SUMMER INSTITUTE OF LINGUISTICS, INC. Consolidated Financial Statements With Independent Auditors Report. September 30, 2017 and 2016

Transcription

1 Consolidated Financial Statements With Independent Auditors Report

2 Table of Contents Independent Auditors Report 1 Consolidated Financial Statements Consolidated Statements of Financial Position 3 Consolidated Statement of Activities Consolidated Statement of Activities Consolidated Statements of Cash Flows 6 7 Supplementary Data Independent Auditors Report on Supplemental Data 22 Consolidating Statement of Financial Position Consolidating Statement of Financial Position Consolidating Statement of Activities Consolidating Statement of Activities Page

3 INDEPENDENT AUDITORS REPORT Audit Committee of the Board of Directors Summer Institute of Linguistics, Inc. Dallas, Texas We have audited the accompanying consolidated financial statements of Summer Institute of Linguistics, Inc., which comprise the consolidated statements of financial position as of, and the related consolidated statements of activities and cash flows for the years then ended, and the related notes to the consolidated financial statements. Management s Responsibility for the Consolidated Financial Statements Management is responsible for the preparation and fair presentation of these consolidated 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 consolidated financial statements that are free from material misstatement, whether due to fraud or error. Auditors Responsibility Our responsibility is to express an opinion on these consolidated 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 consolidated financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the consolidated 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 consolidated 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 consolidated financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion Texan Trail, Suite 125 Grapevine, TX capincrouse.com

4 Audit Committee of the Board of Directors Summer Institute of Linguistics, Inc. Dallas, Texas Opinion In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Summer Institute of Linguistics, Inc. as of, and the changes in its net assets and cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America. Grapevine, Texas April 26,

5 Consolidated Statements of Financial Position (in thousands of dollars) September 30, ASSETS: Cash $ 16,009 $ 15,633 Accounts receivable 1,970 1,284 Notes receivable (Note 4) Amounts due from related entities (Note 7) 1,205 1,181 Inventory (Note 2) 2,734 2,267 Investments (Note 3) 33,436 30,989 Property and equipment net of accumulated depreciation (Note 5) 35,738 36,474 Other assets (Note 2) 3,003 2,503 Total Assets $ 94,543 $ 90,411 LIABILITIES AND NET ASSETS: Liabilities: Accounts payable and accrued expenses $ 4,362 $ 4,060 Amounts due to staff and affiliated entities (Note 7) 12,797 10,888 Other liabilities (Note 2) ,137 15,932 Net assets: Unrestricted: Equity in property and equipment net 34,760 35,489 Board designated (Note 8) 12,330 10,577 Undesignated 20,556 19,107 67,646 65,173 Temporarily restricted (Note 8) 8,372 9,042 Permanently restricted (Note 9) ,406 74,479 Total Liabilities and Net Assets $ 94,543 $ 90,411 See notes to consolidated financial statements -3-

6 Consolidated Statement of Activities (in thousands of dollars) Year Ended September 30, 2017 Temporarily Permanently Unrestricted Restricted Restricted Total OPERATING SUPPORT AND REVENUE: Support from affiliates (Note 7) $ 92,452 $ 16,846 $ 1 $ 109,299 Contributions 1,967 3, ,326 Donated goods and services 1, ,754 Program service revenue (Note 2) 1, ,305 Sales and service income, net (Note 2) Other income Net assets released from restrictions: Satisfaction of program restrictions 20,871 (20,871) - - Total operating support and revenue 118,908 (670) ,362 OPERATING EXPENSES: Program services: Language development and training 113, ,297 Supporting services: General and administrative 6, ,260 Fund-raising , ,113 Total operating expenses 120, ,410 Change in net assets from operating activities (1,502) (670) 124 (2,048) NON-OPERATING ACTIVITIES: Interest and dividends (Note 3) Net realized/unrealized gain on investments (Note 3) 2, ,198 Gain on disposal of fixed assets Gain on sale of fixed assets Change in net assets from non-operating activities 3, ,975 Change in Net Assets 2,473 (670) 124 1,927 Net Assets, Beginning of Year 65,173 9, ,479 Net Assets, End of Year $ 67,646 $ 8,372 $ 388 $ 76,406 See notes to consolidated financial statements -4-

7 Consolidated Statement of Activities (in thousands of dollars) Year Ended September 30, 2016 Temporarily Permanently Unrestricted Restricted Restricted Total OPERATING SUPPORT AND REVENUE: Support from affiliates (Note 7) $ 91,566 $ 18,120 $ - $ 109,686 Contributions 2,014 3, ,098 Donated goods and services 1, ,662 Program service revenue (Note 2) 1, ,178 Sales and service income, net (Note 2) Other loss (114) - - (114) Net assets released from restrictions: Satisfaction of program restrictions 20,545 (20,545) - - Total operating support and revenue 116, ,651 OPERATING EXPENSES: Program services: Language development and training 110, ,784 Supporting services: General and administrative 7, ,822 Fund-raising , ,773 Total operating expenses 119, ,557 Change in net assets from operating activities (2,610) (1,906) NON-OPERATING ACTIVITIES: Interest and dividends (Note 3) Net realized/unrealized gain on investments (Note 3) Gain on sale of fixed assets Change in net assets from non-operating activities Change in Net Assets (1,697) (993) Net Assets, Beginning of Year 66,870 8, ,472 Net Assets, End of Year $ 65,173 $ 9,042 $ 264 $ 74,479 See notes to consolidated financial statements -5-

8 Consolidated Statements of Cash Flows (in thousands of dollars) Year Ended September 30, CASH FLOWS FROM OPERATING ACTIVITIES: Change in net assets $ 1,927 $ (993) Adjustments to reconcile change in net assets to net cash provided (used) by operating activities: Depreciation 3,565 4,034 Gain on sale of fixed assets (580) (11) Gain on disposal of fixed assets (635) - Noncash grant expense of property and equipment Net realized/unrealized gain on sale of investments (1,385) (642) (Gain) loss on investment in captive insurance company (813) 153 Noncash contributions of property and equipment - (53) Contributions restricted for capital expenditures (100) (22) Contributions restricted for endowment (124) (1) Changes in assets and liabilities: Accounts receivable (686) 39 Amounts due from staff and affiliated entities (24) (1) Inventory (467) 72 Other assets (500) 307 Accounts payable, accrued expenses and other liabilities 296 (524) Amounts due to staff and affiliated entities 1,909 4,399 Net Cash Provided by Operating Activities 3,011 7,139 CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of investments (730) (774) Purchase of property and equipment (3,685) (2,025) Proceeds from sale of investments Proceeds from sale of property and equipment 1, Issuance of notes receivable (8) (80) Payments on notes receivable - 1,000 Net Cash Used by Investing Activities (2,859) (730) CASH FLOWS FROM FINANCING ACTIVITIES: Contributions restricted for capital expenditures Contributions restricted for endowment Net Cash Provided by Financing Activities Net Change in Cash 376 6,432 Cash, Beginning of Year 15,633 9,201 Cash, End of Year $ 16,009 $ 15,633 SUPPLEMENTAL DISCLOSURE: Note receivable from the sale of property and equipment $ 360 $ - See notes to consolidated financial statements -6-

9 1. NATURE OF ORGANIZATION: The Summer Institute of Linguistics, Inc. (dba SIL International) (SIL) is a Texas non-profit educational corporation. SIL seeks to carry out, and to encourage and train others to carry out, the following activities with the assistance and cooperation of governmental and private agencies engaged in similar activities: To train linguists. To sponsor such linguists in their study of languages, especially less known and unwritten languages. To make available the data gathered by linguists through publication or other means. To publish resource materials for persons engaged in linguistic research. To prepare literature, both by original composition and by translation into the languages studied. To promote literacy among the people who speak the languages studied. To train people to promote literacy, and prepare literature in their own languages. SIL is exempt from income tax under Section 501(c)(3) of the U.S. Internal Revenue Code (Code) and comparable state law. It is classified as a publicly supported organization, which is not a private foundation under Section 509(a)(1) of the Code. SIL s work is carried out primarily by over 4,000 individuals, many of whom are recruited and supported by member organizations of the Wycliffe Global Alliance (The Alliance). The organizations contribute to the holistic transformation of all peoples through Bible translation and compassionate services. This support is SIL s primary source of revenue. The Alliance is not included in these consolidated financial statements because it is financially and administratively independent of SIL. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: PRINCIPLES OF CONSOLIDATION The consolidated financial statements of SIL include SIL, its field offices, and JAARS, Inc. (JAARS), because they are under the control of SIL. Significant transactions and balances between the organizations and offices have been eliminated for consolidated financial statement purposes. JAARS, Inc. exists to make Bible translation and language development possible, especially in the most remote and difficult places on earth, by enabling locally-appropriate and sustainable solutions in transportation, technology, media, and training. -7-

10 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued: PRINCIPLES OF CONSOLIDATION, continued These consolidated financial statements include the activities and balances of SIL field offices located overseas. As of September 30, 2017, assets held overseas, including cash, accounts receivable, inventory and other assets, totaled $9,775,000 and property and equipment, net of accumulated depreciation, amounted to $25,373,000. As of September 30, 2016, assets held overseas, including cash, accounts receivable, inventory and other assets, totaled $9,340,000 and property and equipment, net of accumulated depreciation, amounted to $27,085,000. Related entities, not included in these consolidated financial statements due to their financial and administrative independence, are listed below: Wycliffe Bible Translators, Inc. (Wycliffe USA) is an interdenominational, nonprofit, missionary organization with the goal of forwarding, in every way possible, the translation of the Word of God into all those languages of the world where it is needed. Wycliffe USA controls and has an economic interest in Wycliffe Foundation (WF) and Seed Company Inc. (SC). SC works with local translators and international partner organizations as well as financial and prayer partners in a concentrated effort to make God s Word readily available for faster church planting, effective discipleship and greater community transformation. These partnerships ensure the Scriptures are translated accurately and provided in the most accessible forms for maximum impact in the local communities. Wycliffe Bible Translators International (dba Wycliffe Global Alliance), (the Alliance) promotes the efforts of the Alliance Organizations (over 90 Alliance Organizations) as they engage the worldwide Church in providing resources for Bible translation and related ministry around the globe. RIA Charitable Investments Inc. (RIACII) exists to provide a pooled investment opportunity for SIL, Wycliffe Global Alliance member and associated partner organizations. Graduate Institute of Applied Linguistics (GIAL) is a graduate professional institute that provides training and research opportunities and equips students with the skills to train and serve others. SIL LEAD, Inc. exists to serve minority language communities and support the purposes and ends of SIL. It does so through advocacy, educational programs, development programs and linking communities with humanitarian and other multi-sectoral forms of assistance. BASIS OF ACCOUNTING The consolidated financial statements of SIL have been prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America. ESTIMATES The preparation of consolidated financial statements in accordance 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, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. -8-

11 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued: CASH Cash consists primarily of checking accounts deposited with financial institutions. Deposits in excess of FDIC insurance limits (including cash held outside the U.S.) at, were approximately $15.4 million and $14.9 million, respectively. Due to the diverse locations and financial cycles of SIL, management does not believe there is significant unmitigated risk. SIL operates a system that facilitates the financial interaction between SIL and Wycliffe Global Alliance organizations. As part of that system, SIL holds deposits from these organizations, which are included in cash and amounts due to staff and affiliated entities, in the amounts of approximately $8 million and $7 million at, respectively. INVESTMENTS Investments in money market funds are reported at fair market value. The investment in the captive insurance company is accounted for using the equity method. Other investments are carried at cost on the consolidated statements of financial position. Realized and unrealized gains and losses are included in non-operating activities in the consolidated statements of activities. Investment income consist primarily of interest. RIA Charitable Investment Funds, Inc. (RIACII) operates as an investment pool available to SIL and certain Alliance organizations. Funds deposited with RIACII are invested in a variety of fixed income securities including U.S. Treasury issues, corporate bonds and mortgage backed bonds, which borrow and pay in U.S. dollars. RIACII carries two investment pools. The short term portfolio pays interest at a stated rate as determined from time to time by the board of directors (2.00% for both years ended September 30, 2017 and 2016) to participants in proportion to the amount they have on deposit in the pool. The short term portfolio is carried at the value of actual deposits made plus accrued interest. The long term pool does not pay out interest, but allocates all net income or loss to the participants deposit in the pool. The long term pool also invests in equity securities, mutual funds, and exchange traded funds. SIL s interest in the long term pool is carried at Net Asset Value. Interest income and dividends recorded in the consolidated statements of activities for 2017 and 2016 was approximately $356,000 and $389,000, respectively. As of, RIACII reported total assets with a fair value of approximately $91,867,000 and $89,243,000, respectively, of which SIL holds approximately $30,013,000 (33%) and $28,258,000 (32%), respectively. Credit risk is the failure of another party to perform in accordance with the contract terms. SIL is exposed to credit risk for the amount invested in the pool, which management believes is mitigated because the RIACII investment pool is only available to a small closed-group of affiliated entities with common missional purposes and RIACII has a limited scope of business as a supporting organization to the small closed-group of affiliated organizations. Dividend income from the captive insurance company recorded in the consolidated statements of activities for the years ended, was approximately $180,000 and $0, respectively. -9-

12 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued: ACCOUNTS RECEIVABLE Accounts receivable are primarily related to amounts due from mission organizations and other local organizations and individuals and an aircraft lease. Past collection experience has been that essentially 100% of receivables have been collected. Therefore, no allowance for doubtful accounts has been established. INVENTORY Inventory consists primarily of books, publications, construction materials, aviation and other parts, supplies and consumer goods that are held for sale. Inventory is stated at the lower of cost or market. Cost is determined using the weighted-average method, the retail method, or the first-in, first-out method, depending on the type of inventory. 55% and 58% of inventories are held at overseas locations as of, respectively. The organization classifies certain aviation parts and materials with other assets. These items are maintained for future use as replacement parts because there are limited supply sources for such parts. MUSEUMS AND COLLECTIONS JAARS established the Mexico Museum and the Museum of the Alphabet (Museums) on its campus. The collections of the Museums at JAARS, which were acquired through purchases and contributions since the organization s inception, are not recognized as assets on the statements of consolidated financial position and, thus, are not reflected on the consolidated financial statements. Purchases of collection items are recorded as decreases in unrestricted net assets in the year in which the items are acquired or as temporarily or permanently restricted net assets if the assets used to purchase the items are restricted by donors. Proceeds for deaccessions or insurance recoveries are reflected as increases in the appropriate net asset classes. PROPERTY AND EQUIPMENT Property and equipment expenditures in excess of $5,000 are capitalized at cost. SIL allows its smaller offices to set a capitalization limit lower than $5,000 based on office size and expected impact of larger purchases on the local financial statements. Depreciation is provided using the straight-line method over the estimated useful lives of the depreciable assets as follows: Buildings Equipment Furniture & Fixtures 10 to 40 years 3 to 10 years 7 to 10 years -10-

13 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued: OTHER ASSETS Other assets of $3,003,000 and $2,503,000 as of, respectively, consist of the following: Beneficial interest in split-interest agreements: At, the Wycliffe Foundation holds charitable gift annuities in the amount of $529,000 and $512,000 for JAARS, respectively. The amount represents the beneficial interest JAARS has in those charitable gift annuities. Aviation parts held for internal use (rather than those held for sale, which are included in Inventory): $1,511,000 and $1,134,000 at, respectively. Prepaid expenses: $963,000 and $857,000 at, respectively. OTHER LIABILITIES Other liabilities consists primarily of Asset Retirement Obligations (ARO) for SIL and JAARS. As of September 30, 2017, the balances were $384,000 and $594,000, respectively, for SIL and JAARS. As of September 30, 2016, the balances were $376,000 and $608,000, respectively, for SIL and JAARS. -11-

14 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued: NET ASSETS The net assets of SIL are classified into net asset categories according to externally (donor or legal) imposed restrictions as follows: Unrestricted net assets are those available for the general operations of SIL, funds designated for specific uses by the board of directors (including designations by the executive committees of overseas offices), and equity in property and equipment. Equity in property and equipment is reported net of related notes payable and asset retirement obligations. Temporarily restricted net assets include gifts for projects for which donor-imposed restrictions have not been met, but for which the ultimate purpose of the proceeds is not permanently restricted. Permanently restricted net assets include gifts that have been contributed by donors with stipulations that they be invested in perpetuity with the income generally restricted for specific programs. REVENUE Revenue is recognized when earned and support when contributions are made, which may be when cash is received, unconditional promises are made, or ownership of donated assets is transferred to the organization. SALES AND SERVICE INCOME SIL provides items for sales and services for use by staff whose work requires them to reside in remote locations and the local economy does not provide what is needed for either staff personal needs or work needs. This includes aviation services, housing and maintenance as well as more personal needs such as groceries or basic medical services. Sales and services income is presented net of expenses of $13,718,368 and $13,969,000 for the years ended, respectively. Since these sales and services are provided to assist staff in accomplishing programs, there is no profit motive and these operations result in a very small net income margin which could easily slip into a loss position. In cases where staff used to provide these sales and services are staff assigned from Wycliffe Global Alliance organizations, the value of those staff are not included in the expenses netted against income, but are included in program services. See Note 7. DONATED GOODS AND SERVICES Donated goods and services are recorded at fair market value at the time of donation. Donated services are recognized as contributions if the services (a) create or enhance non-financial assets or (b) require specialized skills, are performed by people with those skills and would otherwise be purchased by SIL. Donated goods and services does not include the value of labor contributed by affiliates which is recorded at the cost recognized by the affiliates for the personnel providing those services and is included in Support from Affiliates as discussed in Note

15 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued: PROGRAM SERVICE INCOME Program service income is generated from the sale of inventory and use of services provided by JAARS, net of related expense. ALLOCATION OF EXPENSES The costs of providing program and supporting services are allocated and summarized on a functional basis in the consolidated statements of activities. All expenses are recorded when incurred in accordance with the accrual basis of accounting. FOREIGN CURRENCY TRANSLATION SIL has offices in over 40 countries. The U.S. Dollar is the functional currency throughout the organization. Transactions made in other currencies are translated into U.S. Dollars at an average exchange rate during the month of the transaction. For the year ending September 30, 2017, exchange gains were $191,000, and for the year ending September 30, 2016, exchange losses were $175,000, which is reported in consolidated statements of activities as other income. 3. INVESTMENTS: SIL s investments consist of the following (in thousands): September 30, Investments held at other than fair value: Deposits with RIA Charitable Investments, Inc. $ 30,013 $ 28,258 Investment in captive insurance company 2,939 2,126 Certificates of deposit Other 10 7 $ 33,436 $ 30,

16 3. INVESTMENTS, continued: SIL s investments consist of the following (in thousands): September 30, Investments to be held in perpetuity $ 388 $ 264 Investments available for unrestricted and temporarily restricted purposes 33,048 30,725 $ 33,436 $ 30,989 SIL and eight other not-for-profit organizations are members of an offshore captive insurance holding company entitled Stewardship Insurance, Ltd. (Stewardship). There is one wholly-owned subsidiary of Stewardship, Stewardship Reinsurance, Ltd (SRL). Stewardship captive insures claims relating to workers compensation, property, general liability, and auto liability. Stewardship reinsures the first $1,000,000 of any claim. Of that $1,000,000 Stewardship pays the first $250,000 and SRL pays the next $750,000. The next $1,000,000 is reinsured with a primary insurance carrier. The policy limits are $2,000,000 with statutory workers compensation benefits. Umbrella insurance coverage is purchased for claims exceeding $2,000,000. Claim experience will be identified to each participating entity and subsequent premiums will be modified based on an entity s experience. Included within investments is $2,939,000 (cost basis $330,000) and $2,126,000 (cost basis $330,000), which represents SIL s investment in captive insurance as of, respectively, representing 10% and 9%, respectively, of Stewardship. Investment balances are measured as of October 31, which represent the most recent data available. SIL is not aware of any material differences to these balances as of September 30. SIL has paid $357,670 and $284,779, in premiums to the captive during the years ended, respectively. Investment income consists of the following (in thousands): Year Ended September 30, Interest and dividends $ 562 $ 413 Net realized/unrealized gain 1, Gain (loss) on investment in captive insurance company 813 (153) $ 2,760 $

17 4. NOTES RECEIVABLE: Notes receivable consist of the following (in thousands): September 30, Secured non-interest bearing note receivable from Youth with a Mission for land sold in Mozambique, balance due on $700,000 purchase price is expected to be paid in fiscal year 2018 upon transfer of title. Secured non-interest bearing note receivable from Cameroon Baptist Convention for land sold in Cameroon, balance due is expected to be paid in two installments over fiscal years 2018 and $ 88 $ PROPERTY AND EQUIPMENT: Property and equipment at September 30, 2017, consist of the following (in thousands): $ 448 $ 80 Domestic International Total Land and land improvements $ 2,073 $ 2,812 $ 4,885 Buildings 23,098 30,514 53,612 Furniture and equipment 8,314 4,881 13,195 Vehicles 274 3,548 3,822 Aircraft 4,029 9,428 13,457 Utilities ,182 38,159 51,994 90,153 Less accumulated depreciation (28,164) (27,423) (55,587) 9,995 24,571 34,566 Construction in progress ,172 $ 10,366 $ 25,372 $ 35,

18 5. PROPERTY AND EQUIPMENT, continued: Property and equipment at September 30, 2016, consist of the following (in thousands): Domestic International Total Land and land improvements $ 2,072 $ 2,798 $ 4,870 Buildings 22,427 32,278 54,705 Furniture and equipment 7,974 4,894 12,868 Vehicles 274 3,444 3,718 Aircraft 2,885 9,233 12,118 Utilities ,003 53,150 89,153 Less accumulated depreciation (27,140) (26,845) (53,985) 8,863 26,305 35,168 Construction in progress ,306 $ 9,389 $ 27,085 $ 36,474 SIL believes the above assets are properly stated as of, respectively. However, the political situation in many countries is subject to rapid change which could adversely affect the realizable value of the assets. In addition, the carrying value of assets may not be representative of the amount that would be realized should the assets be sold. For the years ended, 42% and 41%, respectively, of the international property and equipment is in Papua New Guinea and 11% for both years is in Australia. 6. OPERATING LEASES: Many SIL offices lease property or have been granted the use of property by the local government. For most of those offices, the leases are on a month-to-month basis and the amounts are immaterial. Others have terms of one year or longer. In addition, JAARS has entered into several leases for equipment. Future minimum rental payments that are required under the annual or long-term leases are presented below (in thousands): Year Ending September 30, 2018 $ Thereafter $ 1,782

19 6. OPERATING LEASES, continued: Total rental expense for the years ending, was $1,291,000 and $1,977,000, respectively. 7. TRANSACTIONS WITH RELATED ENTITIES: SIL had investments with related entities as follows (in thousands): September 30, RIACII $ 30,013 $ 28,258 SIL had amounts due from related entities as follows (in thousands): September 30, Staff $ 487 $ 337 The Alliance organizations SIL LEAD 5 31 $ 1,205 $ 1,181 SIL had amounts due to related entities as follows (in thousands): September 30, Staff $ 3,634 $ 3,724 The Alliance organizations The Alliance organizations cash deposits 8,413 6,835 $ 12,797 $ 10,

20 7. TRANSACTIONS WITH RELATED ENTITIES, continued: SIL received support from and provided support and revenue to related entities as follows (in thousands): Year Ended September 30, Received support from the Alliance organizations $ 109,299 $ 109,686 Provided support and revenue to the Alliance organizations $ 1,215 $ 1,128 Grant to SIL LEAD $ 120 $ 120 Of the total amounts received from the Alliance organizations during the year ended September 30, 2017, $86,247,000 are non-cash contributions consisting of the value of labor of staff assigned to SIL. Of these amounts, $81,294,000 is included in program expenses and $4,953,000 is included in general and administrative expenses. Of the total amounts received from the Alliance organizations during the year ended September 30, 2016, $85,363,000 are non-cash contributions consisting of the value of labor of staff assigned to SIL. Of these amounts, $80,552,000 is included in program expenses and $4,811,000 is included in general and administrative expenses. SIL LEAD has an unsecured revolving line of credit with SIL in the amount of $400,000, monthly payments of principal and interest vary based on outstanding balance, rate is determined at the date of the draw, no set maturity date. During the year ended September 30, 2017, there were no draws on the line of credit. 8. NET ASSETS: Board designated net assets consist of the following (in thousands): September 30, Repair/replacement funds $ 1,327 $ 1,275 Aviation overhaul funds 5,143 5,346 Stewardship Insurance, LTD. 2,939 2,126 International conference travel fund 1, Insurance reserves Language development/publishing Scholarships $ 12,330 $ 10,

21 8. NET ASSETS, continued: Temporarily restricted net assets consist of the following (in thousands): September 30, Language and literacy support projects $ 6,196 $ 6,860 Aviation and aircraft support projects 882 1,143 Beneficial interest in charitable gift annuities Strategic support initiative projects Logistical support projects $ 8,372 $ 9,042 Minority interest: SIL operates a school overseas in which partners hold a minority interest of 29% and 34%, respectively, for the years ended. SIL has an interest of 71% and 66%, respectively, in the school as of. SIL s majority interest and the minority interest in the school are included in SIL s net assets and change in net assets as follows (in thousands): SIL Interest Minority Interest September 30, September 30, Beginning net assets $ 1,255 $ 1,163 $ 513 $ 594 Change in net assets (18) 7 (7) 3 Ending net assets $ 1,237 $ 1,170 $ 506 $ 597 As of, $15,200 and $17,300, respectively, are included in temporarily restricted net assets. 9. ENDOWMENT FUNDS: SIL s endowment assets consist of two individual permanently restricted funds established for a variety of purposes. Net assets associated with endowment funds are classified and reported based on the existence or absence of donor-imposed restrictions. The disclosures required by the Reporting Endowment Funds topic of the FASB ASC have not been included in these consolidated financial statements due to immateriality. -19-

22 10. FAIR VALUE MEASUREMENTS: SIL follows the provisions of the Fair Value Measurements and Disclosure topic of the FASB ASC. These provisions define fair value, establish a framework for measuring fair value, and enhance disclosures about fair value measurements. Fair value is defined under the standards as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market between market participants on the measurement date. SIL uses appropriate valuation techniques to determine fair value based on inputs available. When available, SIL measures fair value using Level 1 inputs because they generally provide the most reliable evidence of fair value. Level 3 inputs are only used when Level 1 or Level 2 inputs are not available. Level 1 inputs consist of unadjusted quoted market prices in active markets for identical assets and have the highest priority, Level 2 inputs consist of observable inputs other than quoted prices for identical assets, and Level 3 inputs have the lowest priority. Changes in methods and assumptions : None. The following table presents the fair value measurements of assets and liabilities recognized in the accompanying consolidated statements of financial position measured at fair value on a recurring basis and the level within the fair value hierarchy in which the fair value measurements fall. Fair values of assets measured on a recurring basis are as follows (in thousands): September 30, 2017 Total Level 1 Level 2 Other assets: Beneficial interest in split-interest agreements $ 529 $ - $ 529 September 30, 2016 Total Level 1 Level 2 Other assets: Beneficial interest in split-interest agreements $ 512 $ - $ 512 WF holds certain charitable gift annuities for JAARS. This amount represents the beneficial interest JAARS has in those charitable gift annuities. The annuity assets held at WF are reported at fair value based on observable inputs other than quoted prices for identical assets, which is Level 2 of the fair value hierarchy. The fair value for the beneficial interest in split-interest agreements is determined by calculating the present value of the future distributions expected to be received, using published life expectancy tables and an appropriate discount rate. -20-

23 11. EMPLOYEE RETIREMENT PLAN: SIL has a 403(b) retirement plan for qualifying US employees, meaning those employees who normally work more than 20 hours per week. Eligible employees may make deferral contributions up to limits set by law, which may be matched by employer contributions equal to 100% of the first 2.5% of compensation deferred. Employer matching contributions as of, were $37,000 and $36,000, respectively. 12. SEVERANCE LIABILITY: As of, SIL had accrued approximately $1,695,000 and $1,797,000, respectively, which is made up entirely of severance liabilities required by local laws in many countries around the world in which SIL employs local citizens as staff. This amount is included in accounts payable and accrued expenses on the consolidated statements of financial position. 13. SUBSEQUENT EVENTS: Subsequent events have been evaluated through April 26, 2018, which represents the date the consolidated financial statements were available to be issued. Subsequent events after that date have not been evaluated. -21-

24 SUPPLEMENTARY DATA

25 INDEPENDENT AUDITORS REPORT ON SUPPLEMENTARY DATA Audit Committee of the Board of Directors Summer Institute of Linguistics, Inc. Dallas, Texas We have audited the consolidated financial statements of Summer Institute of Linguistics, Inc. as of and for the years ended, and our report thereon dated April 26, 2018, which expressed an unmodified opinion on those consolidated financial statements, appears on page 1. Our audits were conducted for the purpose of forming an opinion on the consolidated financial statements as a whole. The consolidating statements of financial position and the consolidating statements of activities are presented for purposes of additional analysis of the consolidated financial statements, rather than to present financial position, results of operations, and cash flows of the individual organizations, and are not a required part of the consolidated 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 consolidated financial statements. The consolidating information has been subjected to the auditing procedures applied in the audit of the consolidated financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the consolidated financial statements or to the consolidated 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 consolidated financial statements as a whole. Grapevine, Texas April 26, Texan Trail, Suite 125 Grapevine, TX capincrouse.com

26 Consolidating Statement of Financial Position (in thousands of dollars) September 30, 2017 Summer Institute of Linguistics JAARS, Inc. Eliminations Total ASSETS: Cash $ 15,671 $ 338 $ - $ 16,009 Investments 33,476 3,529 (3,569) 33,436 Accounts receivable 1, ,970 Notes receivable Amounts due from related entities 1,218 1 (14) 1,205 Inventory 2, ,734 Property and equipment net of accumulated depreciation 30,434 5,304-35,738 Other assets 2, ,003 Total Assets $ 87,416 $ 10,710 $ (3,583) $ 94,543 LIABILITIES AND NET ASSETS: Liabilities: Accounts payable and accrued expenses $ 4,052 $ 160 $ 150 $ 4,362 Amounts due to staff and affiliated entities 16, (3,532) 12,797 Other liabilities , (3,382) 18,137 Net Assets: Unrestricted: Undesignated 20, (151) 20,556 Equity in property and equipment net 30,050 4,710-34,760 Board designated 9,956 2,424 (50) 12,330 60,078 7,769 (201) 67,646 Temporarily restricted 6,196 2,176-8,372 Permanently restricted ,662 9,945 (201) 76,406 Total Liabilities and Net Assets $ 87,416 $ 10,710 $ (3,583) $ 94,

27 Consolidating Statement of Financial Position (in thousands of dollars) September 30, 2016 Summer Institute of Linguistics JAARS, Inc. Eliminations Total ASSETS: Cash $ 15,376 $ 257 $ - $ 15,633 Investments 31,031 4,445 (4,487) 30,989 Accounts receivable 1, ,284 Notes receivable Amounts due from related entities 1,199 4 (22) 1,181 Inventory 1, ,267 Property and equipment net of accumulated depreciation 32,512 3,962-36,474 Other assets 1, ,503 Total Assets $ 85,021 $ 9,899 $ (4,509) $ 90,411 LIABILITIES AND NET ASSETS: Liabilities: Accounts payable and accrued expenses $ 3,845 $ 215 $ - $ 4,060 Amounts due to staff and affiliated entities 15, (4,459) 10,888 Other liabilities , (4,459) 15,932 Net Assets: Unrestricted: Undesignated 18, ,107 Equity in property and equipment net 32,135 3,354-35,489 Board designated 7,748 2,879 (50) 10,577 58,359 6,864 (50) 65,173 Temporarily restricted 6,840 2,202-9,042 Permanently restricted ,463 9,066 (50) 74,479 Total Liabilities and Net Assets $ 85,021 $ 9,899 $ (4,509) $ 90,

28 Consolidating Statement of Activities (in thousands of dollars) Year Ended September 30, 2017 Summer Institute of Linguistics JAARS, Inc. Eliminations Total OPERATING SUPPORT AND REVENUE: Support from affiliates $ 109,198 $ 7,432 $ (7,331) $ 109,299 Contributions 2,815 2,511-5,326 Donated goods and services 1,004 1,044 (294) 1,754 Program service revenue - 1,305-1,305 Sales and service income 15, (15,584) 418 Other (56) 260 Total operating support and revenue 128,735 12,892 (23,265) 118,362 OPERATING EXPENSES: Program services: Bible translation and related programs 122,373 10,098 (19,174) 113,297 Supporting services: General and administrative 9,191 1,056 (3,987) 6,260 Fund-raising (140) 853 9,331 1,909 (4,127) 7,113 Total operating expenses 131,704 12,007 (23,301) 120,410 Change in net assets from operating activities (2,969) (2,048) NON-OPERATING ACTIVITIES: Interest and dividends (187) 562 Net realized/unrealized gain/(loss) 2,204 (6) - 2,198 Gain on disposal of fixed assets Gain on sale of fixed assets Change in net assets from non-operating activities 4,168 (6) (187) 3,975 Change in Net Assets 1, (151) 1,927 Net Assets, Beginning of Year 65,463 9,066 (50) 74,479 Net Assets, End of Year $ 66,662 $ 9,945 $ (201) $ 76,

29 Consolidating Statement of Activities (in thousands of dollars) Year Ended September 30, 2016 Summer Institute of Linguistics JAARS, Inc. Eliminations Total OPERATING SUPPORT AND REVENUE: Support from affiliates $ 109,613 $ 6,958 $ (6,885) $ 109,686 Contributions 2,965 2,133-5,098 Donated goods and services 1, (327) 1,662 Program service revenue - 1,178-1,178 Sales and service income 14, (15,112) 141 Other (158) 105 (61) (114) Total operating support and revenue 128,296 11,740 (22,385) 117,651 OPERATING EXPENSES: Program services: Bible translation and related programs 119,239 9,530 (17,985) 110,784 Supporting services: General and administrative 11,037 1,103 (4,318) 7,822 Fund-raising (82) ,119 2,054 (4,400) 8,773 Total operating expenses 130,358 11,584 (22,385) 119,557 Change in net assets from operating activities (2,062) (1,906) NON-OPERATING ACTIVITIES: Interest and dividends Net realized/unrealized gain/(loss) 490 (1) Gain/(loss) on sale of fixed assets 251 (240) - 11 Change in net assets from non-operating activities 1,153 (240) Change in Net Assets (909) (84) - (993) Net Assets, Beginning of Year 66,372 9,150 (50) 75,472 Net Assets, End of Year $ 65,463 $ 9,066 $ (50) $ 74,