CATHOLIC FOUNDATION OF WESTERN KENTUCKY, INC.

Transcription

1 CATHOLIC FOUNDATION OF WESTERN KENTUCKY, INC. FINANCIAL STATEMENTS Years Ended June 30, 2014 a11d 2013 (With Independent Auditor's Report Thereon)

2 CONTENTS Independent Auditor's Report Financial Statements: Statements of Financial Position Statements of Activities Statements of Cash Flows Notes to Financial Statements

3 ~Riney Hancock CPAs l_w rsc INDEPENDENT AUDITOR'S REPORT Board of Directors Catholic Foundation of Western Kentucky, Inc. We have audited the accompanying financial statements of the Catholic Foundation of Western Kentucky, Inc. (a nonprofit organization), which comprise the statements of financial position as of June 30, 2014 and 2013, and the related statements of activities 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 audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Catholic Foundation of Western Kentucky, Inc. as of June 30, 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. Owensboro, Kentucky October 20, 2014 ~~ C.P"'s: f's.c.. w w w r i n c y h u n c o c k c o m - i n f r i n c y h u n c o c k. c o m 2900 Veach Road, Suite 2- Owensboro, Kentucky Fax: Southeast First Street- Evansville, Indiana Fax: A member tif PK F Ntlflh Amcrictt -All o.'i.wjciutitm tif legally imlepemlellt firms

4 STATEMENTS OF FINANCIAL POSITION June 30,2014 and 2013 ASSETS Cash and cash equivalents $ 21,955 $ 19,505 Investments 8,046,524 7,078,312 Assets held for others: Investments 14,291,099 11,234,710 Due from related party 37,454 14,291,099 11,272,164 Total assets $ 22,359,578 $ 18,369,981 LIABILITIES AND NET ASSETS Due to related party $ 13,908 $ Annuity obligations 376, ,020 Assets held for others 14,291,099 II,272,164 Total liabilities 14,681,377 11,677,184 Net assets: Endowment: Unrestricted- board designated 398, ,432 Temporarily restricted 7,279,225 6,325,365 Total net assets 7,678,201 6,692,797 Total liabilities and net assets $ 22,359,578 $ 18,369,981 Sec NnC<.'S en Financial ScuccmL'tlCs 2

5 STATEMENTS OF ACTIVITIES Unrestricted net assets: Revenues: Contributions and bequests $ $ 2,156 Investment return 43,018 34,600 Other income Total revenues 43,280 37,051 Net assets released from restrictions 298, ,262 Total unrestricted revenues and support 341, ,313 Expenses: Program services : Seminarians 241, ,000 Religious education 17,985 Outreach 10,830 Retired priests 13,908 Supporting services: Management and general 26,071 8,317 Total expenses 309, ,317 Increase in unrestricted net assets 31, ,996 Temporarily restricted net assets: Contributions and bequests 334, ,092 Investment return 953, ,373 Change in value of annuity net assets (36,765) (45,580) Net assets released from restrictions (298,243) (314,262) Increase in temporarily restricted net assets 953, ,623 Increase in net assets 985, ,619 Net assets, beginning of year 6,692,797 6,151 '178 Net assets, end of year $ 7,678,201 $ 6,692,797 S~:.: Nut~-s tu Financ1al Statcm~:nts

6 STATEMENTS OF CASH FLOWS Cash flows from operating activities: Increase in net assets $ 985,404 $ 541,619 Adjustments to reconcile increase in net assets to net cash used in operating activities: Realized gain on investments (225,666) (86,139) Unrealized gain on investments (638,907) (441,899) Actuarial change in value of annuity obligations 36,765 20,614 Increase (decrease) in liabilities: Due to related party 13,908 (39,946) Net cash provided by (used in) operating activities 171,504 (5,751) Cash flows from investing activities: Proceeds from sale and maturities of investments 3,796,798 9,336,676 Purchases of investments (4,170,617) {9,546,430) Withdrawals from investment accounts 270, ,000 Net cash provided by (used in) investing activities (103,819) 15,246 Cash flows from financing activities: Additions to annuity obligations 50,000 Payments on annuity obligations {65,235) (67,198) Net cash used in financing activities (65,235) (17,198) Net increase (decrease) in cash and cash equivalents 2,450 (7,703) Cash and cash equivalents, beginning of year 19,505 27,208 Cash and cash equivalents, end of year $ 21,955 $ 19,505 Sec Nnl\.'l; In I in.mcial Statements

7 1. Organization and Summary of Significant Accounting Policies Nature of Organization The Catholic Foundation of Western Kentucky, Inc. (Foundation), an independent nonprofit corporation founded in 1986, was fonned to provide financial support for the spiritual, educational, and social needs of the Catholic community. This mission is fulfilled by seeking endowment funds to support program objectives, helping donors achieve their charitable and financial goals, and helping parishes, schools, and Catholic organizations meet their long-tenn financial needs. Basis of 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. The Foundation had no permanently restricted net assets at June 30, 2014 or Cash and Cash Eguivalents For purposes of the statement of cash flows, the Foundation considers all cash in financial institutions with an initial maturity of three months or less to be cash equivalents, excluding cash and cash equivalents held as investments in brokerage accounts. [nvestments (nvestments are stated at fair value. Investments acquired by gift are recorded at the fair value on the date the gift was received. Investment income that is initially restricted by donor stipulation and for which the restriction will be satisfied in the same year is included in unrestricted net assets. Other investment return is reflected in the statement of activities as unrestricted, temporarily restricted or permanently restricted based upon the existence and nature of any donor or legally imposed restrictions. Contributions Contributions received are recorded as unrestricted, temporarily restricted, or permanently restricted support, depending on the existence and nature of any donor restrictions. All donorrestricted contributions are reported as increases in temporarily or permanently restricted net assets depending on the nature of the restriction. When a restriction expires, (that is, when a stipulated time restriction ends or purpose restriction is accomplished), temporarily restricted net assets are reclassified to unrestricted net assets and reported in the statement of activities as net assets released from restrictions. Restricted contributions whose restrictions are met in the same period as recei vcd are reported as unrestricted contributions. s

8 Years Ended June 30, and I. Organization and Summary of Significant Accounting Policies, Continued Functional Expenses Expenses are charged directly to program or supporting services categories based on specific identification. Estimates The preparation of financial statements in confonnity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Actual results could differ from those estimates. 2. Investments Investments in the Endowment Fund consist of the following at June 30: Fair Fair Cost Value Cost Value Cash and cash equivalents $ 296,300 $ 296,300 $ 114,059 $ 114,059 Mutual funds 2,352,069 2,626,550 2,331,284 2,463,112 Corporate stocks 1,122,055 1,542,468 1,308,154 1,512,419 Government securities 213, , , ,911 Exchange-traded and closed-end funds 2,996,593 3,369,820 2,638,460 2,737,811 Real estate securities indexes 962 1,100 $ 6,981,209 $ 8,046,524 $ 6,653,663 $ 7,078,312 The following schedule summanzes the Endowment Fund investment return and its classification for the years ended June 30: 2014 Temporarily Unrestricted Restricted Total Interest and dividends $ 7,137 $ 166,239 $ 173,376 Unrealized gains (losses) (7,266) 646, ,907 Realized gains 44, , ,666 Investment fees (1,067) (39,984) (41,051) $ 43,018 $ 953,880 $ 996,898

9 2. Investments, Continued 2013 Temporarily Unrestricted Restricted Total Interest and dividends $ 10,325 $ 183,222 $ 193,547 Unrealized gains 23, , ,899 Realized gains 2,131 84,008 86,139 Investment fees ~ 1,043) (40,569) (41,612) $ 34,600 $ 645,373 $ 679, Split Interest Agreements Charitable Gift Annuities The Foundation administers a charitable gift annuity program which provides for the investment of contributions made by individuals from which a periodic contractual arumity payment is made to the annuitant. The assets received are held as investments of the Foundation at fair market value, and a liability is recorded for the estimated present value of the estimated future payments to be made to the donors and/or other beneficiaries. At the date of gift, the difference between the fair value of the assets received and the present value of the liability is recognized as contribution revenue. As required distributions are made to the annuitants, or upon death of annuitants, the related reductions in the liability are recorded as changes in the value of annuity obligations. In addition, the liability is valued on a recurring basis using generally accepted fair value measurement methods. The annuity obligation balance at June 30, 2014 and 2013 totaled $376,370 and 405,020, respectively. 4. Assets Held for Others Assets held for others represent funds managed by the Foundation on behalf of other Catholic organizations. The assets are stated at fair value, with a corresponding liability reflected in the statement of financial position. Additional investments by these organizations, as well as investment return, investment fees, and withdrawals are reflected as adjustments to the liability account, and are not reflected in the statement of activities. Assets held for others consist of the following at June 30: 7

10 4. Assets Held for Others, Continued Cost Fair Value Cost Fair Value Investments: Cash and cash equivalents $ 273,371 $ 273,371 $ 598,763 $ 598,763 Mutual funds 5,231,796 6,044,763 4,716,024 5,132,572 Corporate stocks 2,200,315 2,837,962 1,704,258 1,963,854 Government securities 256, , , ,701 Eltchange-traded and closed-end funds 4,257,921 4,815,460 3,090,860 3,262,820 Real estate securities indexes 58,147 66,594 $ 12,277,858 14,291,099 $ 10,398,950 11,234,710 Due from related party 37,454 Activity in assets held for others was as follows for the years ended June 30: $ 14,291,099 $ 11,272, Balance, beginning of year $ 11,272,164 $ 9,848,045 Deposits 2,200, ,017 Withdrawals (883, 187) (405,446) Investment return: Interest and dividend income 319, ,348 Unrealized gains I,177, ,625 Realized gains 282, ,261 Investment fees (77,900) (64,686) 1,701,523 I, 113,548 Balance, end of year $ 14,291,099 $ 11,272,164 Endowment Fund The Foundation's Endowment includes funds established for various purposes, and includes both donor-restricted funds and funds designated by the Board of Directors to function as endowments. Net assets associated with endowment funds, including funds designated by the Board of Directors to function as endowments, are classified and reported based on the existence or absence of donor-imposed restrictions. The state of Kentucky has enacted the Uniform Prudent Management of Institutional Funds Act of 2006 (UPMIFA) legislation. The Board of Directors has interpreted UPMIFA as requiring the presentation of the fair value of the original gift as of the gift date of the donor-

11 5. Endowment Fund, Continued restricted endowment funds, absent explicit donor stipulation to the contrary. The Foundation classifies as permanently restricted net assets the original value of contributions to the permanent endowment and the original value of any such subsequent contributions. 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. The Foundation had no permanently restricted funds at June 30, 2014 or The Foundation has adopted investment and spending policies for endowment assets that attempt to provide funding to programs supported by its endowment while seeking to maintain purchasing power of the endowment assets. The composition of net assets by type of the Endowment Fund at June 30 was: Board-designated endowment funds: Unrestricted $ 398,976 $ 367,432 Donor-designated endowment funds: Temporarily restricted 7,279,225 6,325, Total $ 7,678,201 $ 6,692,797 Management considers the total net assets of the Foundation to be for endowment. Therefore, the changes in the endowment for the years ended June 30, 2014 and 2013, are reflected in the statement of activities. Restrictions on Net Assets Temporarily restricted net assets were available for the following purposes at June 30: Endowment: Seminarians $ 5,608,117 $ 5, 118,270 Religious education 519, ,876 Outreach 261, ,363 Catholic charities 200,000 Seminarian endowment 122,580 Annuities 568, ,856 $ 7,279,225 $ 6,325, Fair Value Measurements The Foundation has adopted the provisions of F ASB ASC 820, Fair Value Measurements. F ASB ASC 820 establishes a framework for measuring fair value and establishes a three-tier hierarchy that prioritizes the inputs to valuation techniques used to measure fair value, as follows:

12 7. Fair Value Measurements, Continued Level 1: Quoted prices for identical assets or liabilities in active markets. Level I investments include money market funds, mutual funds, and corporate stocks. Level 2: Observable inputs, such as quoted prices for similar assets or liabilities in active markets or quoted prices for identical or similar assets or liabilities in inactive markets, or unobservable inputs that are derived principally from or corroborated by observable market data. Level 2 investments include mortgagebacked securities and annuity obligations. Level3: Unobservable inputs that are based on the Foundation's own assumptions as to how knowledgeable parties would price assets or liabilities that are not corroborated by market data. The Foundation had no Level 3 investments as of June 30, 2014 or Fair values of assets and liabilities measured on a recurring basis at June 30 were as follows: 2014 Quoted Prices Significant in Active Other Markets for Observable Identical Assets Inputs Fair Value (Levell) (Level2) Foundation investments: Cash and cash equivalents $ 296,300 $ 296,300 $ Mutual funds 2,626,550 2,626,550 Corporate stocks 1,542,468 1,542,468 Government securities 210, ,286 Exchange-traded and closed-end funds 3,369,820 3,369,820 Real estate securities inde~tes 1,100 1,100 $ 8,046,524 $ 8,046,524 $ Assets held for others: Cash and cash equivalents $ 273,371 $ 273,371 $ Mutual funds 6,044,763 6,044,763 Corporate stocks 2,837,962 2,837,962 Government securities 252, ,949 E~tchange-traded and closed-end funds 4,815,460 4,815,460 Real estate securities indexes 66,594 66,594 $ 14,291,099 $ 14,291,099 $ Annuity obligations $ (376,370) $ $ (376,370) ICI

13 7. Fair Value Measurements, Continued 2013 Quoted Prices Significant inactive Other Markets for Observable Identical Assets Inputs Fair Value (Level I} (Level2} Foundation investments: Cash and cash equivalents $ 114,059 $ 114,059 $ Mutual funds 2,463,112 2,463,112 Corporate stocks 1,512,419 1,512,419 Government securities 250, ,911 Exchange-traded and closed-end funds 2,737,811 2,737,811 $ 7,078,312 $ 7,078,312 $ Assets held for others: Cash and cash equivalents $ 598,763 $ 598,763 $ Mutual funds 5,132,572 5,132,572 Corporate stocks 1,963,854 1,963,854 Government securities 276, ,701 Exchange-traded and closed-end funds 3,262,820 3,262,820 $ 11,234,710 $ 11,234,710 $ Annuity obligations $ (405,020) $ $ (405,020) The following methods and assumptions were used to estimate the fair value of each class of financial instrument for which it is practicable to estimate that value: Investments: fair value is based on quoted market prices. 8. Annuity obligations: fair value is based on the present value of the future distributions, using published life expectancy tables and interest rates imputed at the inception date of the obligation. Income Taxes The Foundation is a nonprofit organization exempt from income taxes under Section 50l(c) (3) of the Internal Revenue Code, except on net income derived from unrelated business activities. The Foundation believes that it has support for any tax positions taken, and as such, does not have any uncertain tax positions that are material to the financial statements. As a religious organization, the Foundation is not required to file annual Federal or state information returns.

14 9. Related Party Transactions 10. The Roman Catholic Diocese of Owensboro (Diocese) provides administrative, human resources, and accounting support to the Foundation at no charge. While the Diocese and the Foundation share a common purpose to support the region's Catholic community, the Foundation is not controlled by the Diocese, and, therefore, reports its financial position and activities separately from the Diocese. Related party transactions for fiscal years 2014 and were as follows: Due from the Diocese Operating Fund for Disciples Response Fund offerings $ $ 37,454 Due to the Diocese Charitable Trust Fund resulting from an annuity termination $ ( 13,908) $ Diocese Disciples Response Fund offerings contributed to the Foundation $ 38,419 $ 37,454 Disbursements to the Diocese for program services: Operating Fund: Seminarians $ 241,185 $ 225,000 Religious education 17,985 Outreach 10,830 Charitable Trust Fund: Retired priests 13,908 Concentration of Credit Risk $ 283,908 $ 225,000 Investment securities are exposed to various risks, such as interest rate, market, and credit risks. Due to the level of risk associated with certain investment securities, it is at least reasonably possible that changes in the values of investment securities will occur in the near tenn and that such changes could materially affect the amounts reported in the financial statements. 11. Financial Statement Presentation Certain amounts in the 2013 financial statements have been reclassified to conform to the 2014 presentation. These reclassifications had no effect on net assets or the change in net assets. 12. Subsequent Events The Foundation has evaluated subsequent events through October 20, 2014, the date the financial statements were available to be issued. 12