledge is received or, in the absence of a pledge, when cash is received from the donor. The Organization considers all support as unrestricted unless specifically restricted by the donor as to purpose and for the passage of time. 12

13 NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Continued Revenue Recognition - continued Conditional promises to give are not recognized until they become unconditional, that is, when the conditions on which they depend are substantially met. Long-term, unconditional promises to give are discounted using a risk-adjusted rate. As payments are received, the corresponding discount is amortized and recorded in Current year campaign. UWMC performs support services for an adjacent United Way organization essentially under a costreimbursement contract. The cost reimbursement is recognized ratably as services are performed based upon contractually agreed-upon fees. The cost reimbursement offsets the associated expenses of performing these services in the combined statement of activities. Contributions Designated to Other Organizations Donor organizations and individuals participating in such entities campaigns may choose to designate all or part of their contributions to specific charitable organizations. These transactions are reported as part of the current year campaign, and are deducted as Amounts designated to other organizations to arrive at net campaign revenue. Amounts designated where donation funds are received directly by UWMC are recorded as Designations payable until paid to the designated charitable organizations. Processing fees of up to 8% of amounts designated, subject to certain limitations, are recorded as administrative fee revenue and collected through receipt of the designated amounts. Amounts designated to other organizations also include designations that are paid directly to designated charitable organizations by the donor organization, another United Way or a third-party processor. Gifts In-Kind and Contributed Services Gifts in-kind include print and broadcast marketing, office equipment, supplies, food or entertainment tickets that the Organization receives directly. Contributed services represent services requiring specialized skills that the Organization would typically purchase such as legal and consulting services. Gifts in-kind and contributed services are recognized at their estimated fair values at date of receipt with an equal and offsetting amount in unrestricted functional expenses in the statements of activities, resulting in no net impact on the change in net assets during the year. 13

14 NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued Gifts In-Kind and Contributed Services - continued The following table summarizes gifts in-kind and contributed services at : Gifts in-kind Facilities $ 1.3 $ 4.0 Gift certificates Marketing Tickets Other Total gifts in-kind Contributed services Consulting Legal Total contributed services Total gifts in-kind and contributed services $ 1,522.8 $ The Organization receives services from a large number of volunteers who give significant amounts of their time to fundraising campaigns, various committees and programs. However, no amounts for these types of contributed services have been recognized in the combined financial statements because such services do not require specialized skills and there is no objective basis available to measure the value of such services. Allocations The Board of Directors approves allocations on a quarterly basis to agencies for each fiscal year period extending from July 1 to June 30. Since campaigns are conducted for a calendar year, the Organization funds a portion of the current year and subsequent year allocations utilizing funds available from the current year campaign. The Board of Directors approves the allocations based on an impact area funding strategy which is contingent upon actual and estimated future cash availability, agency financial stability, agency compliance with contractual terms and program execution. Accordingly, allocations are recorded in the combined financial statements when the allocation is deemed unconditional as of the financial statement date. 14

15 NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued Grants and Other Distributions The Organization distributes grants to various foundations and organizations that support the Organization s mission. In fiscal years 2013 and 2012, the Organization issued an education grant to a local foundation for $2,335.0 in each respective year, which supports the Organization s Education funding strategy. These funds are reflected as Grants and other distributions. Functional Allocation of Expenses The costs of providing the various programs and other activities have been summarized on a functional basis in the accompanying financial statements. Accordingly, certain costs have been allocated among the program and supporting services benefited. Cash and Cash Equivalents Cash and cash equivalents consist of cash, money market funds, and other highly liquid short-term investments with original maturities of three months or less and are carried at either cost plus accrued interest or fair value. The Organization s cash reserve policy is to maintain three months cash reserves in the form of cash and cash equivalents and short-term investments. Pledges Receivable Pledges receivable, recorded at net realizable value, consists principally of uncollected campaign pledges received from companies and their employees. The Organization determines an allowance for uncollectible pledges by considering a number of factors, including length of time a pledge is past due, previous loss history, and the consideration of the general economy for the geographic region as a whole. Allowances are provided for pledge amounts estimated by management to be uncollectible. As of June 30 of each fiscal year, a final accounting is made of the prior year s campaign. Pledges receivable related to the prior campaign that have not been collected are generally considered uncollectible and are written off. Subsequent collections of amounts written off are recorded when received, in Collections from, and adjustments to, prior years campaigns. 15

16 NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued Investments Investments consist of certificates of deposit and institutional equity, fixed income, real estate, money market and commodity-linked mutual funds. Certificates of deposit and some publicly traded money market mutual funds with original maturities of greater than three months and less than eighteen months are classified as Short-term investments. Investments are carried at the quoted market value of the securities. Realized gains and losses are based on specific identification of the security sold. Interest, dividends, gains and losses related to these funds are recorded as Interest and other income. Property and Equipment Buildings are carried at cost and depreciated using the straight-line method over 40 years. Furniture, equipment and software are carried at cost and depreciated on the straight-line method, principally over five years. Equipment is capitalized if it has a cost of five hundred dollars ($500) or more and a useful life when acquired of more than one year. Property and equipment once classified as held for sale are not depreciated. Pledge Processing Certain major corporations (clients) have contracts with UWMC to process their regional and national pledge processing activities, including processing of amounts that are not part of the local campaign. Clients remit employee contributions and the corresponding distribution information to UWMC. UWMC consolidates and reconciles the information for a given client and distributes funds according to the clients instructions. Funds received in this manner are recorded as pledge processing payables until such distributions are completed. In return for these services, UWMC receives contractually agreed-upon pledge processing fees. Classification of Net Assets Net assets and changes therein are classified and reported as follows: Unrestricted net assets - Net assets not subject to donor-imposed restrictions. Temporarily restricted net assets - Net assets subject to donor-imposed restrictions as to purpose that may or will be met by actions of the Organization, or that expire by the passage of time. A time restriction is implied in an unconditional promise to give when it is scheduled to be paid in future periods, as with payroll deductions. 16

17 NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued Classification of Net Assets - continued Permanently restricted net assets - Net assets subject to donor-imposed restrictions requiring the assets, or corpus, to be maintained permanently by the Organization. When donor-imposed time restrictions expire or a donor-imposed purpose restriction is fulfilled, temporarily restricted net assets are reclassified to unrestricted net assets and are reported in the combined statements of activities as net assets released from restriction. Support that is restricted by the donor is reported as an increase in unrestricted net assets if the restriction expires in the reporting period in which the support is recognized. The net appreciation of interest, dividends and realized and unrealized gains and losses recognized on donor-restricted endowment funds is classified as temporarily restricted net assets to be spent as directed by the Boards of Directors of UWMC, Northwest or DuPage/West Cook. Unrealized losses that cause the fair value of a donor-restricted endowment fund to fall below the level that the donor requires the Organization to maintain are classified within unrestricted net assets. Net earnings and appreciation that restore these losses are also reflected within unrestricted net assets. NOTE C - PLEDGES RECEIVABLE, NET The following table summarizes pledges receivable, net as of June 30: Campaign beginning in 2011 $ $ 18,849.9 Campaign beginning in , Campaign beginning in Current portion of long-term, unconditional promises to give Total $ 17,238.6 $ 19,100.4 Less allowance for uncollectible pledges (2,270.1) (2,556.2) Pledges receivable, net $ 14,968.5 $ 16,

18 NOTE D - ASSETS CLASSIFIED AS HELD FOR SALE The following table summarizes assets classified as held for sale as of June 30, 2012: Carrying Impairment Adjusted Value Loss Carrying Value Land $ $ $ Building 5, , ,260.1 Total assets classified as held for sale $ 6,237.6 $ 1,370.3 $ 4,867.3 At June 30, 2012, UWMC owned 51.87% of the land and building located at 560 West Lake Street, Chicago, IL with the remaining 48.13% owned by five tenants. An agreement between UWMC and the other tenants governed the management and operations of the building where UWMC was the controlling interest and largest tenant. The 2012 annual operating expense budget was approximately $ Operating expenses are the proportionate responsibility of each owner. In the event of non-payment by a tenant of its share of operating expenses, liens are placed on the delinquent property. However, tenant unpaid obligations may be paid by UWMC in order to maintain the operating condition of the building and to be compliant with local and state occupancy regulations. On August 3, 2012, UWMC sold its interest in the land and building at 560 West Lake Street for $5,300.0 and entered into a lease arrangement with the new owner through May 10, Because of the occurrence of this sale and because the asset was available for immediate sale as of June 30, 2012 in its present condition subject only to terms that are usual and customary for sales of such assets, the land and building assets were classified as held for sale at June 30, The value of the assets classified as held for sale was measured at fair value less costs to sell. Costs to sell of $433.0 include estimated sales commissions, fees and transfer taxes. NOTE E INVESTMENTS AND FAIR VALUE MEASUREMENTS Long-term investments are maintained as endowment and deferred compensation funds for the benefit of UWMC, DuPage/West Cook and Northwest. Northwest maintains a non-endowment related long-term investment. Refer to Note G for additional information regarding deferred compensation. Both the UWMC and DuPage/West Cook long-term investments are comprised of institutional equity mutual funds, fixed income mutual funds, commodity-linked mutual funds, real estate equity mutual funds, and money market mutual funds. Commodity-linked mutual funds are mutual funds having futures contracts or options and can participate in price moves of underlying commodities. Real estate mutual funds are mutual funds that invest in the equity of real estate companies. Northwest s investments are comprised of institutional equity mutual funds and fixed income mutual funds. 18

19 NOTE E INVESTMENTS AND FAIR VALUE MEASUREMENTS - Continued The Organization s endowment investment strategy is to preserve, protect and grow the endowment assets to generate sufficient earnings to be used to meet obligations arising from planned activities. These goals are to be accomplished by achieving a long-term rate of return on the investments that ensures growth of the assets and by diversifying a portfolio among various asset classes with the goal of reducing return volatility among various securities issuers. The allowable asset classes include domestic and international equity, fixed income securities and alternative investments such as hedge funds, private equity, commodities and real estate. Total investments at June 30 and net investment return are summarized as follows: Endowment $ 4,151.4 $ 3,731.8 Long-term investments Deferred compensation Total investments $ 4,458.2 $ 3, Equity mutual funds $ 2,804.4 $ 1,982.4 Fixed income mutual funds 1, Commodity-linked mutual funds Real estate equity mutual funds Money-market mutual funds Pooled funds Total investments by type $ 4,458.2 $ 3, Investment income $ 91.3 $ 76.0 Unrealized losses (124.3) (75.6) Realized gains Net investment return $ $

20 NOTE E INVESTMENTS AND FAIR VALUE MEASUREMENTS - Continued The fair value of investments, as well as some cash equivalents, is based on observable inputs such as quoted prices in active markets, or other than quoted prices in active markets, that are observable either directly or indirectly. Fair value is measured as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, a three-tiered fair value hierarchy has been established, which prioritizes the inputs used in measuring fair value as follows: Level 1 Observable inputs, such as quoted prices in active markets; Level 2 Inputs, other than quoted prices in active markets, that are observable either directly or indirectly; and Level 3 Unobservable inputs in which there is little or no market data, which requires the Organization to develop its own assumptions. A financial instrument s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. The Organization uses third-party providers to determine the fair values of its investments. The third-party providers receive market prices from a variety of industry standard data providers with reasonable levels of price transparency. Investments with values based on quoted market prices in active markets are classified by the Organization as Level 1 and includes publicly traded mutual funds. The mutual funds legally and contractually redeem their outstanding shares at net asset value. Investments that trade in markets that are not considered to be active but are valued based on quoted market prices, dealer quotations or alternative pricing sources supported by observable inputs are classified as Level 2 by the Organization and include certificates of deposits and pooled investment funds that are valued at net asset value ( NAV ) the redemption value of units held based on the underlying assets and liabilities. Investments participating in the pool include marketable equity securities, fixed income securities, hedge funds, real estate funds and commodities funds. The pooled investment funds may be redeemed at their redemption value at or near the reporting date. The pooled funds recorded at NAV as of June 30, 2012 are $554.2 and have no unfunded commitments, are redeemed annually and have a redemption notice period of 90 days. 20

21 NOTE E INVESTMENTS AND FAIR VALUE MEASUREMENTS - Continued The following tables summarize investments measured at fair value as of : June 30, 2013 Level 1 Level 2 Total Investments Equity mutual funds $ 2,804.4 $ $ 2,804.4 Fixed income mutual funds 1, ,255.7 Commodity-linked mutual funds Real estate mutual funds Money-market mutual funds Total $ 4,458.2 $ $ 4,458.2 Short-term Investments Certificates of deposit $ $ $ Money-market mutual funds Total $ $ $ Cash & Cash Equivalents Money-market mutual funds $ 6,315.9 $ $ 6,315.9 Total $ 6,315.9 $ $ 6,

22 NOTE E INVESTMENTS AND FAIR VALUE MEASUREMENTS - Continued June 30, 2012 Level 1 Level 2 Total Investments Equity mutual funds $ 1,982.4 $ $ 1,982.4 Fixed income mutual funds Money-market mutual funds Pooled funds Total $ 3,281.7 $ $ 3,835.9 Short-term Investments Certificates of Deposit $ $ $ Money Market Mutual Funds Stocks Total $ $ $ Cash & Cash Equivalents Money-market mutual funds $ 8,208.7 $ $ 8,208.7 Total $ 8,208.7 $ $ 8,208.7 NOTE F - PROPERTY AND EQUIPMENT, NET Property and equipment, net, at June 30 are summarized as follows: Land $ 22.0 $ 22.0 Buildings Leasehold improvements 2,263.7 Office equipment and software 3, ,448.4 Total property and equipment 5, ,560.2 Accumulated depreciation/amortization (2,376.2) (2,265.2) Property and equipment, net $ 3,128.3 $

23 NOTE F - PROPERTY AND EQUIPMENT, NET - Continued UWMC sold its interest in land and a building at 560 West Lake Street, Chicago, IL on August 3, The related assets with an adjusted carrying value of $4,867.3 were reclassified as held for sale as of June 30, UWMC entered into an agreement to lease office and storage space at 333 South Wabash, Chicago, IL. Leasehold improvements consist of $2,062.7, the cost to build out the office space, and $201.0, the estimated cost to restore the property to the original state. Amortization of leasehold improvements is computed on the straight-line method over the lesser of an asset s estimated useful life or the remaining lease term (15 years). Northwest Suburban owns the land and building located at 5010 Oakton Street, Skokie, IL which was used by North Shore as its principal office. The land and building, recorded at cost, were $22.0 and $89.8, respectively, at. NOTE G - POSTRETIREMENT BENEFITS UWMC sponsors a defined contribution retirement plan covering all of its eligible employees. UWMC matches, subject to IRS limitations, 50% of the first 6% that an employee contributes, up to a maximum match amount equivalent to 3% of an employee's gross pay. The cost of this plan was $117.0 and $120.5 in fiscal years 2013 and 2012, respectively. UWMC provides a deferred compensation plan that allows certain officers to defer portions of their compensation. The deferred income obligation was $147.7 and $104.1 at, respectively, and is included in Obligations for retirement benefits. The related plan assets are included in Investments. UWMC also maintains a non-contributory defined benefit pension plan which was frozen effective December 31, 2003, and covers eligible employees up to that date. Payments are made to eligible retired employees based on earnings, age and years of service. Effective December 31, 2011, United Way of Illinois ( UWI ) and UWMC merged the UWI frozen non-contributory defined benefit pension plan into the UWMC plan. The combined plan is a multiple-employer plan subject to provisions of Section 413(c) of the Internal Revenue Code, and is maintained as a single plan. The liability at June 30, 2013 and 2012 as well as the disclosures below include the effects of both plans. The plan s funding policy is to contribute amounts sufficient to meet the minimum funding requirements set forth in the Employee Retirement Income Security Act of 1974, plus such additional amounts as UWMC may determine to be appropriate. UWMC expects to make a contribution of $1,269.0 to the defined benefit pension plan in fiscal year

24 NOTE G - POSTRETIREMENT BENEFITS - Continued The components of net periodic pension cost for the fiscal years ended June 30 are summarized as follows: Interest cost $ 1,059.6 $ 1,257.8 Expected return on plan assets (1,374.1) (1,587.7) Administrative expenses Amortization of actuarial loss $ $ The components of the pension-related change other than net periodic pension cost for the fiscal years ended June 30 are summarized as follows: Actuarial (gain) loss arising during the year $ (2,274.3) $ 5,679.7 Amortization of actuarial loss (582.4) (353.4) $ (2,856.7) $ 5,326.3 Amounts that have not yet been recognized as a component of net periodic pension cost consist of a net actuarial loss of $12,798.7 and $15,655.2 at, respectively. The estimated actuarial loss that will be amortized from unrestricted net assets into net periodic pension cost through June 30, 2014 is $ The following table summarizes the weighted-average assumptions used in determining pension costs for the fiscal years ended June 30: Discount rate (UWMC plan) 3.75% 5.25% Discount rate (UWI plan) 3.75% 4.95% Expected return on plan assets (both plans) 7.00% 8.00% The weighted-average discount rate used in determining the benefit obligation for both plans was 4.35% at June 30, 2013, and 3.75% at June 30,

25 NOTE G - POSTRETIREMENT BENEFITS - Continued The discount rate is determined as of the measurement date based upon the discounting of future expected cash flows using the Citigroup Pension Discount Curve, a high-quality corporate bond interest rate. The expected long-term rate of return on plan assets assumption is based upon a building block approach. The expected long-term rate of inflation and risk premiums for the various asset categories are based on the current investment environment. General historical market returns and inflation rates are used in the development of the long-term expected inflation rates and risk premiums. The target allocation of assets is used to develop a composite rate of return assumption. The following tables summarize the changes in the projected benefit obligation, the fair value of plan assets and the funded status at June 30: Change in projected benefit obligation Beginning of year $ 29,091.2 $ 24,323.5 Merger - UWI 1,003.3 Interest cost 1, ,257.8 Actuarial (gain) loss (1,789.7) 4,158.4 Administrative expenses assumed Benefits paid (1,540.8) (1,746.8) End of year $ 26,930.3 $ 29,091.2 Change in fair value of plan assets Beginning of year $ 19,832.7 $ 19,284.9 Merger - UWI Actual return on plan assets 1, Organization contributions 1, ,399.0 Benefits paid (1,540.8) (1,746.8) End of year $ 21,414.7 $ 19,832.7 Funded status, end of year Fair value of plan assets $ 21,414.7 $ 19,832.7 Less projected benefit obligation (26,930.3) (29,091.2) Funded status $ (5,515.6) $ (9,258.5) 25

26 NOTE G - POSTRETIREMENT BENEFITS Continued The funded status obligation is included in Obligations for retirement benefits. The Organization s overall investment strategy is to achieve a mix of long-term growth and nearterm benefit payments. The assets are to be broadly diversified in terms of securities and security types so as to limit the potential impact of a large loss from any single security or type of security. The target asset allocations are as follows: fixed income and cash securities 40%, domestic equity securities, 30%, global balanced funds 15.0%, real estate securities 10%, and international equity securities, 5.0%. The following table summarizes the asset allocations at June 30 by asset category: Fixed income and cash securities 38.9% 21.6% Domestic equity securities 31.7% 48.0% Global balanced funds 14.7% Real estate securities 9.3% International equity securities 4.9% 7.3% Hedge funds of funds 0.5% 23.1% 100.0% 100.0% The objective within each asset class is to be fully diversified, benchmarking performance to indices such as the Barclays Aggregate Bond Index, the MSCI US Broad Market Index, and the Global Balanced 60/40 Index. Asset allocations are rebalanced whenever total equity or total fixed income falls outside of their target allocations by more than 2.5%. Cash and equivalents are held at minimum levels, with typically less than three months of expected benefit payments maintained. The plan s assets are maintained in a separate, collective master trust created for the benefit of the Organization and other participating agencies and represent the Organization s share of the net assets of the trust. The assets of the trust consist primarily of money-market funds, equity and fixed income mutual funds, and global balanced funds. The Organization uses a third-party provider to determine the fair values of the master trust assets. The third-party provider receives market prices from a variety of industry standard data providers with reasonable levels of price transparency. Automated transmissions of prices are received on a daily basis to facilitate current pricing. When automated pricing is not available for a particular fund, alternate pricing sources are utilized. Equity, fixed income, global balanced, and real estate mutual funds as well as money market fund holdings are valued based on quoted market prices in active markets. Hedge fund-of-funds are priced monthly using alternative pricing sources with unobservable inputs. 26

27 NOTE G - POSTRETIREMENT BENEFITS - Continued The Organization uses a three-tiered fair value hierarchy to measure the fair value of these investments. The Organization s share of the master trust assets is classified as a Level 3 asset because of liquidity constraints. The Organization would not be able to redeem its interest in the master trust at its NAV equivalent at or near the reporting date. The fair value of the Organization s investment in the collective trust at June 30, by asset category, is as follows: Level Investment in a collective trust $ 21,414.7 $ 19,832.7 Total pension investments $ 21,414.7 $ 19,832.7 The following table presents the Organization s activity for pension assets measured at Level 3 for the years ended June 30: Investment in a collective trust Beginning of year $ 19,832.7 $ 19,284.9 Merger - UWI Earned income Realized gains 3, Unrealized losses (2,380.1) (179.3) Purchases 1, ,104.9 Sales (1,461.2) (2,414.5) End of year $ 21,414.7 $ 19,832.7 As of June 30, 2013, the Organization has an unfunded commitment to the collective master trust of $5,515.6 as its pension liability is not fully funded. The Organization, as sponsor of the pension plan, may terminate the pension plan or the master trust at any time. The Organization may not redeem its investment in the master trust unless it terminates its participation in the plan by transferring its share of the assets to another qualified pension plan. Such a transfer requires no less than six months notice. 27

28 NOTE G - POSTRETIREMENT BENEFITS - Continued The following table presents the benefits expected to be paid under UWMC s defined benefit plan in each of the next five fiscal years, and in the aggregate for the five years thereafter, as of June 30, 2013: 2014 $ 1, , , , , ,551.2 NOTE H - TEMPORARILY AND PERMANENTLY RESTRICTED NET ASSETS Temporarily restricted net assets include contributions or grants subject to donor-imposed restrictions as to purpose that may or will be met by actions of the Organization, or that expire by the passage of time. The following table summarizes temporarily restricted net assets as of June 30: Pledges receivable, time restricted for use in future periods $ 14,823.0 $ 16,673.1 Cash contributions received for future campaigns Endowment net investment return Purpose-restricted contributions Domestic violence programs Southland capacity transportation project Diabetes project Various other specific programs Total purpose restricted 1, Total temporarily restricted net assets $ 17,240.3 $ 18,

29 NOTE H - TEMPORARILY AND PERMANENTLY RESTRICTED NET ASSETS - Continued Permanently restricted net assets included contributions to endowment funds that are subject to donor-imposed restrictions that cannot be released from restriction by expiration of time or fulfillment of purpose. The following table summarizes permanently restricted net assets as of June 30: Pledges receivable, net $ 45.0 $ Endowment funds 3, ,102.5 Restricted cash to be invested in endowments Total permanently restricted net assets $ 3,364.0 $ 3,316.2 The Organization s endowment consists of donor-restricted endowment funds maintained by UWMC, Northwest and DuPage/West Cook. As required by U.S. GAAP, net assets associated with endowment funds are classified and reported based on the existence or absence of donor-imposed restrictions. The Organization accounts for endowment net assets by preserving the fair value of the original gift as of the gift date of the donor-restricted endowment fund absent explicit donor stipulations to the contrary. As a result, the Organization classifies as permanently restricted net assets (a) the original value of gifts donated to the permanent endowment, (b) the original value of subsequent gifts to the permanent endowment, and (c) accumulations to the permanent endowment made in accordance with the direction of the applicable donor gift instrument at the time the accumulation is added to the fund. 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. 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 funds. 2. The purposes of the Organization and 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. 7. The investment policies of the Organization. 29

30 NOTE H - TEMPORARILY AND PERMANENTLY RESTRICTED NET ASSETS - Continued The following table summarizes the donor-restricted endowment net asset composition by type of fund as of June 30, 2013: Temporarily Permanently Restricted Restricted Total Endowment funds - UWMC $ $ 2,235.6 $ 2,906.2 Endowment funds - Northwest Endowment funds - DuPage/West Cook ,082.9 Total $ $ 3,199.9 $ 4,147.3 During the year ended June 30, 2013, the Organization had the following endowment-related activities: Temporarily Permanently Restricted Restricted Total Endowment net assets, beginning of year $ $ 3,102.5 $ 3,731.7 Investment return Investment income Net appreciation Contributions Endowment net assets, end of year $ $ 3,199.9 $ 4,147.3 The following table summarizes the donor-restricted endowment net asset composition by type of fund as of June 30, 2012: Temporarily Permanently Restricted Restricted Total Endowment funds - UWMC $ $ 2,160.5 $ 2,603.1 Endowment funds - Northwest Endowment funds - DuPage/West Cook ,009.5 Total $ $ 3,102.5 $ 3,