CHIEF SEATTLE COUNCIL BOY SCOUTS OF AMERICA. Financial Statements. For the Years Ended December 31, 2016 and 2015

Transcription

1 CHIEF SEATTLE COUNCIL BOY SCOUTS OF AMERICA Financial Statements and 2015

2 Table of Contents Independent Auditor s Report 1 2 Financial Statements: Statements of Financial Position 3 Statements of Activities and Changes in Net Assets 4 5 Statements of Cash Flows 6 Statement of Functional Expenses Statement of Functional Expenses Page

3 Independent Auditor s Report To the Board of Directors Chief Seattle Council, Boy Scouts of America Seattle, Washington We have audited the accompanying financial statements of Chief Seattle Council, Boy Scouts of America (the Council), which comprise the statements of financial position as of December 31, 2016 and 2015, and the related statements of activities and changes in net assets, cash flows and functional expenses for the years then ended, and the related notes to the financial statements. Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor s Responsibility Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free from material misstatement. T: T: F: NE 4th St Suite 1700 Bellevue WA 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. clarknuber.com

4 Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Council as of December 31, 2016 and 2015, and the changes in its net assets and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America. Report on Supplementary Information Our audit was conducted for the purpose of forming an opinion on the financial statements as a whole. The fund level information in the statements of financial position, statements of activities and changes in net assets, and cash flows are presented for purposes of additional analysis and are not a required part of the basic financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the financial statements. The information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated in all material respects in relation to the financial statements as a whole. Certified Public Accountants May 2,

5 Statements of Financial Position December 31, 2016 Operating Fund Assets Current Assets: Cash and cash equivalents $ 1,639,327 $ 1,378,949 Accounts, grants and pledges receivable, net of allowance for doubtful accounts of $7,381 and $8,416 for 2016 and 2015, respectively (Note 3) 183, ,012 Prepaid expenses 42,844 34,803 Deferred activity expenses 204,725 54,228 Due (to) from other funds 0 34,135 Merchandise inventories 86, ,660 Total Current Assets 2,157,197 1,801,787 Long term investments (Note 5) 0 0 Contributed land held for sale Cash designated or restricted for improvement of long term assets (Note 4) Receivables designated or restricted for improvement of long term assets net of allowance for doubtful accounts of $4,536 and $54,536 for 2016 and 2015, respectively (Note 4) Land, buildings, equipment and construction in progress, net (Note 6) Beneficial interests in trusts (Note 7) Other noncurrent assets Total Assets $ 2,157,197 $ 1,801,787 Liabilities and Net Assets Current Liabilities: Accounts payable and accrued liabilities $ 192,198 $ 188,959 Custodial funds held for others 448, ,311 Deferred income 471, ,734 Total Current Liabilities 1,112, ,004 Total Liabilities 1,112, ,004 Net Assets: Unrestricted 778, ,649 Temporarily restricted (Note 10) 265, ,134 Permanently restricted (Note 11) Total Net Assets 1,044, ,783 Total Liabilities and Net Assets $ 2,157,197 $ 1,801,787 See accompanying notes.

6 Capital Fund Endowment Fund Total $ $ $ 66,163 $ 65,045 $ 1,705,490 $ 1,443, , ,012 42,844 34, ,725 54,228 0 (34,135) , ,660 (34,135) 66,343 65,045 2,223,540 1,832,697 17,923,192 17,749,843 17,923,192 17,749,843 3,673 3,673 3,673 3,673 1,801, ,542 1,801, ,542 35,393 69,690 35,393 69,690 17,607,100 17,670,681 17,607,100 17,670, , , , ,463 60,700 63,549 60,700 63,549 $ 19,443,587 $ 18,258,778 $ 18,512,905 $ 18,341,573 $ 40,113,689 $ 38,402,138 $ 360,624 $ $ $ $ 552,822 $ 188, , , , , ,624 1,473, , ,624 1,473, ,004 18,286,855 17,933,350 10,925,462 10,842,471 29,991,097 29,420, , ,428 1,952,654 1,922,615 3,014,571 2,528,177 5,634,789 5,576,487 5,634,789 5,576,487 19,082,963 18,258,778 18,512,905 18,341,573 38,640,457 37,525,134 $ 19,443,587 $ 18,258,778 $ 18,512,905 $ 18,341,573 $ 40,113,689 $ 38,402,138 3

7 Statements of Activities and Changes in Net Assets Changes in Unrestricted Net Assets Operating Capital Endowment Fund Fund Fund Total Total Total support 2,219, ,015 2,224,798 2,232,974 Support, Revenues and Reclassifications: Support Friends of Scouting contributions $ 1,272,671 $ $ $ 1,272,671 $ 1,268,730 United Way 200, , ,590 Special events, net of expenses of $141,665 and $121,209 for 2016 and 2015, respectively 581, , ,091 Other contributions 164, , , ,563 Revenues Sales of product to the public: Gross sales 1,370,960 1,370,960 1,353,019 Less cost of goods sold (377,387) (377,387) (339,524) Less commissions paid to scout units (546,506) (546,506) (479,369) Net sales of product to the public 447, , ,126 Camp fees 1,999, ,533 2,111,441 1,956,155 Scouting activities 191, , ,337 Investment income (Note 5) 364,586 52,505 (2,009) 415, ,182 BSA stores (Note 8) 104, , ,514 Realized and unrealized gains (losses) on investments (Note 5) 349,374 38,072 77, ,309 (430,023) Miscellaneous 3,222 3,600 6,822 9,938 Total revenues 3,460, ,710 75,854 3,741,798 2,763,229 Net assets released from restrictions Expiration of time restrictions 108, , ,121 Satisfaction of use restrictions 162, ,469 8,275 1,098,693 3,866,115 Total assets released from restrictions 271, ,469 8,275 1,207,603 4,012,236 Total Support, Revenues and Reclassifications 5,951,376 1,133,679 89,144 7,174,199 9,008,439 Expenses: Program services 4,386,279 1,049,071 5,435,350 5,245,576 Supporting services Management and general 593,312 21, , ,323 Fundraising 448,557 15,647 5, , ,702 Total supporting services 1,041,869 37,238 6,153 1,085,260 1,314,025 Charter and national service fee 82,962 82,962 83,062 Total Expenses 5,511,110 1,086,309 6,153 6,603,572 6,642,663 Change in Unrestricted Net Assets $ 440,266 $ 47,370 $ 82,991 $ 570,627 $ 2,365,776 See accompanying notes. 4

8 Statements of Activities and Changes in Net Assets (Continued) Operating Capital Endowment Fund Fund Fund Total Total Change in Unrestricted Net Assets $ 440,266 $ 47,370 $ 82,991 $ 570,627 $ 2,365,776 Changes in Temporarily Restricted Net Assets: Friends of Scouting contributions 78,529 78,529 91,910 United Way 17,000 17,000 34,000 Other contributions 170,280 1,398,149 1,568, ,960 Realized and unrealized gains (losses) on investments and interest (Note 5) 30,039 30,039 (285,616) Net assets released from restrictions (280,134) (927,469) (1,207,603) (4,012,236) Change in Temporarily Restricted Net Assets (14,325) 470,680 30, ,394 (3,962,982) Changes in Permanently Restricted Net Assets: Contributions 58,769 58, ,106 Change in value of beneficial interests in trusts (Notes 5 and 7) (467) (467) (32,590) Change in Permanently Restricted Net Assets 58,302 58,302 76,516 Change in Net Assets 425, , ,332 1,115,323 (1,520,690) Net Assets, Beginning of Year: Unrestricted 644,649 17,933,350 10,842,471 29,420,470 27,054,694 Temporarily restricted 280, ,428 1,922,615 2,528,177 6,491,159 Permanently restricted 5,576,487 5,576,487 5,499,971 Total Net Assets, Beginning of Year 924,783 18,258,778 18,341,573 37,525,134 39,045,824 Transfers (Note 14) (306,135) 306,135 Net Assets, End of Year: Unrestricted 778,780 18,286,855 10,925,462 29,991,097 29,420,470 Temporarily restricted 265, ,108 1,952,654 3,014,571 2,528,177 Permanently restricted 5,634,789 5,634,789 5,576,487 Total Net Assets, End of Year $ 1,044,589 $ 19,082,963 $ 18,512,905 $ 38,640,457 $ 37,525,134 See accompanying notes. 5

9 Statements of Cash Flows Operating Capital Endowment Fund Fund Fund Total Total Cash Flows From Operating Activities: Change in net assets $ 425,941 $ 518,050 $ 171,332 $ 1,115,323 $ (1,520,690) Adjustments to reconcile change in net assets to net cash provided (used) by operating activities Depreciation 1,078,573 1,078,573 1,025,495 Decrease (increase) in accounts, grants and pledges receivable 13,291 84,298 (180) 97, ,324 (Decrease) increase in allowance for doubtful accounts 0 (50,000) (50,000) 32,803 (Increase) decrease in prepaid expenses (8,035) (8,035) 7,824 Increase in deferred activity expenses (150,497) (150,497) (33,932) Decrease in merchandise inventories 16,080 16,080 33,625 Increase (decrease) in accounts payable and accrued liabilities 3, ,239 (21,793) Increase (decrease) in custodial funds held for others 1,196 1,196 (30,140) Increase in deferred income 231, ,162 19,552 Decrease in cash surrender value of life endowments 2,846 2,846 14,829 Change in value of beneficial interests in trusts ,591 Contributions restricted for long term assets or endowments (2,646,701) (58,769) (2,705,470) 2,739,267 Interest and dividends retained by long term investments (374,014) (374,014) (382,140) Loss on disposal of fixed assets 2,585 Net realized and unrealized losses on long term investments 773, , ,605 Net Cash Provided (Used) by Operating Activities 532,377 (1,015,780) 515,671 32,268 2,982,805 Cash Flows From Investing Activities: Purchases of buildings and equipment (654,369) (654,369) (3,594,006) Purchases of investments (9,743,436) (9,743,436) (10,650,233) Interest retained by long term investments designated 0 0 for capital asset acquisitions 0 (520) Proceeds from sales and maturities of investments 0 9,170,114 9,170,114 11,372,810 Net Cash Used by Investing Activities 0 (654,369) (573,322) (1,227,691) (2,871,949) Cash Flows From Financing Activities: Contributions received restricted for capital asset acquisitions 1,398,150 1,398,150 37,736 Contributions received restricted for endowment 58,769 58, ,106 Interest received from long term investments designated for capital asset acquisitions 520 Transfers (306,135) 306,135 0 Payments received (made) on interfund loan 34,136 (34,136) 0 0 Net Cash (Used) Provided by Financing Activities (271,999) 1,670,149 58,769 1,456, ,362 Net Change in Cash and Cash Equivalents 260,378 1, , ,218 Cash and cash equivalents, beginning of year 1,378,949 65,045 1,443,994 1,185,776 Cash and Cash Equivalents, End of Year $ 1,639,327 $ $ 66,163 $ 1,705,490 $ 1,443,994 Supplementary Disclosures of Cash Flow Information: Fixed asset purchases in accounts payable $ $ 360,624 $ $ $ See accompanying notes. 6

10 Statement of Functional Expenses For the Year Ended December 31, 2016 Supporting Services Program Management Services and General Fundraising Total 2016 Total Employee Compensation: Salaries and wages $ 2,102,108 $ 292,357 $ 213,101 $ 505,458 $ 2,607,566 Employee benefits 365,380 57,654 41,946 99, ,980 Payroll taxes 190,146 23,117 16,819 39, ,082 Total Employee Compensation 2,657, , , ,994 3,302,628 Bank fees 49,730 4,319 54,049 54,049 Conferences, conventions and meetings 38,740 4,233 3,080 7,313 46,053 Depreciation 1,041,737 21,323 15,513 36,836 1,078,573 Insurance 169,404 9,390 6,832 16, ,626 Membership and advancement 70,755 70,755 Occupancy 347,557 19,338 14,474 33, ,369 Other 9,197 2,802 3,236 6,038 15,235 Postage and shipping 25,644 3,801 8,535 12,336 37,980 Printing and publications 19, ,838 25,998 45,523 Professional fees ,409 8,222 98,631 99,581 Public relations 3, ,483 5,291 Recognition awards 97, ,257 73, ,728 Rental and maintenance of equipment 77,896 10,708 7,790 18,498 96,394 Scoutreach dues 16,612 16,612 Specific assistance to individuals 41,992 41,992 Supplies 614,377 4,128 7,691 11, ,196 Telephone 50,745 4,127 3,003 7,130 57,875 Travel 150,792 20,837 15,521 36, ,150 Total Functional Expenses $ 5,435,350 $ 615,276 $ 469,984 $ 1,085,260 $ 6,520,610 See accompanying notes. 7

11 Statement of Functional Expenses For the Year Ended December 31, 2015 Supporting Services Program Management Services and General Fundraising Total 2015 Total Employee Compensation: Salaries and wages $ 1,978,011 $ 323,852 $ 276,409 $ 600,261 $ 2,578,272 Employee benefits 334,700 62,373 52, , ,933 Payroll taxes 189,961 26,723 22,647 49, ,331 Total Employee Compensation 2,502, , , ,864 3,267,536 Bank fees 60,420 3,104 63,524 63,524 Conferences, conventions and meetings 42,358 7,026 5,955 12,981 55,339 Depreciation 980,175 24,531 20,789 45,320 1,025,495 Insurance 162,501 10,780 9,136 19, ,417 Membership and advancement 40,279 40,279 Occupancy 323,845 20,016 18,008 38, ,869 Other 45,113 6,119 46,275 52,394 97,507 Postage and shipping 21,398 4,074 7,712 11,786 33,184 Printing and publications 18,127 1,987 26,969 28,956 47,083 Professional fees 1, ,014 6, , ,067 Public relations Recognition awards 87, ,782 58, ,240 Rental and maintenance of equipment 87,516 11,619 9,847 21, ,982 Scoutreach dues 24,871 24,871 Specific assistance to individuals 42,787 42,787 Supplies 648,613 5,544 10,156 15, ,313 Telephone 45,771 4,661 3,950 8,611 54,382 Travel 169,001 27,080 26,025 53, ,106 Total Functional Expenses $ 5,245,576 $ 710,323 $ 603,702 $ 1,314,025 $ 6,559,601 See accompanying notes. 8

12 Note 1 Summary of Significant Accounting Policies Purpose of Organization The Chief Seattle Council, Boy Scouts of America (the Council) is chartered by the National Council of Boy Scouts of America (the National Council). The Council is a not for profit organization within the State of Washington s counties of King, Jefferson, Clallam, North Mason and Kitsap. The Council has four camping facilities: Camp Parsons in Jefferson County, Camp Sheppard in Pierce County, and Camps Pigott and Brinkley in Snohomish County. The Council is devoted to preparing young people to make ethical and moral choices over their lifetimes by instilling in them the values of the Scout Oath and Law. Teaching leadership, participating citizenship, character development and self reliance are the objectives of Scouting. The Council s programs are classified as follows: Tiger Cubs A family oriented program for first grade boys and an adult partner (usually a parent). Together they search, discover and share. Tiger Cubs is the first year of the Cub Scout program. Cub Scouts A family and community centered program for boys 8 to 10 years of age. Cub Scouts learn citizenship, compassion, and courage through service projects, ceremonies, games, and other activities promoting character development and physical fitness. Boy Scouts A leadership development program for boys 11 to 18 years of age. With the Scout Oath and Scout Law as guides, and the support of parents and community and religious organizations, these youth develop an awareness and appreciation of their role in the community and become good citizens. The program teaches leadership and character development through different methods, such as, advancement, camping and training. Varsity Scouting A program for young men 14 to 17 years of age. Varsity Scouting provides options for those who are looking for rugged high adventure or challenging sporting activities and still want to be a part of a Scouting program that offers the advancement opportunities and values of the Boy Scouts of America. There are five fields of emphasis: advancement, high adventure, personal development, service and special programs and events. Venturing A program for young men and women 14 (or 13 with completion of the eighth grade) through 20 years of age. Venturing provides experiences to develop youth to become mature, responsible, caring adults. Each program is specific to the youth participating. There are robotic groups, high adventure groups, computer groups, and sea ship groups. The one thing that is consistent with Venturing is that the youth run the program. Learning for Life/Exploring A co educational mix of worksite and classroom based programs that offer career education through role models and hands on experiences by bringing young men and women, up to age 20, and organizations in the community together. This program gives youth an opportunity to explore careers or fields of interest. These programs served: (Unaudited) (Unaudited) Youth members 18,027 17,624 Registered adult volunteers 6,414 6,616 Pack, troops and posts

13 Note 1 Continued The Council s website address is: SeattleBSA.org. Fund Accounting To ensure observance of limitations and restrictions placed on the use of available resources, the accounts of the Council are maintained in accordance with the principles of fund accounting. Under such principles, resources for various purposes are classified for accounting and reporting purposes into funds that are in accordance with specified activities or objectives. Basis of Presentation The financial statements of the Council have been prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States. Accordingly, the accounts of the Council are reported in the following net asset categories: Unrestricted Net Assets Net assets that are not subject to externally imposed restrictions. Quasi endowment funds designated by the Board of the Council are included in this classification (Note 12). Temporarily Restricted Net Assets Net assets subject to externally imposed restrictions that will be met by actions of the Council and/or the passage of time. Permanently Restricted Net Assets Permanently restricted net assets must be maintained by the Council in perpetuity, the income of which is expendable. Permanently restricted net assets increase when the Council receives contributions for which donor imposed restrictions exist, which limit the Council s use of an asset for its economic benefits and neither expire with the passage of time nor can be removed by the Council meeting certain requirements. Revenues are reported as increases in unrestricted net assets unless use of the related assets is limited by restrictions imposed by donors. When donor restrictions expire, temporarily restricted net assets are reclassified to unrestricted net assets and are reported in the statements of activities and changes in net assets as assets released from restriction. If a restriction is fulfilled in the same time period in which the contribution is received, the contribution is reported as unrestricted. Expenses are reported as decreases in unrestricted net assets. Gains and losses on investments and other assets or liabilities are reported as increases or decreases in unrestricted net assets unless their use is restricted by explicit donor restriction or by law. The Council reports gifts of land, buildings, and equipment as unrestricted support unless explicit donor stipulations specify how the donated assets must be used. Gifts of long lived assets with explicit restrictions that specify how the assets are to be used and gifts of cash or other assets that must be used to acquire long lived assets are reported as restricted support. Absent explicit donor stipulations about how those long lived assets must be maintained, the Council reports expirations of donor restrictions when the donated or acquired long lived assets are placed in service. Fair Value of Financial Instruments Financial instruments not reflected at fair value on a recurring basis include cash, short term investments, receivables, accounts payable, and accrued liabilities. The carrying amount of these financial instruments approximates fair value. Cash and Cash Equivalents Cash and cash equivalents consist of deposits with financial institutions, which at times exceed federally insured limits. 10

14 Note 1 Continued Short Term Investments Short term investments consist of investments directed by the Council that have an original maturity of less than 90 days. Investments Investments in securities with quoted market values are carried at fair value using Level 1 inputs. Accordingly, unrealized gains or losses due to fluctuations in the fair value are reflected in the statements of activities and changes in net assets. The Council s investment policy intends for the Council to invest in assets that would produce results exceeding the investment s purchase price and incur a reasonable yield of return, while assuming a moderate level of investment risk. The Council expects its Endowment Fund, over time, to provide a reasonable rate of return. To satisfy the long term rate of return objective, the Council 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 Council targets a diversified asset allocation that places greater emphasis on marketable equity and debt securities and money market accounts to achieve its long term return objectives within prudent risk constraints. Merchandise Inventories Inventories consist of items for sale through the camp stores of the Council. They are stated at the lower of cost (first in, first out basis) or market. Land, Buildings and Equipment Land, buildings and equipment are recorded at cost, if purchased, or at fair value, if donated, if the value exceeds the Council s capitalization threshold of $1,000. Depreciation is computed using the straightline method based upon estimated useful lives of ten to forty years for buildings and three to ten years for equipment. Contributed Land Contributed land, whether held for resale or development, is recorded at the lesser of fair value at the date of the gift or the property s current fair value. Donated Materials and Services Donated materials and services which meet the criteria for recognition are reflected as other contributions and expenses in the accompanying consolidated statements of activities and changes in net assets to the extent fair value is objectively determinable. The value of materials and services donated in 2016 and 2015 were nominal. Some members of the Council have donated significant amounts of time to the Council to further the Council s programs and objectives. No amounts have been included in the consolidated financial statements for donated member volunteer services since they did not meet the criteria for recognition. Income Taxes The Council is exempt from federal income taxes under Section 501(c)(3) of the Internal Revenue Code as charitable organizations whereby only unrelated business income, as defined by Section 509(a)(1) of the Code, is subject to federal income tax. The Council has no unrelated business income. Accordingly, no provision for income taxes has been recorded. Statement of Functional Expenses The costs of providing the various programs and other activities have been summarized on a functional basis in the consolidated statements of activities and changes in net assets and functional expenses. Accordingly, certain costs have been allocated among the programs and supporting services based on the benefits derived. Administrative expenses are allocated between programs and supporting services based on personnel time studies performed periodically throughout the year, in accordance with the guidelines provided by the National Council. Direct costs are assigned to the respective programs as they are incurred. 11

15 Note 1 Continued Use of Estimates The preparation of financial statements requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates. Significant estimates include collectability of pledges and accounts receivable, discounts on multiyear pledges, the value of contributed noncash assets, including land held for sale, functional allocation of expenses, and useful lives of fixed assets. Note 2 Capital and Endowment Campaign During 2007, the Council s Board approved a campaign to raise $12 million for capital improvements and $8 million for the endowment fund. During 2015, the Council closed the campaign after raising $13.8 million and completing capital projects at Camp Edward and a new dining hall and leadership center at Camp Parsons totaling $13.1 million and investing $600 thousand in the endowment fund for camp maintenance. Remaining capital improvement funds from the campaign totaling $135 thousand will be used to complete a bar b que area at Camp Parsons and other camp maintenance projects. Note 3 Accounts, Grants and Pledges Receivable Operating Fund The Operating Fund had accounts, grants and pledges receivable of $183,721 and $197,012 due within one year, and zero and $1,000 due in more than one year at December 31, 2016 and 2015, respectively. The amounts due beyond one year have not been discounted as the amount was determined to be immaterial. Accounts, grants and pledges receivable are stated at unpaid balances, less an allowance for doubtful accounts. It is the Council s policy to write off uncollectible receivables when management determines the receivable will not be collected. Note 4 Assets Designated or Restricted for Improvement of Long Term Assets Capital Fund The Capital Fund had accounts, grants and pledges receivable of $5,000 and $10,000 due in more than one year at December 31, 2016 and 2015, respectively. The amounts due beyond one year have not been discounted as the amount was determined to be immaterial. Note 5 Investments The following schedule summarizes the cost and market values of investments by fund: December 31, 2016 December 31, 2015 Cost Market Value Cost Market Value Endowment Fund $ 16,767,969 $ 17,923,192 $ 17,029,772 $ 17,749,843 12

16 Note 5 Continued Investments (including short term investments) were comprised of the following: December 31, 2016 December 31, 2015 Cost Market Value Cost Market Value Money market funds $ 818,837 $ 818,837 $ 767,789 $ 767,789 Debt securities 2,876,768 2,795,690 3,201,131 3,129,918 Equity securities 13,072,364 14,308,665 13,060,852 13,852,136 $ 16,767,969 $ 17,923,192 $ 17,029,772 $ 17,749,843 Valuation Techniques The Council uses a three level valuation hierarchy. Financial assets and liabilities valued using Level 1 inputs are based on unadjusted quoted market prices within active markets. Financial assets and liabilities valued using Level 2 inputs are based primarily on quoted prices for similar assets or liabilities in active or inactive markets. Financial assets and liabilities using Level 3 inputs are valued using management s assumptions about the assumptions market participants would utilize in pricing the asset or liability. The Council did not hold any Level 3 assets at December 31, 2016 and Valuation techniques utilized to determine fair value are consistently applied. Following is a description of the valuation methodologies used for assets measured at fair value. There have been no changes in the methodologies used at December 31, 2016 and Level 1 Money Market Funds Includes money market funds valued at cost plus accrued interest, which approximates fair value. Marketable Equity Securities Valued at the closing price reported on the active market on which the securities are traded. Level 2 Debt Securities Securities listed on a securities exchange or traded on the National Association of Securities Dealers National Market System ( NASDAQ ) are valued at their closing price or at the most recently quoted bid price if there is not a closing price. Debt securities and over the counter stocks not listed on the NASDAQ are valued at prices that reflect a broker/dealer supplied valuation or are obtained from independent pricing services. If the available prices are deemed unreliable, the valuation is based on fundamental valuation methods, which may include the analysis of the effect of any restrictions on the resale of the security, industry analysis and trends, significant changes in the issuer s financial position, and any other event that could have a significant effect on the value of the security. 13

17 Note 5 Continued Fair Values Measured on a Recurring Basis Fair values of assets measured on a recurring basis at December 31, 2016 and 2015 were as follows: Fair Value Measurements at December 31, 2016 Level 1 Level 2 Level 3 Total Money market funds $ 818,837 $ $ $ 818,837 Debt securities Investment grade taxable 2,568,590 2,568,590 International developed bonds 46,198 46,198 Global high yield taxable 180, ,902 Marketable securities Equities: US large cap 4,935,756 4,935,756 US mid cap 1,087,188 1,087,188 US small cap 908, ,631 International developed 2,562,750 2,562,750 Emerging markets 2,143,670 2,143,670 Public REITs 1,222,939 1,222,939 Commodities mutual funds 550, ,061 Hedge funds 897, ,670 Total at December 31, 2016 $ 15,127,502 $ 2,795,690 $ $ 17,923,192 Fair Value Measurements at December 31, 2015 Level 1 Level 2 Level 3 Total Money market funds $ 767,789 $ $ $ 767,789 Debt securities Investment grade taxable 2,664,734 2,664,734 International developed bonds 212, ,768 Global high yield taxable 171, ,857 Other 80,559 80,559 Marketable securities Equities: US large cap 4,861,112 4,861,112 US mid cap 1,645,759 1,645,759 US small cap 709, ,740 International developed 2,953,252 2,953,252 Emerging markets 1,107,900 1,107,900 Public REITs 1,348,716 1,348,716 Commodities mutual funds 426, ,038 Hedge funds 799, ,619 Total at December 31, 2015 $ 14,619,925 $ 3,129,918 $ $ 17,749,843 14

18 Note 5 Continued The following schedule summarizes the activity in each fund for 2016: Beginning Investment Ending Balance Contributions Distributions Return Balance Endowment fund $ 17,749,843 $ 65,045 $ (776,435) $ 884,739 $ 17,923,192 The following schedule summarizes the activity in each fund for 2015: Beginning Distributions Investment Ending Balance Contributions and Other Return Balance Endowment fund $ 18,704,883 $ 66,155 $ (718,543) $ (302,652) $ 17,749,843 The following schedule summarizes the investment return and classification in the consolidated statements of activities and changes in net assets: Dividends and interest on long term investments $ 488,967 $ 460,094 Net realized and unrealized gains (losses) 492,936 (674,631) Return on long term investments 981,903 (214,537) Dividends and interest on short term investments and cash accounts 1, Investment fees (99,505) (101,034) Total return on investments 884,377 (314,945) Return on perpetual trusts held by others (Note 7) 25,586 (18,102) $ 909,963 $ (333,047) 15

19 Note 6 Land, Buildings, Equipment and Construction in Progress Land, buildings, equipment and construction in progress were as follows for December 31: Buildings and improvements $ 25,093,209 $ 24,839,728 Equipment 1,192,307 1,174,687 Less accumulated depreciation (11,317,089) (10,270,582) 14,968,427 15,743,833 Construction in progress 715,719 3,894 Land 1,922,954 1,922,954 $ 17,607,100 $ 17,670,681 Note 7 Perpetual Trusts The Council is named as a 15% beneficiary of a trust held for the benefit of local nonprofit agencies, and a sole beneficiary of a trust held for its benefit. The trusts, which are held in perpetuity, are administered by financial institutions and provide for at least annual earnings distributions to the Council. The earnings are available for general operating purposes. The Council s interests in the trust agreements are included in permanently restricted net assets. The Council s interests in gains and losses in the trust value are recognized in the consolidated statements of activities and changes in net assets as permanently restricted activities. Fair values of the Council s share of investment securities held by the trusts measured on a recurring basis at December 31, 2016 and 2015, were $458,997 and $459,463, respectively. A reconciliation of the beginning and ending balances for fair value measurements made using significant unobservable inputs (Level 3) for perpetual trusts is as follows: Beginning balance $ 459,463 $ 492,054 Investment return 25,586 (18,102) Distributions (26,052) (14,489) Ending Balance $ 458,997 $ 459,463 Note 8 Boy Scouts of America Store Revenue The National Council is responsible for managing the Boy Scouts of America stores. Under this agreement through January 2019, the National Council remits 8% of store revenues to the Council for use of its facilities plus an additional 5% of store revenues on sales in excess of $750,000 in a calendar year. Revenue received from the National Council was $104,233 and $101,514 for 2016 and 2015, respectively. 16

20 Note 9 Benefit Plans The Boy Scouts of America has a defined benefit multi employer plan, administered by the National Council, which covers substantially all full time employees of the national office and the local councils, including the Council. The plan name is the Boy Scouts of America Master Pension Trust Boy Scouts of America Retirement Plan for Employees and covers all employees who have completed one year of service and who have agreed to make contributions. Eligible employees contribute 2% of compensation, and the Council contributes an additional 7% to the plan. The Council s policy is to fund accrued pension costs when incurred. The Council s pension expense, net of contributions made by employees, was $122,611 and $132,932 for 2016 and 2015, respectively, which approximated the current service cost. The actuarial information for the plan as of February 1, 2015, indicates that it is in compliance with ERISA regulations regarding funding. Because the Council participates in the plan with the Boy Scouts of America and other local councils, specific identification of the Council s portion of net plan assets or the actuarial present value of accumulated plan benefits is not determined. Additionally, the Council has a 403(b) defined contribution retirement plan available to all employees. Employees may voluntarily contribute a portion of their compensation to the plan subject to limits set by the federal tax code. The Council contributes to the plan an amount equal to 50% of the first 6% of compensation contributed by eligible employees. Employees are eligible for Council contributions upon completing one year and one thousand hours of service. The Council s contributions under the plan are fully vested with the employee after five years of service. Defined contribution retirement plan expense amounted to $55,040 and $52,463 for 2016 and 2015, respectively. It is the policy of the Council to fund retirement costs accrued currently. The Council s employees participate in a healthcare plan provided by the National Council. The Council pays a portion of the cost for employees, and the employees pay the remaining portion and the cost for any of their dependents participating in the plan. During 2016 and 2015, the Council remitted $248,768 and $222,679, on behalf of its employees to the National Council related to the health care plan. Note 10 Temporarily Restricted Net Assets Temporarily restricted net assets are available for the following purposes or periods: December 31, Purchase/maintenance of fixed assets $ 796,108 $ 325,428 Unappropriated earnings from permanently restricted net assets 1,952,654 1,922,615 Time restricted for future periods 265, ,134 $ 3,014,571 $ 2,528,177 17

21 Note 11 Permanently Restricted Net Assets Permanently restricted net assets are restricted for investment in perpetuity, the income from which is available to support: December 31, General operations $ 3,504,291 $ 3,464,301 Camperships 433, ,179 Scoutreach 1,000,000 1,000,000 Camp operations 3,090 3,090 Camp maintenance 693, ,917 $ 5,634,789 $ 5,576,487 Note 12 Endowment The Council s endowment consists of both endowment funds restricted by donors and funds designated by the Board of Directors to function as endowments (quasi endowments). Net assets associated with endowment funds, including quasiendowments, are classified and reported based on the existence or absence of restrictions imposed by donors. Interpretation of Relevant Law The Council s Board of Directors has interpreted the Washington State Prudent Management of Institutional Funds Act (PMIFA), and, having considered its rights and obligations thereunder, has determined that it is desirable to preserve, on a long term basis, the fair value of the original gift as of the gift date of the donor restricted endowment funds absent explicit donor stipulations to the contrary. As a result of this determination, the Council classifies as permanently restricted net assets (a) the original value of gifts donated to the permanent endowment, and (b) the original value of subsequent gifts to the permanent endowment. 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 Council in a manner consistent with the standard of prudence prescribed by PMIFA. In accordance with PMIFA, the Council considers the following factors in making a determination to appropriate or accumulate donor restricted endowment funds: - The duration and preservation of the fund; - The purposes of the Council and the donor restricted endowment fund; - General economic conditions; - The possible effect of inflation and deflation; - The expected total return from income and the appreciation of investment; - Other resources of the Council; and - The investment policies of the Council. 18

22 Note 12 Continued As of December 31, 2016 and 2015, endowment net assets consisted of the following: Temporarily Permanently Unrestricted Restricted Restricted 2016 Total Donor restricted endowment funds $ $ 1,952,654 $ 5,634,789 $ 7,587,443 Board designated quasi endowment fund 10,925,462 10,925,462 Endowment Net Assets $ 10,925,462 $ 1,952,654 $ 5,634,789 $ 18,512,905 Temporarily Permanently Unrestricted Restricted Restricted 2015 Total Donor restricted endowment funds $ $ 1,922,615 $ 5,576,487 $ 7,499,102 Board designated quasi endowment fund 10,842,471 10,842,471 Endowment Net Assets $ 10,842,471 $ 1,922,615 $ 5,576,487 $ 18,341,573 Changes to endowment net assets for 2016 were as follows: Temporarily Permanently Unrestricted Restricted Restricted Total Endowment net assets, December 31, 2015 $ 10,842,471 $ 1,922,615 $ 5,576,487 $ 18,341,573 Endowment investment return Interest and dividends, net of fees 366, ,593 Realized and unrealized gains (losses) 75, ,880 (467) 515,267 Total endowment investment return 75, ,473 (467) 881,860 Contributions 13,290 58,769 72,059 Endowment fundraising expenditures (6,153) (6,153) Appropriation of assets for expenditure (776,434) (776,434) Endowment Net Assets, December 31, 2016 $ 10,925,462 $ 1,952,654 $ 5,634,789 $ 18,512,905 19

23 Note 12 Continued Changes to endowment net assets for 2015 were as follows: Temporarily Permanently Unrestricted Restricted Restricted Total Endowment net assets, December 31, 2014 $ 11,586,191 $ 2,208,231 $ 5,499,971 $ 19,294,393 Endowment investment return Interest and dividends, net of fees 412, ,920 Realized and unrealized gains (losses) (749,028) 20,007 (32,590) (761,611) Total endowment investment return (749,028) 432,927 (32,590) (348,691) Contributions 10, , ,530 Endowment fundraising expenditures (5,116) (5,116) Appropriation of assets for expenditure (718,543) (718,543) Endowment Net Assets, December 31, 2015 $ 10,842,471 $ 1,922,615 $ 5,576,487 $ 18,341,573 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 PMIFA requires the Council to retain as a fund of perpetual duration. Deficiencies of this nature that are reported in unrestricted net assets were $119,912 and $120,322 as of December 31, 2016 and 2015, respectively. This deficiency resulted from unfavorable market fluctuations that occurred shortly after the investment of new permanently restricted contributions. Subsequent gains that restored the fair value of the assets of the endowment fund to the required level were classified as an increase in unrestricted net assets. Return Objectives and Risk Parameters The Council has adopted investment and spending policies for endowment assets that attempt to provide a predictable 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 Council must hold in perpetuity or for a donor specified period as well as board designated funds. Under this policy, as approved by the Board, the endowment assets are invested in a manner that is intended to produce results that are comparable to the price and yield results of a weighted average of widely followed market indicies matching the asset allocation of the endowment investments while assuming a moderate level of investment risk. The Council expects its endowment funds, over time, to provide an average rate of return of approximately 8 percent annually. Actual returns in any given year may vary from this amount. Strategies Employed for Achieving Objectives To satisfy the long term rate of return objectives, the Council 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 Council targets a diversified asset allocation that places a greater emphasis on equity based investments to achieve the long term return objectives within prudent risk constraints. 20

24 Note 12 Continued Spending Policy and How the Investment Objectives Relate to Spending Policy The Council has a policy of appropriating for distribution each year 4.5 percent in 2016 and 2015 of the endowment fund s average fair value over the prior 12 quarters ending one year prior to the year in which the distribution is planned. In establishing this policy, the Council considered the long term expected return on the endowment. Accordingly, over the long term, the Council expects the current spending policy to allow the endowment to grow at an average of 3.5 percent annually. This is consistent with the Council s objective to maintain the purchasing power of the endowment assets held in perpetuity or for a specified term as well as to provide additional real growth through new gifts and investment return. Note 13 Commitments and Contingencies Operating Leases The Council leases printing and postage equipment, a vehicle, and a facility in Silverdale under noncancelable leases. A summary of annual noncancelable minimum commitments under equipment and facility leases is as follows: For the Year Ending December 31, 2017 $ 77, , , , ,560 Thereafter 1,140 $ 176,303 Rental expense incurred amounted to $135,287 and $143,593 in 2016 and 2015, respectively. The Council also uses land from the Forest Service, U.S. Department of Agriculture, for one of the Council s camps under a special use permit. The permit expired in The Forest Service, U.S. Department of Agriculture is in the process of renewing the permit. The rent has historically been set at the beginning of each year based on the fair market value of the land and a percentage of the previous year s retail sales at the camp store. Rental payments are in the form of cash payments, and in kind labor to maintain the property and for providing youth programs at the facility. Rental expense for the camp for 2016 and 2015 was $5,725 and $7,006, respectively. Legal Claims From time to time, the Council is involved in claims, proceedings and litigation arising in its operations. The Council carries insurance coverage relative to any such incidents and does not believe that any such claims, proceedings or litigation either alone or in the aggregate, will have a material effect on the Council s financial position or results of operations. The Council incurred approximately zero and $8,000 in legal fees during 2016 and 2015, respectively, related to litigation. Fees incurred subsequent to December 31, 2016, through the date of this report have been immaterial. However, future fees, if any, related to litigation matters are unknown. Commitments During the year ended December 31, 2016, the Council entered into a contract related to the remodel of the Dining Hall at Camp Edward. The total contractual sum is $1.3 million. The contract has two phases, an exterior and interior phase. The exterior phase was completed and placed in service during As of December 31, 2016, estimated costs to complete the project are approximately $820,

25 Note 14 Fund Transfers In January 2017, the Board passed a resolution to transfer $306,135 from the operating fund to the capital fund for the year ending December 31, The transfer was made to provide $272,000 for future capital needs of the Council and $34,135 to repay the remaining half of the inter fund loan. In January 2016, the Board passed a resolution to transfer $134,136 from the operating fund to the capital fund for the year ending December 31, The transfer was made to provide $100,000 for future capital needs of the Council and $34,136 to repay half of the inter fund loan. Note 15 Subsequent Events The Council has evaluated subsequent events through May 2, 2017, the date on which the financial statements were available to be issued. 22