COMMUNITY FOUNDATION OF GREENVILLE AUDITED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2014 AND 2013

Transcription

1 COMMUNITY FOUNDATION OF GREENVILLE AUDITED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2014 AND 2013

2 COMMUNITY FOUNDATION OF GREENVILLE TABLE OF CONTENTS PAGE Independent Auditor's Report 1-2 Statements of Financial Position 3 Statements of Activities 4 Statements of Cash Flows 5 Notes to the Financial Statements 6-20

3 INDEPENDENT AUDITOR S REPORT The Board of Directors Community Foundation of Greenville Greenville, South Carolina We have audited the accompanying financial statements of the Community Foundation of Greenville (a nonprofit organization), which are comprised of the statements of financial position as of December 31, 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. R America Counts on CPAs Members American Institute of Certified Public Accountants S.C. Association of Certified Public Accountants Suite North Pleasantburg Drive Greenville, South Carolina (864) Fax (864)

4 To the Board of Directors Community Foundation of Greenville August 7, 2015 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 Community Foundation of Greenville 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. Greenville, South Carolina August 7,

5 COMMUNITY FOUNDATION OF GREENVILLE STATEMENTS OF FINANCIAL POSITION DECEMBER 31, 2014 and ASSETS Cash and cash equivalents $ 2,440,692 $ 4,556,550 Other accounts receivable 1,254,218 59,867 Expected collection under agreement with third parties 802, ,953 Assets held - split-interest agreements 269,063 1,175,657 Investments 53,007,849 51,058,214 Cash surrender value life insurance 469, ,889 Property and equipment, net 104, ,999 Total assets $ 58,348,649 $ 58,286,129 LIABILITIES Accounts payable $ 1,021,266 $ 34,110 Obligations under agreement with third parties 802, ,953 Liability under split-interest agreements 493, ,242 Funds held for others 5,841,166 5,774,581 Total liabilities 8,158,226 7,709,886 NET ASSETS Unrestricted 31,509,809 32,704,029 Temporarily restricted 3,241,788 4,081,990 Permanently restricted 15,438,826 13,790,224 Total net assets 50,190,423 50,576,243 Total liabilities and net assets $ 58,348,649 $ 58,286,129 The accompanying notes are an integral part of the financial statements. 3

6 COMMUNITY FOUNDATION OF GREENVILLE STATEMENTS OF ACTIVITIES YEARS ENDED DECEMBER 31, 2014 and 2013 Changes in unrestricted net assets Unrestricted revenues and other support Contributions $ ,281,750 $ ,711,688 Investment income 845, ,836 Net gain(loss) on investments 205,420 1,889,609 Management fees 40,635 38,988 Net assets released from restrictions 982, ,332 Total unrestricted revenues and other support 13,355,331 11,733,453 Expenses Programs Grants and distributions 13,428,260 6,733,863 Supporting services Administrative expenses 1,121,291 1,027,136 Total expenses 14,549,551 7,760,999 Increase (decrease) in unrestricted net assets (1,194,220) 3,972,454 Changes in temporarily restricted net assets Contributions 61,675 35,045 Investment income 642, ,767 Net gain (loss) on investments (159,565) 575,048 Change in value of split-interest agreements (402,468) (14,658) Net assets released from restrictions (982,117) (494,332) Increase (decrease) in temporarily restricted net assets (840,202) 512,870 Changes in permanently restricted net assets Contributions 1,647,738 11,502,347 Investment income 1,781 2,133 Net gain on investments (917) 7,295 Increase in permanently restricted net assets 1,648,602 11,511,775 Change in net assets (385,820) 15,997,099 Net assets, beginning of year 50,576,243 34,579,144 Net assets, end of year $ 50,190,423 $ 50,576,243 The accompanying notes are an integral part of these financial statements. 4

7 COMMUNITY FOUNDATION OF GREENVILLE STATEMENTS OF CASH FLOWS YEARS ENDED DECEMBER 31, 2014 and CASH FLOWS FROM OPERATING ACTIVITIES Change in net assets $ (385,820) $ 15,997,099 Adjustments to reconcile changes in net assets to net cash provided by operating activities Proceeds from contributions restricted for long-term investment (1,709,413) (11,537,392) Depreciation 11,376 13,439 Net realized/unrealized gain on investments 44,938 (2,471,952) Change in Assets held in trust 906,594 (77,935) Other accounts receivable (1,194,351) 224,128 Grants and accounts payable 987,156 15,171 Liabilities under trust (504,125) 92,592 Funds held for others 66, ,156 Net cash (used by) provided by operating activities (1,777,060) 2,984,306 CASH FLOWS FROM INVESTING ACTIVITIES Purchase of property and equipment (5,311) - Increase in cash surrender value life insurance (48,327) (67,995) Net increase in investments (1,994,573) (13,605,277) Net cash used by investing activities (2,048,211) (13,673,272) CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from contributions restricted for long-term investment 1,709,413 11,537,392 Net cash provided by financing activities 1,709,413 11,537,392 NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (2,115,858) 848,426 CASH AND CASH EQUIVALENTS, beginning of year 4,556,550 3,708,124 CASH AND CASH EQUIVALENTS, end of year $ 2,440,692 $ 4,556,550 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION Contributed securities acquired and sold $ 3,790,716 $ 7,926,091 The accompanying notes are an integral part of these financial statements. 5

8 COMMUNITY FOUNDATION OF GREENVILLE NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2014 AND 2013 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Organization The Community Foundation of Greenville (the Foundation ) was established in 1956 as a charitable trust and changed to corporate form in 1971 to benefit Greenville County and the Greater Greenville Area. The Foundation manages and administers charitable funds and makes distributions to nonprofit organizations through a volunteer self-perpetuating Board of Directors. Based on the by-laws of the Foundation, the Board of Directors has the power to modify any condition or restriction on the distribution of funds for any specified charitable purpose or to any specified organization if in its sole judgment such condition or restriction becomes incapable of fulfillment, inconsistent with the charitable needs of the community, or unnecessary. Basis of Accounting and 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. Net assets, including endowment funds, are classified and reported based on the existence or absence of donorimposed restrictions. The bylaws of the Foundation include a variance provision that allows the Board of Directors of the Foundation to vary the use of substantially all contributions received. Income Tax Status The Foundation has obtained exemption from federal income taxes under Section 501(c)(3) of the Internal Revenue Code as an organization which is not a private foundation as well as eleemosynary corporation recognized in South Carolina. Therefore, no provision for income taxes has been included in the financial statements. Financial Accounting Standards Board ( FASB ) Accounting Standards Codification ( ASC ) prescribes a comprehensive model for how an organization should measure, recognize, present, and disclose in its financial statements uncertain tax positions that the Foundation has taken or expects to take on a tax return. In accordance with FASB ASC , the Foundation recognizes the tax benefits from uncertain tax positions only if it is more-likely-than-not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The Foundation s income tax filings are subject to audit by various taxing authorities. Management believes the adoption of ASC resulted in no significant impact to the Foundation s financial statements. Cash and Cash Equivalents Cash and cash equivalents presented in the statement of cash flows represent cash on hand, demand deposits, and other high liquidity assets except those amounts designated and classified as investments at financial institutions with a maturity of three months or less when purchased. Investments Investments consist primarily of assets invested in marketable equity and debt securities, alternative investments, and money-market accounts. The Foundation accounts for investments in accordance with 6

9 FASB ASC and subsections. This standard requires that investments in equity securities with readily determinable fair values and all investments in debt securities be measured at fair value in the statement of financial position. The realized and unrealized gain or loss on investments is reflected in the statement of activities. Short-Term Investments Short-term investments include cash equivalents and fixed income investments with maturities of less than one year. Short-term investments are valued using observable market data and are categorized as Level 1 to the degree that they can be valued based on quoted market prices in active markets. The majority of these short-term investments are held in U.S. Treasury money market accounts. Although these cash equivalents are readily available, it is the intent of the Foundation to hold these cash equivalents for investment purposes and therefore has classified them as investments. Equity Investments Equity investments consist of corporate stocks and daily traded mutual funds. Securities held in corporate stocks and daily traded mutual funds are generally valued based on quoted market prices in active markets obtained from exchange or dealer markets for identical assets, and are accordingly categorized as Level 1, with no valuation adjustments applied. Corporate stocks that are traded in inactive markets are categorized as Level 2. Debt Investments Debt investments consist of U.S. Government obligations, corporate bonds and notes and daily traded mutual funds. All investments in debt securities are valued based on quoted market prices in active markets and are categorized as Level 1. Alternative Investment Portfolio The alternative investment portfolio is made up of investments of limited partnership interests in hedge funds. The fund managers invest in a variety of securities based on the strategy of the fund which may or may not be quoted in an active market. Illiquid investments, if any, are generally designated as a side pocket by hedge fund managers and may be valued based on an appraised value, discounted cash flow, industry comparables or some other method. Limited partnership interests are valued at NAV. All alternative investments are valued at NAV and are categorized as Level 3. Investments are exposed to various risks such as significant world events, interest rate, credit, and overall market volatility risks. Due to the level of risk associated with certain investment securities, it is reasonably possible that changes in the fair value of investments will occur in the near term and that such changes could materially affect the amounts reported in the statements of financial position. Property and Equipment Property and equipment are reported at cost, if purchased, or fair value at the date of donation. Depreciation is computed on a straight-line basis over the estimated useful life of the assets, primarily five years. The Foundation capitalizes assets with a cost of $1,000 or more. Donated Assets Donated marketable securities and other noncash donations are recorded as contributions at their estimated fair values at the date of donation. 7

10 Funds Held for Others Funds established by an unrelated not-for-profit organization using its own funds and for its own benefit are classified by the Foundation as a liability, rather than as a net asset, in accordance with ASC The Foundation maintains variance power and legal ownership of the funds based on the agency and intermediary agreements and as such continues to report the funds as assets of the Foundation. Net Asset Classifications FASB ASC , Endowments of Not-for-Profit Organizations: Net Assets Classification of Funds Subject to an Enacted Version of the Uniform Prudent Management of Institutional Funds Act, and Enhanced Disclosures for All Endowment Funds (FASB ASC ) provides guidance on the net asset classification of donor-restricted endowment funds for a not-for-profit organization that is subject to an enacted version of the Uniform Prudent Management of Institutional Funds Act (UPMIFA). FASB ASC also improved disclosures about an organization s endowment funds (both donor-restricted and board-designated endowment funds) whether or not the Foundation is subject to UPMIFA. The Foundation is governed subject to the Governing Documents for the Foundation and most contributions are subject to the terms of the Governing Documents and the related Fund and Gift Agreements. Certain contributions are received subject to other gift or grant instruments, or are subject to specific agreements with the Foundation, and may be recorded as permanently restricted, temporarily restricted, or unrestricted, depending on the specific terms of the agreements. The Board of Directors have the ability to distribute so much of the corpus of any trust or separate gift, devise, bequest, or fund as the board in its sole discretion shall determine. As a result of the ability to distribute corpus, all contributions not classified as temporarily restricted or permanently restricted are classified as unrestricted net assets for financial statement purposes. The Foundation classifies as permanently restricted net assets a) the original value of the gifts and grants to permanent endowments, b) the original value of subsequent gifts to the permanent endowments, and c) accumulations to the permanent endowments in accordance with the applicable donor or grantor gift instrument. The remaining portion of endowment fund investments that is not classified as permanently restricted net assets is classified as temporarily restricted net assets until those amounts are appropriated for expenditure for the intended purpose or, when unrestricted, reported as unrestricted and designated by management for specific purposes. Temporarily restricted net assets consist of contributions received under split-interest agreements wherein the Foundation or a third party serves as trustee and the remaining portion of donor-restricted endowment funds that are not classified as permanently restricted. When a restriction expires, that is, when a stipulated time restriction ends or a purpose restriction is fulfilled, temporarily restricted net assets are reclassified to unrestricted net assets and reported in the statements of activity as net assets released from restrictions. Investment Policy The Foundation has adopted a policy whereby it limits the amount of income that may be utilized for operating or grant purposes to five percent of the trailing three-year average of the endowment s market value. This policy enables the Foundation to preserve and strengthen its endowment for the future. Grants Policy Grants authorized but unpaid at year-end are reported as liabilities. 8

11 Donated Services No amounts have been reflected in the financial statements for donated services. The Foundation pays for most services requiring specific expertise. However, many individuals volunteer their time and perform a variety of tasks that assist the Foundation with specific programs and various committee assignments. Estimates The preparation of 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 and 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. Fair Value of Financial Instruments The following methods and assumptions were used to estimate the fair value of the following financial instruments: Cash and cash equivalents: The carrying amounts approximate fair value due to the short maturity of those instruments. Accounts receivable, prepaid expenses, accounts payable and funds held for others: The carrying amounts of these items approximate fair value due to their short-term nature. Concentrations of Credit Risk The Foundation s cash accounts are subject to potential concentrations of credit risk. Cash accounts have bank balances of $3,079,147 and a book balance of $2,440,692 at December 31, Of the bank balances of $3,079,147, Federal Deposit Insurance Corporation (FDIC) or collateral covers $250,000, while $2,829,147 is not covered by insurance or collateral. Cash accounts had bank balances of $4,928,640 and a book balance of $4,556,550 at December 31, Of the bank balances of $4,928,640, Federal Deposit Insurance Corporation (FDIC) or collateral covers $250,000, while $4,678,640 is not covered by insurance or collateral. The Foundation has not experienced any losses in such accounts and believes it is not exposed to significant credit risk on cash and cash equivalents. Management Fees The Foundation charges component funds a management fee for managing and administering fund assets during the year. Management fees transferred from the component funds for supporting services were $404,999 and $356,427 for the years ended December 31, 2014 and 2013, respectively. These fees have been eliminated in the accompanying financial statements. Reclassifications Certain reclassifications have been made to the 2013 financial statement presentation to correspond to the current year s format. Total net assets and change in net assets are unchanged due to these reclassifications. Fair Value The Fair Value Measurements and Disclosures, FASB ASC 820, defines fair value and establishes a framework for measuring fair value that includes a hierarchy that categorizes and prioritizes the sources used to measure and disclose fair value. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (an exit price). The hierarchy is broken down into three levels based on inputs that 9

12 market participants would use in valuing the asset or liability developed based on market data obtained from sources independent of the Foundation as follows: Level 1 - Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities 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 inactive markets; - inputs other than quoted prices that are observable for the asset or liability; - inputs that are derived principally from or corroborated by observable market data by correlation or by other means. If the asset or liability has a specified (contractual) term, the level 2 input must be observable for substantially the full term of the asset or liability. Level 3 - Inputs to the valuation methodology are unobservable and significant to the fair value measurement. Inputs refer broadly to the assumptions that market participants use to make valuation decisions, including assumptions about risk. Inputs may include price information, volatility statistics, specific and broad credit data, liquidity statistics and other factors. The Foundation is required by the pronouncement to maximize the use of observable inputs (Levels 1 and 2) and minimize the use of unobservable inputs (Level 3). The Foundation considers observable data to be that market data which is readily available, regularly distributed or updated, reliable and verifiable, not proprietary and provided by independent sources that are actively involved in the relevant market. The categorization of a financial instrument within the hierarchy is based upon the pricing transparency of the instrument and does not necessarily correspond to the Foundation s perceived risk of that instrument. Assets and liabilities within the hierarchy are disclosed in the Notes to Financial Statements based on the lowest (or least observable) input that is significant to the measurement. The Foundation s assessment of the significance of an input requires judgment, which may affect the valuation and classification within the fair value hierarchy. The fair value of assets and liabilities using Level 3 inputs are generally determined by using pricing models, discounted cash flow methods or calculated net asset value per share, which all require significant management judgment or estimation. The Fair Value Measurement standard establishes a framework for estimating the fair value of investments in investment companies (limited partnerships) that have a calculated value of their capital account or net asset value (NAV) in accordance with, or in a manner consistent with U.S. generally accepted accounting principles. As a practical expedient, the Foundation is permitted under U.S. GAAP to estimate the fair value of an investment at the measurement date using the reported NAV without further adjustment unless the entity expects to sell the investment at a value other than NAV or if the NAV is not calculated in accordance with U.S. GAAP. The Foundation s investments in certain hedge funds in the alternative investment portfolio are generally fair valued based on the most current NAV received, adjusted for cash flows when the reported NAV is not at the measurement date. This amount represents fair value of these investments at December 31, 2014 and

13 NOTE 2 INVESTMENTS Investments are comprised of the following at December 31, 2014 and Investments are stated at fair value Cost Fair Value Cost Fair Value Short-term investments Money market funds $ 1,775,424 $ 1,775,424 $ 4,705,030 $ 4,705,030 Certificates of deposit ,053 22,056 Equity investments Publicly traded equities 1,488,557 2,453,570 3,755,974 4,447,556 Mutual funds 22,940,419 24,409,232 19,682,795 21,932,424 Exchange traded funds 10,258,443 11,269,186 5,561,614 6,096,552 Debt investments U.S. Government obligations ,988 10,988 Corporate bonds and notes 645, ,051 1,088,696 1,133,590 Mutual funds 8,631,054 8,417,911 8,812,232 8,650,286 Alternative investments Hedge funds 3,525,039 4,062,515 3,578,543 4,019,636 Private equity funds 144, , Real estate Real estate investment trust 58,651 64,530 46,371 40,096 $ 49,467,027 $ 53,007,849 $ 47,264,296 $ 51,058,214 The Foundation s investment income, net of investment income and gains allocated to funds held for others, consists of the following for the years ended December 31: Less Funds Total Held for Others 2014 Interest and dividend income $ 1,657,595 $ (168,233) $ 1,489,362 Net realized gain (loss) on investments 935,176 (176,038) 759,138 Net unrealized gain (loss) on investments (826,612) 112,411 (714,201) $ 1,766,159 $ (231,860) $ 1,534,299 Less Funds Total Held for Others 2013 Interest and dividend income $ 1,136,811 $ (124,075) $ 1,012,736 Net realized gain (loss) on investments 968,130 (118,820) 849,310 Net unrealized gain (loss) on investments 2,125,570 (502,928) 1,622,642 $ 4,230,511 $ (745,823) $ 3,484,688 The Foundation paid investment fees of approximately $162,237 and $117,802 for the years ended December 31, 2014 and 2013, respectively. 11

14 NOTE 3 FAIR VALUE MEASUREMENTS The following tables summarize the valuation of the Foundation s financial assets and liabilities measured and recorded at fair value on a recurring basis at December 31, 2014 and 2013, based on the level of input utilized to measure fair value: Fair value measurements at December 31, 2014 using Level 1 Level 2 Level 3 Total Pooled investments: Short-term investments Money market funds $ 927,907 $ - $ - $ 927,907 Equity investments Publicly traded equities 2,373, ,373,134 Mutual funds 19,301, ,301,784 Exchange traded funds 11,269, ,269,186 Debt investments Corporate bonds and notes 382, ,161 Mutual funds 6,077, ,077,186 Alternative investments Hedge funds - - 3,134,354 3,134,354 Real estate Real estate investment trust 64, ,530 Total pooled investments 40,395,888-3,134,354 43,530,242 Separate accounts: Short-term investments Money market funds 847, ,517 Certificates of deposit Equity investments Publicly traded equities 80, ,436 Mutual funds 5,107, ,107,448 Debt investments U.S. Government obligations Corporate bonds and notes 28, ,890 Mutual funds 2,340, ,340,725 Alternative investments Hedge funds , ,161 Private equity funds 144, ,430 Total separate accounts 8,549, ,161 9,477,607 Total investments 48,945,334-4,062,515 53,007,849 Split-interest agreements: Short-term investments Money market funds 45, ,800 Equity investments Mutual funds 173, ,248 Debt investments U.S. Government obligations 50, ,015 Total split-interest agreements 269, ,063 Total assets at fair value $ 49,214,397 $ - $ 4,062,515 $ 53,276,912 12

15 Fair value measurements at December 31, 2013 Level 1 Level 2 Level 3 Total Pooled investments: Short-term investments Money market funds $ 3,543,516 $ - $ - $ 3,543,516 Equity investments Publicly traded equities 4,264, ,264,694 Mutual funds 16,695, ,695,504 Exchange traded funds 6,096, ,096,552 Debt investments Corporate bonds and notes 1,110, ,110,787 Mutual funds 7,517, ,517,068 Alternative investments Hedge funds 167,021-2,864,878 3,031,899 Real estate Real estate investment trust 40, ,096 Total pooled investments 39,435,238-2,864,878 42,300,116 Separate accounts: Short-term investments Money market funds 1,161, ,161,514 Certificates of deposit 22, ,056 Equity investments Publicly traded equities 182, ,862 Mutual funds 5,236, ,236,922 Debt investments U.S. Government obligations 10, ,987 Corporate bonds and notes 22, ,802 Mutual funds 1,133, ,133,218 Alternative investments Hedge funds , ,737 Total separate accounts 7,770, ,737 8,758,098 Total investments 47,205,599-3,852,615 51,058,214 Split-interest agreements: Short-term investments Money market funds 53, ,967 Equity investments Mutual funds 1,071, ,071,608 Debt investments U.S. Government obligations 50, ,082 Total split-interest agreements 1,175, ,175,657 Total assets at fair value $ 48,381,256 $ - $ 3,852,615 $ 52,233,871 The table below sets forth a summary of changes in the fair value of the Foundation s Level 3 assets: 13

16 Hedge fund investments Equity long/short Global multi-strategy Arbitrage Total Fair value as of December 31, 2012 $ - $ 2,846,020 $ 1,030,866 $ 3,876,886 Net realized/unrealized gains - 197,032 2, ,090 Purchase of investments - 552, , ,505 Sale of investments - - (1,030,866) (1,030,866) Fair value as of December 31, ,595, ,058 3,852,615 Net realized/unrealized gains - 105,858 6, ,492 Purchase of investments - 48,942 51,000 99,942 Sale of investments - (2,534) - (2,534) Fair value as of December 31, 2014 $ - $ 3,747,823 $ 314,692 $ 4,062,515 ASC 820 requires additional disclosures for investments valued at net asset value to enable users of the financial statements to understand the nature and risk of those investments. At December 31, 2014 and 2013, the Foundation s investments valued at net asset value were as follows: Fair Value Redemption frequency (if currently eligible) Redemption notice period Global multi-strategy hedge fund (a) $ 3,747,823 $ 3,595,557 monthly, quarterly days Arbitrage hedge fund (b) 314, ,058 quarterly 60 days Total $ 4,062,515 $ 3,852,615 The Foundation does not have any unfunded commitments related to the above investments as of December 31, 2014 and (a) This class invests in hedge funds that pursue multiple strategies to diversify risks and reduce volatility. The fund of fund managers allocates across a broad range of hedge fund categories including global macro, long/short, event driven and arbitrage strategies that provide low correlation to other asset classes in the portfolio. The fair values of the investments in this class have been estimated using the net asset value per share of the investments. (b) This class invests in hedge funds that pursue multiple strategies to provide capital appreciation by utilizing a variety of absolute return investment strategies with the goal of achieving superior, risk-adjusted returns with a low correlation to major equity and fixed income markets. The fund of fund managers allocates across a broad range of arbitrage strategies. The fair values of the investments in this class have been estimated using the net asset value per share of the investments. NOTE 4 WALTER D. JOHNSON, JR. TRUST The Foundation is the trustee for the Walter D. Johnson, Jr. Trust. This trust, which has assets of $224,498 and $214,915 as of December 31, 2014 and 2013, respectively, was established in order to make grants for education in the field of social services. In 2014 and 2013, the trust made grants of $0 and $0, respectively. The assets of the Walter D. Johnson, Jr. Trust are not included in these financial statements. 14

17 NOTE 5 BENEFICIAL INTEREST TRUST The Foundation is the beneficiary of a trust administered by a bank. The assets of the trust are not included in the Statements of Financial Position of the Foundation since the Foundation does not exercise any control over those funds. The income from the trust is distributed to the donor annually. The market value of the trust s assets at December 31, 2014 and 2013 was $148,687 and $151,016, respectively. NOTE 6 PROPERTY AND EQUIPMENT Property and equipment at December 31 are summarized below: Land $ 93,000 $ 93,000 Equipment 66,364 64, , ,279 Less: accumulated depreciation 54,430 46,280 $ 104,934 $ 110,999 Depreciation expense for the years ended December 31, 2014 and 2013 was $11,376 and $13,439, respectively. NOTE 7 OPERATING LEASES The Foundation has noncancelable operating leases for equipment that expire in Rental expense for these leases was approximately $14,110 and $11,317 for the years ended December 31, 2014 and 2013, respectively. The Foundation leases offices under operating leases expiring in various years through Rental expense under these leases was $46,383 and $48,693 in 2014 and 2013, respectively. Future minimum lease payments remaining under these operating leases are as follows: Year Ending December 31, Equipment Office Space 2015 $ 8,941 $ 46, ,941 48, ,196 49, , ,233 $ 26,078 $ 225,288 NOTE 8 EMPLOYEES RETIREMENT SAVINGS PLAN The Foundation established a 401(k) defined contribution retirement plan effective March 1, 2011 for the benefit of all regular full-time employees who are a minimum of twenty-one years of age. Participating employees may elect to contribute, on a tax deferred basis, a portion of their compensation, in accordance with Section 401(k) of the Internal Revenue Code. Additional Foundation contributions may be made to the plan at the discretion of the Board of Directors, with the maximum limitation of the amount the employer can deduct for federal income tax purposes. The Foundation elected on a discretionary basis to contribute 10% of all eligible 15

18 participants compensation for the years ended December 31, 2014 and 2013, respectively. The Foundation s contribution to the plan for the years ended December 31, 2014 and 2013 was $37,726 and $41,004, respectively. NOTE 9 SPLIT-INTEREST AGREEMENTS The Foundation administers various charitable remainder trusts and charitable gift annuities which provide for the payment of distributions to designated beneficiaries over the instrument s term (usually the designated beneficiary s lifetime). Assets are invested and payments are made to donors and/or other beneficiaries in accordance with the respective agreements. At the end of the instrument s term, the remaining assets are available for the Foundation s use. The portion of the trust attributable to the present value of the future benefits to be received by the Foundation is recorded in the Statements of Activities as a temporarily restricted contribution in the period the trusts are established. Assets held in the charitable remainder trusts totaled $269,063 and $1,175,657 at December 31, 2014 and 2013, respectively. On an annual basis, the Foundation revalues the liability to make distributions to the designated beneficiaries based on actuarial assumptions. The present values of the estimated future payments of $493,117 and $997,242 at December 31, 2014 and 2013, respectively, are calculated using a discount rate of 7% and applicable mortality tables. NOTE 10 FUNDS HELD FOR OTHERS Transactions in funds held for others are summarized as follows: Additions: Contributions $ 138,804 $ 279,366 Investment income 168, ,075 Net realized gains (losses) 176, ,820 Net unrealized gains (losses) (112,411) 502, ,664 1,025,189 Deductions: Administrative fees (40,635) (38,988) Investment fees (12,943) (13,655) Distributions - grants (250,501) (243,390) (304,079) (296,033) Increase in funds held for others 66, ,156 Balance, beginning of year 5,774,581 5,045,425 Balance, end of year $ 5,841,166 $ 5,774,581 NOTE 11 COMMITMENTS The Foundation has granted conditional scholarships to twelve students through The aggregate commitment under these agreements is approximately $55,200 and $39,200 at December 31, 2014 and 2013, respectively. 16

19 NOTE 12 OBLIGATION UNDER AGREEMENT WITH THIRD PARTY During 2004, County Council of Greenville, South Carolina (the County ) requested that the Foundation s Board of Directors authorize the Foundation to enter into an arrangement, with a commercial bank serving the Greenville market, for the purpose of expediting the transfer of funds to several charitable organizations for use by the beneficiary organizations to enhance their charitable activities in the Greenville community. In conjunction with the County s request to the Foundation, the County approved certain appropriations of the County s local accommodations tax revenues to repay the debt which was expected to arise from the arrangement. As a result of the above noted request from the County, the Foundation executed a loan agreement and a non-recourse promissory note repayable to the bank bearing interest at the annual rate of 5.2% and repayable in quarterly payments of $36,580 including interest through After the related documents were executed, the proceeds of the bank loan were disbursed by the Foundation to the beneficiary organizations in accordance with the request from the County. As also evidenced by the loan agreement and the promissory note, the bank and the Foundation have agreed and each has acknowledged that the Foundation is obligated to repay the promissory note balance and accrued interest thereon only to the extent that the Foundation has received the necessary appropriation of local accommodations tax revenues therefore from the County. The beneficiary organizations have executed agreements whereby the beneficiary organizations individually will indemnify and hold harmless the Foundation with respect to this arrangement and each beneficiary organization has represented and warranted to the Foundation that it is a qualified public charity under the Internal Revenue Code. The Foundation has included the unpaid balance of the promissory note in the Foundation s liabilities in the accompanying statements of financial position under Obligations under agreement with third parties. Further, to give effect to the amounts expected to be funded by the County to repay the unpaid principal, a corresponding asset in an amount equal to the unpaid principal balance of the promissory note is also included in the Foundation s assets and reported in the accompanying statements of financial position under Expected collection under agreement with third parties. In the event, expected to be unlikely, that the County does not appropriate sufficient funds to repay the contractual principal and interest payments as such become due, the loan agreement and promissory note shall immediately terminate without penalty or expense to the Foundation of any kind whatsoever. Future maturities of the promissory note are as follows: 2015 $ 106, , , , ,127 Thereafter 209,831 $ 802,675 17

20 NOTE 13 CASH SURRENDER VALUE LIFE INSURANCE The Foundation is the owner and beneficiary of insurance policies on the lives of certain supporters of the Foundation with face amounts totaling $2,175,000 at December 31, 2014 and The cash surrender value of these policies amounted to $469,216 and $420,889 at December 31, 2014 and 2013, respectively. NOTE 14 FUNCTIONAL ALLOCATION OF EXPENSES The costs of providing the various programs and activities have been summarized on a functional basis in the statements of activities. Accordingly, certain costs have been allocated among the programs and supporting services benefited. NOTE 15 ENDOWMENT ASSETS The Foundation s endowment consists of approximately 37 individual funds established for a variety of purposes including both donor-restricted endowment 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 majority of the endowment funds of the Foundation have been pooled in the Foundation s Pooled Investments, which is invested in equities, bonds, hedge funds, and real estate investment trusts. Interpretation of Relevant Law The Board of Directors of the Foundation has interpreted the South Carolina Uniform Prudent Management of Institutional Funds Act ( UPMIFA ) as requiring the preservation of the fair value of the original gift as of the date of the donor-restricted endowment funds absent explicit donor stipulations to the contrary. As a result of this interpretation, the Foundation classifies as permanently restricted net assets (a) the original value of the gifts donated to the permanent endowment, (b) the original value of subsequent gifts to the permanent endowment, and (c) accumulation of earnings required to be added to the permanent endowment as stipulated by the donor-applicable donor gift instrument. 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 Foundation in a manner consistent with the standard of prudence prescribed by the Act. In accordance with the Act, the Foundation considers the following factors in making a determination to appropriate or accumulate donor-restricted endowment funds: 1. The duration and preservation of the fund. 2. The purposes of the Foundation and the donor-restricted endowment fund. 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 Foundation. 7. The investment policies of the Foundation. Changes in endowment net assets for the year ended December 31, 2014 are as follows: 18

21 Unrestricted - Board Designated Temporarily Restricted Permanently Restricted Total Endowment Fund net assets, December 31, 2013 $ 3,071,272 $ 3,903,575 $ 13,789,035 $ 20,763,882 Investment return: Investment income 99, ,798 1, ,935 Net appreciation, (realized and unrealized) (10,319) (159,565) 271 (169,613) 89, ,233 2, ,322 Contributions - 61,675 1,647,738 1,709,413 Appropriation of endowment assets for expenditure (139,985) (782,641) - (922,626) Endowment net assets, December 31, 2014 $ 3,020,323 $ 3,465,842 $ 15,438,826 $ 21,924,991 Changes in endowment net assets for the year ended December 31, 2013 are as follows: Unrestricted - Board Designated Temporarily Restricted Permanently Restricted Total Endowment Fund net assets, December 31, 2012 $ 2,733,612 $ 3,376,044 $ 2,278,449 $ 8,388,105 Investment return: Investment income 131, , ,508 Net depreciation, (realized and unrealized) 341, ,049 7, , , ,504 8,239 1,329,385 Contributions - 35,045 11,502,347 11,537,392 Appropriation of endowment assets for expenditure (134,982) (356,018) - (491,000) Endowment net assets, December 31, 2013 $ 3,071,272 $ 3,903,575 $ 13,789,035 $ 20,763,882 Funds with Deficiencies From time to time, the fair value of assets associated with individual donor-restricted endowment funds may fall below the level that the donor or UPMIFA requires the Foundation to retain as a fund of perpetual duration. In accordance with accounting principles generally accepted in the United States of America, deficiencies of this nature are reported in unrestricted net assets. The aggregated deficiencies of this nature for all donor-restricted endowment funds totaled $330,806 and $107,269 as of December 31, 2014 and 2013, respectively. Return Objectives and Risk Parameters The Foundation has adopted investment and spending policies for endowment assets that attempt to provide a relatively predictable, stable stream of funding to programs supported by its endowment while seeking to maintain the purchasing power of the endowment assets. Endowment assets include those assets of donor-restricted funds that the Foundation must hold in perpetuity or for a donor-specified period as well as board-designated funds. As authorized by Board-approved policies, these assets are invested to maximize long-term returns, while simultaneously mitigating risk through maintaining a diversified portfolio. A multi-generational window not only allows for the typical diversification across asset classes, but also for time diversification across both up and down markets. The assets are invested in a manner that 19

22 is intended to produce results that meet or exceed the composite return and are within the risk parameters of an appropriate benchmark that corresponds to each fund goal. The long-term objective is to attain, within acceptable risk parameters, an average annual total return that exceeds the sum of the Foundation s approved payout rate plus inflation, plus investment management and related fees. The objective is expected to be obtained over time but not in each and every reporting period. Strategies Employed for Achieving Objectives To address its long-term rate-of-return objectives, the Foundation relies on a total return strategy in which investment returns are achieved through both capital appreciation (realized and unrealized) and current yield (interest and dividends). The Foundation targets a diversified asset allocation that places a greater emphasis on equity-based investments to achieve its long-term objectives within prudent risk constraints. Spending Policy and How the Investment Objectives Relate to Spending Policy The Foundation s spending policy appropriates for distribution each year a certain percentage of its endowment funds average fair value for the prior three years through the fiscal year-end preceding the fiscal year in which the distribution is planned. In establishing this policy, the Foundation considered the expected return on its endowment. The goal of such spending policy is to allow the endowment to maintain its purchasing power, achieve a reasonable degree of stability and predictability in income availability for operations and to achieve a balance between present and future needs. Real growth is achieved through new gifts and any excess investment return. NOTE 16 NET ASSETS Description of amounts classified as permanently restricted net assets and temporarily restricted net assets is as follows: Permanently restricted net assets: The portion of endowment funds that is required to be retained permanently either by explicit donor stipulation or by UPMIFA $ 15,438,826 $ 13,790,224 Total permanently restricted net assets $ 15,438,826 $ 13,790, Temporarily restricted net assets: The portion of endowment funds subject to a time restriction under UPMIFA: Without purpose restrictions for spending $ 633,713 $ 652,057 With purpose restrictions for spending 2,832,129 3,251,518 Total endowment funds classified as temporarily restricted net assets 3,465,842 3,903,575 Net split-interest agreements and contributions receivable (224,054) 178,415 Total temporarily restricted net assets $ 3,241,788 $ 4,081,990 NOTE 17 SUBSEQUENT EVENTS Subsequent events have been evaluated through the date of the auditor s report, which is the date the financial statements were available to be issued. 20