Humane Society of North Texas, Inc.

Transcription

1 Financial Statements As of and For the Years Ended December 31, 2014 and 2013 This report was issued by BDO USA, LLP, a Delaware limited liability partnership and the U.S. member of BDO International Limited, a UK company limited by guarantee.

2 Humane Society of North Texas Financial Statements As of and For the Years Ended December 31, 2014 and 2013

3 Contents Independent Auditor s Report 1 Financial Statements Statements of Financial Position 3 Statements of Activities 4 Statements of Cash Flows 5 Statement of Functional Expenses for the Year Ended December 31, Statement of Functional Expenses for the Year ended December 31, Notes to Financial Statements 8

4 IBDO Tel: Fax: Southwest Blvd, Suite 300 Fort Worth, TX Independent Auditor's Report The Board of Directors Humane Society of North Texas, Inc. Fort Worth, Texas We have audited the accompanying financial statements of the Humane Society of North Texas, Inc. (the "Society"), which comprise the statements of financial position as of December 31, 2014 and 2013, and the related statements of activities, cash flows, and functional expenses for the years then ended, and the related notes to the financial statements. Management's ResponsibiUty for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor's Responsibility Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. 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. BDO USA, LLP, a Delaware limited liability partnership, is the U.S. member of BDO International Limited, a UK company limited by guarantee, and forms part of the international BDO network of independent member firms. BDO is the brand name for the BDO network and for each of the BDO Member Firms.

5 IBDQ Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Society as of December 31, 2014 and 2013 and the changes in net assets, cash flows, and functional expenses for the years then ended, in conformity with accounting principles generally accepted in the United States of America. &JJo laja LLi I Fort Worth, Texas November 12,

6 Financial Statements

7 Statements of Financial Position December 31, Assets Current assets Cash and cash equivalents $ 1,010,426 $ 692,406 Investments 10,468,562 9,745,681 Pledges receivable 4,913,859 77,443 Other receivables 12, Interest receivable 24,633 32,843 Prepaid expenses 18,279 3,000 Total current assets 16,447,884 10,551,735 Investments 2,560,300 2,273,998 Assets permanently restricted for endowment 944, ,857 Beneficial interest in charitable trusts 159, ,637 Land, buildings and equipment, net 1,135,721 1,124,459 Total assets $ 21,247,855 $ 15,300,686 Liabilities and Net Assets Current liabilities Accounts payable $ 95,148 $ 39,789 Accrued liabilities 122,819 85,094 Total current liabilities 217, ,883 Commitments and contingencies Net assets Unrestricted: Undesignated 15,302,933 9,372,048 Designated 4,782,207 4,865,898 Total unrestricted 20,085,140 14,237,946 Permanently restricted 944, ,857 Total net assets 21,029,888 15,175,803 Total liabilities and net assets $ 21,247,855 $ 15,300,686 See accompanying notes to consolidated financial statements. 3

8 Statements of Activities Years Ended December 31, Permanently Permanently Unrestricted Restricted Total Unrestricted Restricted Total Public Support and Revenue Public support Contributions and bequest $ 6,722,825 $ - $ 6,722,825 $ 2,545,786 $ - $ 2,545,786 Special events 32,216-32,216 48,414-48,414 Plea letter 342, , , ,205 Prospect 1,450-1,450 29,831-29,831 Newsletter 168, ,260 9,349-9,349 Total public support 7,267,575-7,267,575 3,056,585-3,056,585 Revenue Adoptions of animals 953, , , ,358 Interest and dividend income 658, , , ,697 Realized gain on sale of investment, net 532,573 48, , ,451 37, ,299 Unrealized gain (loss) on investments, net 71,847 (42,066) 29, ,739 47, ,206 Service fees 71,469-71,469 31,941-31,941 Other 3,721-3,721 2,789-2,789 Total revenue 2,291,773 6,891 2,298,664 1,995,975 85,315 2,081,290 Total public support and revenue 9,559,348 6,891 9,566,239 5,052,560 85,315 5,137,875 Expenses Program services: Animal care 2,602,859-2,602,859 2,007,902-2,007,902 Cruelty investigations 451, , , ,964 Education 132, , , ,279 Total program services 3,187,047-3,187,047 2,484,145-2,484,145 General and administrative 383, , , ,612 Fund raising 141, , , ,001 Total expenses 3,712,154-3,712,154 2,958,758-2,958,758 Increase in net assets 5,847,194 6,891 5,854,085 2,093,802 85,315 2,179,117 Net assets at beginning of year 14,237, ,857 15,175,803 12,144, ,542 12,996,686 Net assets at end of year $ 20,085,140 $ 944,748 $ 21,029,888 $ 14,237,946 $ 937,857 $ 15,175,803 4 See accompanying notes to consolidated financial statements.

9 Statements of Cash Flows Years ended December 31, Cash flows from operating activities Increase in net assets $ 5,854,085 $ 2,179,117 Adjustments to reconcile the increase in net assets to net cash provided by operating activities: Depreciation 148, ,076 Realized and unrealized gain on investments, net (611,311) (892,093) Changes in assets and liabilities: (Increase) decrease in: Pledges receivable (4,836,416) 524,957 Interest receivable 8,210 (7,676) Beneficial interest in charitable trusts 253,435 (55,612) Other receivables (11,763) (247) Prepaid expenses (15,279) - Increase (decrease) in: Accounts payable 55,359 (9,087) Accrued liabilities 37,725 (2,452) Net cash provided by operating activities 882,072 1,879,983 Cash flows from investing activities Proceeds from sale of investments 5,671,854 3,992,096 Purchases of investments (6,068,269) (5,486,538) Increase in cash restricted for endowment (8,349) (35,974) Purchase of land, buildings and equipment (159,288) (164,316) Net cash used in investing activities (564,052) (1,694,732 ) Cash flows from financing activities Payments on the line of credit - (55,000) Net cash used in financial activities - (55,000 ) Increase in cash and cash equivalents 318, ,251 Cash and cash equivalents at beginning of year 692, ,155 Cash and cash equivalents at end of year $ 1,010,426 $ 692,406 Supplemental Disclosures Cash paid for interest during the year $ 50 $ 1,066 See accompanying notes to consolidated financial statements. 5

10 Statement of Functional Expenses Year Ended December 31, 2014 Program Services Total Animal Care Cruelty Investigations Education Program Services General and Administrative Fund Raising Total Adoption refunds $ 6,876 $ - $ - $ 6,876 $ - $ - $ 6,876 Advertising 5, , ,033 Animal disposal 9, , ,267 Automobile and travel 13,410 13,410-26, ,820 Bank charges 25,623 10,981-36, , ,418 Cruelty supplies - 108, , ,840 Depreciation 112,145 14,803 1, ,428 9,237 10, ,027 Educational supplies - - 3,794 3, ,794 Equipment ,701-2,430 Health insurance 147,126 19,292 9, ,905 13,845 8, ,069 Interest expense Maintenance and repairs 53, ,603 6, ,912 Miscellaneous ,843-1,843 Office supplies 6, , ,358 Payroll taxes 106,237 13,930 6, ,018 9,997 6, ,022 Postage ,745 18,745-18,745 37,490 Printing ,138-29,138 Professional fees ,807-26,807 Property taxes (131) - - (131) (41) (6) (178) Rent 85,397 11,447 3, ,736 8,814 4, ,472 Salaries 1,345, ,457 86,779 1,608, ,636 76,090 1,811,673 Seminars and training 8, , ,698 Shelter supplies 116,325 14, ,866 14, ,407 Special events ,556 14,556 Subscriptions ,415-2,415 Telephone 38,307 4,788-43,095 4,789-47,884 Utilities 113,653 14, ,860 14, ,067 Veterinary services 57,851 6,428-64, ,279 Veterinary supplies 326,065 36, , ,295 Workers compensation 24,911 3,339 1,135 29,385 2,571 1,436 33,392 Total $ 2,602,859 $ 451,498 $ 132,690 $ 3,187,047 $ 383,708 $ 141,399 $ 3,712,154 See accompanying notes to consolidated financial statements. 6

11 Statement of Functional Expenses Year Ended December 31, 2013 Program Services Total Animal Care Cruelty Investigations Education Program Services General and Administrative Fund Raising Total Adoption refunds $ 5,469 $ - $ - $ 5,469 $ - $ - $ 5,469 Advertising 4, , ,909 Animal disposal 7, , ,221 Automobile and travel 13,968 13,968-27, ,936 Bank charges 16,331 6,893-23,224 68,232-91,456 Cruelty supplies - 85,665-85, ,665 Depreciation 108,394 14,407 1, ,232 8,829 10, ,076 Educational supplies - - 6,469 6, ,469 Equipment Rent 81,684 10,950 3,723 96,357 8,431 4, ,496 Health insurance 112,672 14,774 7, ,711 10,603 6, ,685 Interest expense ,066-1,066 Maintenance and repairs 31, ,427 3, ,712 Miscellaneous ,859-1,859 Office supplies 4, , ,803 Payroll taxes 83,789 10,987 5, ,179 7,885 4, ,802 Postage ,024 29,024-29,023 58,047 Printing ,865-42,865 Professional fees ,678-60,678 Property taxes 3, , ,217 Salaries 1,042, ,704 67,229 1,246,477 98,107 58,948 1,403,532 Seminars and training 3, , ,839 Shelter supplies 99,768 12, ,239 12, ,710 Special Events ,571 10,571 Subscriptions ,404-1,404 Telephone 25,411 3,176-28,587 3,176-31,763 Utilities 102,680 12, ,515 12, ,350 Veterinary services 93,781 10, , ,201 Veterinary supplies 133,815 14, , ,683 Workers compensation 32,555 4,364 1,484 38,403 3,458 1,877 43,738 Total $ 2,007,902 $ 353,964 $ 122,279 $ 2,484,145 $ 347,612 $ 127,001 $ 2,958,758 See accompanying notes to consolidated financial statements. 7

12 Notes to the Financial Statements 1. Organization, Operations, and Summary of Significant Accounting Policies Organization and Operations The Humane Society of North Texas, Inc. (the Society ), founded in 1905, is a non-profit organization incorporated under the laws of the state of Texas. The purpose of the Society is the prevention of cruelty to animals and animal humane education. In accordance with its mission of promoting a humane and caring attitude toward all animals and to relieve suffering and prevent cruelty to animals, the Society provides protection and welfare to homeless, injured and abandoned animals in Tarrant County, plus six surrounding counties. Its services include adoptions, spay/neuter assistance, education, cruelty investigations, emergency rescues and lost and found functions. The Society is dedicated to providing a haven of care for all animals in need, and none are turned away. The Society's current programs include the following: Animal Care The Society provides for the general care and feeding of animals, surgery and medical care for animals and an adoption center for animals. Cruelty Investigations The Society provides for investigation of animal cruelty cases, animal seizures and civil and criminal prosecution of criminal acts toward animals. Education The Society provides for education of the general public through printing and mailing of newsletters and other materials for animal care, spay/neuter and general awareness of animals in need of adoption. Financial Statement Presentation The Society presents its financial position and activities according to three classes of net assets: unrestricted net assets, temporarily restricted net assets and permanently restricted net assets. At December 31, 2014 and 2013, there were no temporarily restricted net assets. Use of Estimates The process of preparing financial statements in conformity with accounting principles generally accepted in the United States of America requires the use of estimates and assumptions regarding certain types of assets, liabilities, revenues and expenses. Such estimates primarily relate to unsettled transactions and events as of the date of the financial statements. Accordingly, upon settlement, actual results may differ from estimated amounts. Investments Investments consist of marketable equitable securities, mutual funds, bonds and United States treasury notes and are carried at fair value. 8

13 Notes to Financial Statements Increases and decreases in fair value are recognized as gains and losses in the period in which they occur. Pledges Receivable Pledges receivable consists of amounts due from bequests with anticipated collection within one year. Land, Buildings and Equipment Land, buildings, and equipment are stated at cost, if purchased, or fair value at the date received if donated. The Society capitalizes all equipment greater than $1,000. Depreciation is provided over the estimated useful lives of the related assets on the straight-line basis. Estimated useful lives are 30 years for the buildings and 3 to 25 years for equipment. Expenditures for repairs and maintenance are charged to expense as incurred, while expenditures for major renewals or betterments of buildings and equipment are capitalized. Upon sale or retirement of land, buildings and equipment, the cost and related accumulated depreciation are eliminated from the respective accounts and the resulting gain or loss is included in the statements of activities. Federal Income Taxes The Society is a qualified non-profit organization and is exempt from federal income tax under Section 501(c)(3) of the Internal Revenue Code. The Society applied the provisions of the Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) topic Accounting for Uncertainty in Income Taxes during the years ended December 31, 2014 and Under ASC topic Accounting for Uncertainty in Income Taxes, an organization must recognize the tax benefit associated with tax positions taken for tax return purposes when it is more-likely-than-not that the position will be sustained. The ASC topic Accounting for Uncertainty in Income Taxes had no impact on the Society s financial statements. The Society does not believe there are any unrecognized tax benefits that should be recorded. For the years ended December 31, 2014 and 2013, there were no interest or penalties recorded or included in the statements of activities related to taxes. The Society is still open to examination by taxing authorities from 2010 forward. Contributions Contributions received are recorded as unrestricted, temporarily restricted, or permanently restricted support depending on the existence and/or nature of any donor restrictions. Temporarily restricted contributions are reported as temporarily restricted support and are then reclassified to unrestricted net assets upon expiration of the time or purpose restriction. If the restrictions are met in the year of contribution, the amounts of temporarily restricted gifts are listed as unrestricted contributions. 9

14 Notes to Financial Statements Functional Expenses Allocation The cost of providing various programs and supporting services has been summarized on a functional basis in the statements of functional expenses. Accordingly, certain costs have been allocated among the programs and supporting services benefited. Cash and Cash Equivalents The Society considers all underlying liquid investments with original maturities of three months or less to be cash equivalents. The Society includes cash in banks and amounts held in money market accounts as cash equivalents except cash permanently restricted for endowment. Concentrations of Credit Risk Concentrations of credit risk consist of cash and investments. The Society places its cash with quality financial institutions and, by policy, limits its amount of exposure to any one financial institution; however, at times the balances in accounts may exceed Federal Deposit Insurance Corporation insured limits. One donor comprised 99% of the total pledge receivable balance as of December 31, Two donors comprise 89% of the total pledge receivable balance as of December 31, The investments of the Society are valued at fair market value and are subject to market risk. Impairment of Long-Lived Assets The Society periodically reviews the carrying value of its long-lived assets, including land, buildings and equipment, whenever events or changes in circumstances indicate that the carrying value may not be recoverable. An impairment loss is recognized to the extent fair value of a longlived asset is less than the carrying amount. In management s opinion, no impairment of long-lived assets exists at December 31, 2014 or Fair Value of Financial Instruments Fair value is an exit price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. Hierarchy Levels 1, 2, or 3 are terms for the priority of inputs to valuation techniques used to measure fair value. Level 1 inputs are quoted prices in active markets for identical assets or liabilities. Level 2 inputs are inputs other than quoted prices included with level 1 that are directly or indirectly observable for the asset or liability. Level 3 inputs are inputs that are not observable in the market. Advertising Advertising costs are charged to program services as incurred. Total advertising expenses were $5,033 and $4,909 for the years ended December 31, 2014 and Reclassifications Certain reclassifications have been made in 2013 to conform to the presentation used in

15 Notes to Financial Statements Recent Accounting Pronouncements The Society s management has evaluated the recently issued accounting pronouncements through the date that these financial statements were available to be issued and has determined the application of these pronouncements will have no material impact on the Society s financial position or changes in net assets. 2. Investments Investments are stated at fair value, using quoted market prices. Realized and unrealized gains and losses are reflected in the statements of activities. Investments at December 31, 2014 and 2013 consisted of the following: December 31, 2014 Estimated Cost Fair Value Unrealized Appreciation Marketable equity securities $ 5,846,929 $ 6,682,915 $ 835,986 Bonds and United States treasury notes - current 1,683,911 1,708,160 24,249 Bonds and United States treasury notes - non-current 2,163,101 2,560, ,199 Mutual funds 2,899,393 2,899, Total investments $ 12,593,334 $ 13,851,361 $ 1,258,027 December 31, 2013 Estimated Cost Fair Value Unrealized Appreciation Marketable equity securities $ 3,357,469 $ 4,012,447 $ 654,978 Bonds and United States treasury notes current 2,160,438 2,180,655 20,217 Bonds and United States treasury notes non-current 2,272,819 2,273,998 1,179 Mutual funds 3,824,662 4,376, ,872 Total investments $ 11,615,388 $ 12,843,634 $ 1,228,246 Investments are comprised of the following: December 31, Investments short-term $ 10,468,562 $ 9,745,681 Investments long-term 2,560,300 2,273,998 Investments restricted for endowment 822, ,955 $ 13,851,361 $ 12,843,634 11

16 Notes to Financial Statements A reconciliation of unrealized appreciation during the year is provided as follows: December 31, Unrealized appreciation, beginning of year $ 1,228,246 $ 805,040 Unrealized gain on investments, net 29, ,206 Unrealized appreciation, end of year $ 1,258,027 $ 1,228, Assets Permanently Restricted for Endowment Assets permanently restricted for investment in perpetuity are composed of the following: December 31, Cash and cash equivalents $ 122,249 $ 113,902 Marketable equity securities 604, ,407 Bonds and United States treasury notes 218, , Donor Designated and Board Designated Endowments $ 944,748 $ 937,857 The Society s endowments consist of one donor-restricted fund and one fund designated by the Board of Directors to function as an endowment. As required by generally accepted accounting principles, 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 Board of Directors of the Society has interpreted the Texas Uniform Prudent Management of Institutional Funds Act ( TUPMIFA ) as requiring the preservation of 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 interpretation, the Society classifies as permanently restricted net assets (a) the original value of gifts donated to the permanent endowment, (b) the original value of subsequent gifts to the permanent endowment, and (c) accumulations to the permanent endowment made in accordance with the direction of the applicable donor gift instrument at the time the accumulation is added to the fund (d) and all realized and unrealized gains and losses on investments of permanently restricted gifts in accordance with applicable donor gift instruments. 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 Society in a manner consistent with the standard of prudence prescribed by TUPMIFA. In accordance with TUPMIFA, the Society considers the following factors in making a determination to appropriate or accumulate donor-restricted endowment funds: (1) the duration and preservation of the various funds, (2) the purposes of the donor-restricted endowment funds, (3) general economic conditions, (4) the possible effect of inflation and deflation, (5) the expected total return from income and the appreciation of investments, (6) other resources of the Society, and (7) the Society s investment policies. 12

17 Notes to Financial Statements Investment Return Objectives, Risk Parameters and Strategies The Society has adopted investment and spending policies, approved by the Board of Directors, for endowment assets that attempt to provide a predictable stream of funding for Society operations supported by its endowment funds while also maintaining the purchasing power of those endowment assets over the long-term. The investment process seeks to achieve an after-cost total real rate of return, including investment income as well as capital appreciation, which meets the annual distribution with acceptable levels of risk. Endowment assets are invested in a well-diversified asset mix, which includes equity and debt securities and mutual funds that is intended to result in a consistent inflation-protected rate of return that has sufficient liquidity to make annual distributions for operations. Investment risk is measured in terms of the total endowment fund; investment assets and allocation between asset classes and strategies are managed to not expose the fund to unacceptable levels of risk. Spending Policy The Society has a policy of appropriating for distribution each year all interest earned on its donor designated endowment fund. The bylaws of the Society require that by simple majority of those Board members present, the Board may vote to expend income and capital gains earned on its board designated endowment assets. The Board may not expend the corpus of such assets unless such expenditure is made for new buildings or for improvements to existing structures. Any such vote to expend corpus shall require a written proposal, signed by at least two-thirds of the Board members present at a duly called meeting to the Board, which is entered into the minutes for that meeting. Such proposal must then be approved by at least two-thirds of the Board members present at the duly called meeting of the Board. Endowment net asset composition by type of fund as of December 31, 2014 and 2013 is as follows: December 31, 2014 Unrestricted Temporarily Restricted Permanently Restricted Total Net Endowment Assets Endowment net assets, beginning of year $ 4,865,898 $ - $ 937,857 $ 5,803,755 Net realized and unrealized gains 63,180-6,891 70,071 Interest and dividend income 121,107 22, ,281 Amounts appropriated for expenditure (267,978) (22,174) - (290,152) Endowment net assets end of year $ 4,782,207 $ - $ 944,748 $ 5,726,955 13

18 Notes to Financial Statements December 31, 2013 Unrestricted Temporarily Restricted Permanently Restricted Total Net Endowment Assets Endowment net assets, beginning of year $ 4,657,354 $ - $ 852,542 $ 5,509,896 Net realized and unrealized gains 550,684-85, ,999 Interest and dividend income 101,544 17, ,023 Amounts appropriated for expenditure (443,684) (17,479) - (461,163) Endowment net assets end of year $ 4,865,898 $ - $ 937,857 $ 5,803, Fair Value Measurements ASC topic Fair Value Measurements and Disclosures establishes a framework for measuring fair value. That framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements). The three levels of the fair value hierarchy under ASC topic Fair Value Measurements and Disclosures are described as follows: Level 1: Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the Society 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 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. The asset or liability s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs. 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, 2014 or

19 Notes to Financial Statements Marketable Equity Securities The fair values of marketable equity securities are based on quoted market price and are classified in level 1 of the fair value hierarchy. Bonds and United States Treasury Notes Bonds and United States Treasury Notes have observable inputs that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the reporting entity. However, they do not have quoted market prices in an active market. Therefore, these assets are classified in level 2 of the fair value hierarchy. Mutual Funds (Registered Investment Companies) The fair value of Mutual Funds (registered investment companies) are valued based on exchange listed prices at the close of each business day and are classified in Level 1 of the fair value hierarchy. Beneficial Interest in a Charitable Remainder Trust The fair values are based on significant unobservable inputs including estimates of future cash flows and present value discount rates and are classified in level 3 of the fair value hierarchy. The preceding methods described may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, although the Society believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date. 15

20 Notes to Financial Statements The following table sets forth by level, within the fair value hierarchy, the Society s assets measured at fair value on a recurring basis as of December 31, 2014: Investment Assets at Fair Value as of December 31, 2014 Level 1 Level 2 Level 3 Total Marketable equity securities: Banks and finance $ 709,187 $ - $ - $ 709,187 Basic materials 190, ,359 Consumer 238, ,615 Healthcare 423, ,500 Industrial commodities 287, ,867 Services 766, ,270 Technology 659, ,327 Utilities 10, ,798 Other 3,396, ,396,992 Bonds and United States treasury notes - 4,268,460-4,268,460 Mutual funds: Large growth 42, ,075 Foreign large blend 410, ,018 Foreign small/mid growth 131, ,001 Small value 331, ,801 Taxable bonds 1,625, ,625,228 Diversified emerging markets 197, ,221 Real estate 162, ,642 Beneficial interest in charitable trusts , ,202 Total assets at fair value $ 9,582,901 $ 4,268,460 $ 159,202 $ 14,010,563 The Society s beneficial interests in charitable trusts are valued at Level 3 of the fair value hierarchy. The changes for the years ending December 31, are as follows: December 31, Beginning of year $ 412,637 $ 357,025 Distribution of expired trust (278,353) - Change in value of charitable trusts 24,918 55,612 End of year $ 159,202 $ 412,637 16

21 Notes to Financial Statements The following table sets forth by level, within the fair value hierarchy, the Society s assets measured at fair value on a recurring basis as of December 31, 2013: Investment Assets at Fair Value as of December 31, 2013 Level 1 Level 2 Level 3 Total Marketable equity securities: Banks and finance $ 77,922 $ - $ - $ 77,922 Basic materials 74, ,170 Conglomerates 13, ,997 Consumer 46, ,005 Healthcare 66, ,911 Industrial commodities 33, ,789 Services 102, ,214 Technology 87, ,016 Utilities 7, ,075 Other 3,503, ,503,348 Bonds and United States treasury notes - 4,454,653-4,454,653 Mutual funds: Large growth 1,039, ,039,565 Foreign large growth 390, ,019 Large value 1,036, ,036,902 Foreign small/mid growth 130, ,188 Small cap growth 322, ,267 Taxable bonds 1,138, ,138,902 Diversified emerging markets 191, ,458 Real estate 127, ,233 Beneficial interest in charitable trusts , ,637 Total assets at fair value $ 8,388,981 $ 4,454,653 $ 412,637 $ 13,256, Land, Buildings and Equipment The composition of land, buildings, and equipment at December 31 is as follows: December 31, Land $ 239,466 $ 239,466 Buildings and improvements 2,192,328 2,164,275 Office equipment 85,585 71,434 Shelter equipment 346, ,733 Vehicles 419, ,841 3,284,038 3,124,749 Less accumulated depreciation (2,148,317) (2,000,290) $ 1,135,721 $ 1,124,459 17

22 Notes to Financial Statements 7. Beneficial Interest in Charitable Trusts The Society has been named as a beneficiary of several charitable trusts. December 31, The Society maintains one-sixth interest in a trust with a fair market value of approximately $635,000 and $643,000 for the years ended December 31, 2014 and 2013, respectively. The Society will receive interest-only distributions on a periodic basis. The trust will be continued indefinitely and has been classified as a longterm asset. $ 105,805 $ 107,139 The Society records its interest as a beneficiary of five trusts created by an individual estate. The Society recognizes their remainder interest based upon the estimated present value of the assets in the trust. In a previous year, one of the five trusts was dissolved due to the primary beneficiary s death. In 2014, a second trust dissolved due to the primary beneficiary s death. 53, ,173 The Society records its interest as a beneficiary of a trust created by an individual estate. The Society recognizes their remainder interest based upon the estimated present value of the assets in the trust. The trust expired on December 31, 2013 and the final payment was received in ,325 $ 159,202 $ 412, Commitments and Contingencies The Society leases certain equipment and office space under non-cancelable operating leases, among which are the following. On May 1, 2011, the Society entered into a facility lease with a monthly payment of $1,568 to be paid through May 31, On November 1, 2011, the Society entered into another non-cancelable operating facility lease through October 31, 2016 with escalating monthly payments. On December 9, 2014, this lease was extended, expiring October 31, 2019, with escalating payments as follows: November 1, 2013 to October 31, 2014 $ 3,350 November 1, 2014 to October 31, 2016 $ 3,500 November 1, 2016 to October 31, 2017 $ 4,987 November 1, 2017 to October 31, 2018 $ 5,237 November 1, 2018 to October 31, 2019 $ 5,498 Rental expense for all leases consisted of $114,472 and $109,496 for 2014 and 2013, respectively. 18

23 Notes to Financial Statements Future minimum lease payments under lease commitments for the years ended December 31 are as follows: 2015 $ 82, , , , , Subsequent Events $ 341,142 Management evaluated subsequent events through November 12, 2015 which is the date the financial statements were available to be issued. 19