FOUNDATION FOR THE CAROLINAS. Combined Financial Statements for the Years Ended December 31, 2008 and 2007

Transcription

1 Combined Financial Statements for the Years Ended

2 Contents Page Report of Independent Auditors... 2 Combined Statements of Financial Position... 3 Combining Statements of Activities Combined Statements of Cash Flows

3 Report of Independent Auditors Board of Directors Foundation For The Carolinas Charlotte, North Carolina We have audited the accompanying combined statements of financial position of the Foundation For The Carolinas and its supporting organizations (the Foundation ) as of, and the related combining statements of activities and combined statements of cash flows for the years then ended. These financial statements are the responsibility of the Foundation's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the combined financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the combined financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall combined financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the combined financial statements referred to above present fairly, in all material respects, the combined financial position of the Foundation For The Carolinas and its supporting organizations as of, and the changes in their net assets and their cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America. As explained in Note 2, the financial statements include certain investments valued at $148,595,177 (24.4% of total assets), whose fair values have been estimated by management in the absence of readily determinable fair values. Management s estimates are based on information provided by the fund managers or the general partners. Charlotte, North Carolina August 13, 2009

4 3 Combined Statements of Financial Position Assets December 31, Cash and cash equivalents $ 13,802,367 $ 8,358,358 Accounts receivable 2,026,982 7,434,735 Pledges receivable, net 28,114,447 38,548,894 Prepaid expenses 5,728 53,499 Short-term investments 95,330,625 89,859,004 Property and equipment, net 5,501,243 5,676,657 Notes receivable 1,051,265 1,151,265 Beneficial interest in trust 8,261 7,924 Long-term investments 463,240, ,392,882 Total assets $ 609,081,479 $ 801,483,218 Liabilities and Net Assets Liabilities Fund obligations $ 581,579 $ 553,568 Grants payable 11,006,493 13,356,231 Liability for amounts held on behalf of others 173,643, ,469,231 Annuity obligations 18,466,268 27,920,418 Other liabilities 246, ,369 Total liabilities 203,944, ,636,817 Net assets The Foundation Unrestricted 214,611, ,617,314 Temporarily restricted 56,663,545 77,615,349 Permanently restricted 109,772, ,915,231 Supporting foundations Unrestricted 16,857,823 1,792,145 Temporarily restricted 706,519 1,954,437 Permanently restricted 6,525,556 6,951,925 Total net assets 405,137, ,846,401 Total liabilities and net assets $ 609,081,479 $ 801,483,218 The accompanying notes are an integral part of these combined financial statements.

5 4 Combining Statements of Activities For the Year Ended December 31, 2008 The Foundation Supporting Foundations Temporarily Permanently Temporarily Permanently Combined Unrestricted Restricted Restricted Unrestricted Restricted Restricted Eliminations Total Revenues, gains and other support Contributions $ 27,317,028 $ 25,005,741 $ 1,952,467 $ 5,024,114 $ 18,711,676 $ 450,150 $ - $ 78,461,176 Less - contributions received on behalf of others - (8,955,367) - - (18,363,497) - - (27,318,864) Net contributions 27,317,028 16,050,374 1,952,467 5,024, , ,150-51,142,312 Net investment income 7,815,966 1,722, , , ,111,338 Net investment gains (losses) (76,161,178) (18,890,241) 1,904,800 (5,045,313) (928,799) (876,519) - (99,997,250) Administrative fees received 4,884, , (728,823) 4,424,954 Change in beneficial interest in trust Net assets released from restrictions - Satisfaction of purpose 19,834,587 (19,834,587) - 800,612 (800,612) Total revenues, gains and other support (16,308,996) (20,951,804) 3,857,604 1,487,997 (1,247,918) (426,369) (728,823) (34,318,309) Expenses Grant disbursements 92,923, ,406, ,329,874 Less - grants disbursed on behalf of others (4,216,686) - - (8,374,065) (12,590,751) Net grant distributions 88,706, ,032, ,739,123 Operating expenses 5,685, ,685,467 Depreciation expense 368, ,852 Administrative fees charged 3,663, , (728,823) 3,308,632 Program expenses 2,126, , ,267,183 Pass-through fund expenses 1,014, , ,021,423 Total expenses 101,565, ,554, (728,823) 103,390,680 Change in net assets (117,874,482) (20,951,804) 3,857,604 (1,066,020) (1,247,918) (426,369) - (137,708,989) Net assets, beginning of year 348,617,314 77,615, ,915,231 1,792,145 1,954,437 6,951, ,846,401 Transfer of supporting foundations (Note 3) (16,131,698) ,131, Net assets, end of year $ 214,611,134 $ 56,663,545 $ 109,772,835 $ 16,857,823 $ 706,519 $ 6,525,556 $ - $ 405,137,412 The accompanying notes are an integral part of these combined financial statements.

6 5 Combining Statements of Activities For the Year Ended December 31, 2007 The Foundation Supporting Foundations Temporarily Permanently Temporarily Permanently Combined Unrestricted Restricted Restricted Unrestricted Restricted Restricted Eliminations Total Revenues, gains and other support Contributions $ 167,651,401 $ 57,069,679 $ 8,459,049 $ (22,917) $ 26,492,418 $ 1,339,432 $ - $ 260,989,062 Less - contributions received on behalf of others - (7,123,743) (2,517,617) - (26,172,535) (655,145) - (36,469,040) Net contributions 167,651,401 49,945,936 5,941,432 (22,917) 319, , ,520,022 Net investment income 11,404,523 2,510,588-73, , ,216,386 Net investment gains (losses) 11,721,700 4,573, , , ,813,013 Administrative fees received 4,732, , (694,854) 4,290,524 Change in beneficial interest in trust ,569-5,791 Net assets released from restrictions - Satisfaction of purpose 14,975,194 (14,975,194) - 374,124 (374,124) Total revenues, gains and other support 210,484,913 42,054,619 5,941, , , ,856 (694,854) 259,845,736 Expenses Grant disbursements 104,365, ,979, ,345,459 Less - grants disbursed on behalf of others (2,976,327) - - (1,474,307) (4,450,634) Net grant distributions 101,389, , ,894,825 Operating expenses 5,195, ,195,079 Depreciation expense 276, ,506 Administrative fees charged 3,213, , (694,854) 2,760,221 Program expenses 924, ,333 Pass-through fund expenses 1,954, , ,053,999 Total expenses 112,952, , (694,854) 113,104,963 Change in net assets 97,532,368 42,054,619 5,941,654 (44,923) 567, , ,740,773 Net assets, beginning of year 251,084,946 35,560,730 99,973,577 1,837,068 1,387,238 6,262, ,105,628 Net assets, end of year $ 348,617,314 $ 77,615,349 $ 105,915,231 $ 1,792,145 $ 1,954,437 $ 6,951,925 $ - $ 542,846,401 The accompanying notes are an integral part of these combined financial statements.

7 6 Combined Statements of Cash Flows December 31, Cash flows from operating activities Change in net assets $ (137,708,989) $ 146,740,773 Adjustments to reconcile change in net assets to cash provided by operating activities Depreciation 368, ,506 Realized (gains) losses on sale of investments 1,512,987 (9,832,613) Unrealized (gains) losses on investments 98,484,263 (6,980,400) Contributions and income restricted for investments in endowments (2,402,617) (4,709,212) Non-cash contributions (12,401,177) (1,232,442) Changes in operating assets and liabilities: Receivables 5,407,753 32,111,063 Pledges receivable, net 10,434,447 (18,199,257) Prepaid expenses 47,771 (35,024) Notes receivable 100,000 63,439 Beneficial interest in trust (337) - Fund obligations 28,011 (698,735) Grants payable (2,349,738) 9,762,202 Liability for amounts held on behalf of others (42,825,599) 42,921,517 Annuity obligations (9,454,150) 1,478,964 Other liabilities (91,274) 4,699 Net cash provided by (used by) operating activities (90,849,797) 191,671,480 Cash flows from investing activities Purchases and gifts of property and equipment (193,438) (513,655) Net (purchases) sales of investments 94,084,627 (197,358,836) Net cash provided by (used by) investing activities 93,891,189 (197,872,491) Cash flows from financing activities Contributions restricted for investment in endowment 2,402,617 4,709,212 Net cash provided by financing activities 2,402,617 4,709,212 Net increase (decrease) in cash and cash equivalents 5,444,009 (1,491,799) Cash and cash equivalents, beginning of year 8,358,358 9,850,157 Cash and cash equivalents, end of year $ 13,802,367 $ 8,358,358 The accompanying notes are an integral part of these combined financial statements.

8 7 Notes to Combined Financial Statements Note 1 Organization Foundation For The Carolinas (the Foundation ) was established in 1958 as a North Carolina nonprofit corporation. The Foundation, headquartered in Charlotte, North Carolina, receives gifts, grants and bequests for the purpose of making charitable donations to approved organizations. The combined financial statements include supporting organizations. These supporting organizations are separate legal entities established under Section 509(a)(3) of the Internal Revenue Code to operate solely for supporting the activities of the Foundation. They have their own board of directors or trustees and use the Foundation to administer and invest their assets. These supporting organizations include the Salisbury Community Foundation, Inc. (effective June 1, 1995), the Foundation for the Charlotte Jewish Community, Inc. (effective April 22, 1998), the Crosland Foundation Trust (effective May 1, 2000), the Turner Family Foundation (effective June 20, 2000), the Lopez Family Foundation (effective August 9, 2000), and the Ginter Foundation (effective January 1, 2008). The Foundation effectively controls, either directly or indirectly, all operating aspects of these organizations and the organizations are financially interrelated to the Foundation. Accordingly, their financial activity has been included in the accompanying combined financial statements. All significant intercompany transactions have been eliminated in the combination. The United Way Legacy Foundation (effective July 24, 2001), The Greater Charlotte Cultural Trust (effective December 31, 2002) and Foundation for the Mint Museums (effective October 27, 2006), also operate in connection with the Foundation as supporting organizations under Section 509(a)(3) of the Internal Revenue Code. These organizations are not controlled, directly or indirectly, by the Foundation. Therefore, financial activity of these organizations is not included in the accompanying combined financial statements except as noted below and as discussed in Note 2 under fiduciary agent. Certain funds originally established at Foundation For The Carolinas were transferred to United Way Legacy Foundation, The Greater Charlotte Cultural Trust, and Foundation for the Mint Museums for reporting purposes. However, if any of these organizations ceased to operate as a supporting organization of the Foundation, these funds would be transferred back to the Foundation. As such, the financial activity related to these funds is included in the accompanying combined financial statements. Note 2 Summary of significant accounting policies Basis of accounting - The accompanying financial statements have been prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America. The Foundation complies with the provisions of Statement of Financial Accounting Standards ( SFAS ) No. 116, Accounting for Contributions Received and Contributions Made, and SFAS No. 117, Financial Statements of Not-for-Profit Organizations.

9 8 Notes to Combined Financial Statements Note 2 Summary of significant accounting policies (continued) The financial statements report amounts separately by net asset classification. A summary of these classifications follows. Unrestricted - Unrestricted net assets consist of contributions and investment earnings received from donors who have placed no restrictions on the available distribution of principal and spendable income. The Foundation s policy is to designate unrestricted donor gifts at the discretion of the Board of Directors. Temporarily restricted - Temporarily restricted net assets consist of contributions and investment earnings whose use by the Foundation is limited by donor-imposed stipulations that expire by passage of time or can be fulfilled by actions of the Foundation. When a donor restriction expires, temporarily restricted net assets are reported in the statements of activities and changes in net assets as net assets released from restrictions. Contributions that are restricted by donors are reported as increases in unrestricted net assets if the restrictions expire in the reporting period in which the contribution is recognized. As of, the Foundation s temporarily restricted net assets are restricted for funding various community educational and philanthropic programs specified by the donors. Permanently restricted - Permanently restricted net assets consist of contributions received from donors whose use by the Foundation is limited by permanent donor-imposed stipulations. The restrictions are for the donated assets to remain in perpetuity, and the Foundation does not have the right to invade the original principal. Income derived from permanently restricted net assets fund various community educational and philanthropic programs specified by the donors. Revenues are reported as increases in unrestricted net assets unless use of the related assets is limited by donor-imposed restrictions. 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 stipulation or by law. Expirations of temporary restrictions on net assets (i.e., the donor-stipulated purpose has been fulfilled and/or the stipulated time period has elapsed) are reported as reclassifications between the applicable classes of net assets. Contributions, including unconditional promises, are recognized as revenues in the period made. Conditional promises are not recognized until they become unconditional, that is, when the conditions on which they depend are substantially met. Contributions of assets other than cash are recorded at their estimated fair value. Donated services - In accordance with the SFAS No. 116, the Foundation records contributed services if the services received create or enhance long-lived assets or require specialized skills, are provided by individuals possessing those skills, and would typically need to be purchased if not provided by donation.

10 9 Notes to Combined Financial Statements Note 2 Summary of significant accounting policies (continued) Donated services (continued) - A number of unpaid volunteers, who serve in the capacity of Board members and various volunteer assistants, have made significant contributions of their time in the furtherance of the Foundation s programs. The value of this contributed time is not reflected in these financial statements since it does not meet the above recognition criteria. Income taxes - The Foundation and its supporting foundations are exempt from federal income tax under the provisions of Section 501(c)(3) of the Internal Revenue Code. Cash and cash equivalents - The Foundation considers short-term investments with original maturities of three months or less to be cash equivalents, except for those short-term investments managed as part of investment management strategies. Property and equipment - Property and equipment are recorded at cost for purchased items and estimated fair market value for donated items, and are depreciated on a straight-line basis over the estimated life of the respective asset. The costs of maintenance and repairs, which do not improve or extend the life of the respective asset, are expensed when incurred. The cost and any accumulated depreciation are removed from the accounts for items sold or retired, and any resulting gain or loss is included in the determination of the change in net assets. Investments - Investments in marketable securities with readily determinable fair values and all investments in debt securities are valued in the statement of financial position at their fair value. Fair value is determined by reference to exchange or dealer-quoted market prices. If a quoted market price is not available, fair value is estimated using quoted market prices for similar investment securities. Diversified venture capital holdings and certain other limited partnership interests are carried at fair values based upon financial information provided by external investment partners. Because the venture capital holdings are not readily marketable, the estimated value is subject to uncertainty and, therefore, may differ significantly from the value that would have been used had a ready market for the investments existed. The amount of investment gain (loss) associated with these investments represents (13.82%) and 1.17% of the total return on investment for the years ended, respectively. Changes in the fair value of investments carried at fair value are reflected as investment gains or losses in the accompanying statements of activities and changes in net assets. Pledges receivable - Unconditional promises to give that are expected to be collected within one year are recorded at net realizable value. Unconditional promises to give that are expected to be collected in future years are recorded at the present value of their estimated future cash flows. The discounts on those amounts are computed using risk-free interest rates, adjusted for credit risk. Amortization of the discounts is included in contributions revenue. An allowance for doubtful accounts is based on specific identification of possible uncollectible accounts and the Foundation s historical collection experience.

11 10 Notes to Combined Financial Statements Note 2 Summary of significant accounting policies (continued) Pledges receivable (continued) - Effective for the fiscal year ended December 31, 2008, the Foundation has voluntarily elected under SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities, to apply the fair value option for valuing all pledges. Originally, these were valued under Accounting Principal Board ( APB ) opinion No. 21, Interest on Receivables and Payables. It is believed that this election will improve the clarity and consistency of the valuation of these pledges. Liability for amounts held on behalf of others - In accordance with SFAS No. 136, Transfers of Assets to a Not-for-Profit Organization or Charitable Trust That Raises or Holds Contributions to Others, the Foundation recognizes a liability for funds received and held for the sole benefit of another organization. Fiduciary Agent - The Foundation acts as fiduciary agent for all its supporting organizations (see Note 1). The Foundation s responsibilities as fiduciary agent include, but are not limited to, safeguarding of assets, recordkeeping of transactions, investment management and ensuring appropriate distributions. As part of its fiduciary responsibility, the Foundation manages the assets of The Greater Charlotte Cultural Trust ( GCCT ) and Foundation for the Mint Museums ( FFMM ). As stated in Note 1, GCCT was established at December 31, 2002 as a supporting organization of the Foundation. GCCT was organized for the benefit of, to perform the endowment functions of and to carry out the purposes of the Foundation with respect to the Charlotte-Mecklenburg cultural community, the Arts & Science Council-Charlotte/Mecklenburg, Inc. (the ASC ) and affiliate organizations of the ASC. The existing assets of the ASC s 1995 and 1998 endowment campaigns were transferred into the new organization for management. The Foundation, as fiduciary agent for GCCT, has recorded $108,773,203 and $135,158,148 in assets and related liabilities as amounts held on behalf of others at December 31, 2008 and 2007, respectively. As stated in Note 1, FFMM was established at October 27, 2006 as a supporting organization of the Foundation. FFMM was organized for the benefit of, to perform the endowment functions of and to carry out the purposes of the Foundation with respect to the Mint Museums of Art (the Museum ). The existing assets of the Museum s endowment were transferred into the new organization for management. The Foundation, as fiduciary agent for FFMM has recorded $10,474,551 and $9,968,182 in assets and related liabilities as amounts held on behalf of others at, respectively. Charitable remainder unitrusts and gift annuities - The Foundation receives gifts of future interest through charitable remainder unitrusts and gift annuities. Charitable remainder unitrusts are arrangements in which a donor establishes and funds a trust with specified distributions to be made to a non-charitable beneficiary, usually the donor, over a specified period of time not to exceed the lives of the beneficiaries. The distributions to the beneficiaries are for a specified percentage of the trust s fair value as determined annually. The annual distribution is limited to the lesser of the stated percentage or the actual income earned. Upon termination of the trust, a donor specified not-for-profit organization in addition to the Foundation receives the assets remaining in the trust.

12 11 Notes to Combined Financial Statements Note 2 Summary of significant accounting policies (continued) Charitable remainder unitrusts and gift annuities (continued) - Charitable gift annuities are similar to the charitable remainder unitrusts except that no trust exists and the annual distribution to the non-charitable beneficiary is a fixed amount. The present value of the liability resulting from these gifts, determined based on mortality tables using annual IRS discount rates, is recorded as an annuity obligation. The amount equal to the portion of the current fair value of the gift over the amount payable is recorded as net assets if the Foundation is the beneficiary or annuity obligations if the Foundation is acting as the agent. Effective for the fiscal year ended December 31, 2008, the Foundation has voluntarily elected under SFAS No. 159 the fair value option for valuing all liabilities associated with the irrevocable trust agreements and annuity agreements, originally valued under APB opinion No. 21 or SFAS No. 155, Accounting for Certain Hybrid Financial Instruments. It is believed that this will improve the clarity and consistency of the valuation of these liabilities. Program expenses - Program expenses are those incurred by the Foundation as part of the administration of certain civic initiatives and other ongoing programs of the Foundation. Pass-through fund expenses - Pass-through fund expenses are those incurred by individual component funds of the Foundation as part of the administration of these funds. Expenses are directly related to the fund activity. Use of estimates - The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of any contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could significantly differ from these estimates. Recent accounting pronouncements - Recent accounting pronouncement - In July 2006, Financial Accounting Standards Board Interpretation ( FIN ) No. 48, Accounting for Uncertainty in Income Taxes, was issued and interprets SFAS No. 109, Accounting for Income Taxes. FIN No. 48 clarifies the accounting for uncertainty in income taxes recognized in an entity s financial statements in accordance with SFAS No. 109 by prescribing a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN No. 48 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition.

13 12 Note 2 Summary of significant accounting policies (continued) Recent accounting pronouncements (continued) - FASB Staff Position ( FSP FIN ) 48-3 defers the effective date of FIN No. 48 for certain non-public enterprises until fiscal years beginning after December 15, The Foundation has elected to defer the application of FIN No. 48 in accordance with FSP FIN During the deferral period of the application of FIN No. 48 the Foundation will continue to evaluate whether uncertain tax positions exist utilizing the underlying principles of SFAS No At this time, the Foundation does not expect the impact of FIN No. 48 to be material to its financial statements. Note 3 Transfer of supporting foundations The Pension Protection Act of 2006 included certain exempt organization reforms which affected Type III supporting organizations. As a result of this legislation, the Board of Foundation for the Charlotte Jewish Community ( FCJC ) voted to convert to a Type I supporting organization. Upon conversion, the net asset balances for the FCJC donor advised funds as of January 1, 2008 were transferred back to FCJC. The net effect of these transfers is a decrease in the Foundation s net assets and an increase in supporting foundation net assets of $16,131,698 for Note 4 Investments The Foundation classifies investments as either short-term or long-term. Short-term investments include marketable securities with maturity dates less than one year, as well as all investments intended to be liquidated within a year. Long-term investments include marketable securities with maturity dates greater than one year and any cash equivalents managed as part of the long-term investment strategies. The carrying value of investments at is summarized below: Short-term investments Money market funds $ 45,226,673 $ 44,625,319 Fixed income funds - 34,881,073 Closely-held securities 525, ,688 Equity securities 841,497 1,183,963 Bonds 40,065, ,845 Real estate 1,740,817 1,901,817 Surrender value of life insurance 5,668,669 4,741,807 Partnerships 1,262,125 1,586,417 Other 75 71,075 Total short-term investments $ 95,330,625 $ 89,859,004

14 13 Note 4 Investments (continued) Long-term investments Money market funds $ 13,482,147 $ 20,023,758 Bonds 16,989,581 35,812,133 Private investment funds 77,804,937 41,372,542 Marketable securities 166,267, ,121,974 Equity securities 37,812,255 58,621,918 Fixed income funds 150,883, ,440,557 Total long-term investments $ 463,240,561 $ 650,392,882 Total long term investments include assets for annuity obligations and other liabilities of $18,712,363 and $28,257,787 for 2008 and 2007, respectively, as presented on the combined statements of financial position. The Foundation maintains its investments with various broker-dealers. These investments are insured by the Securities Investor Protection Corporation (SIPC) up to $500,000. The Foundation invests in a variety of investments, which are subject to fluctuations in market values and expose the Foundation to a certain degree of interest and credit risk. Investment income at is presented net of related expenses of $822,299 and $912,091, respectively. Net investment gains (losses) at are comprised as follows: Net investment gains (losses) $(167,508,457) $ 30,567,738 Less: agency funds reclassified to liabilities (67,511,207) 13,754,725 $ (99,997,250) $ 16,813,013 The Foundation has investments with fifteen fund managers, which invest in private investment funds as part of the Foundation s asset allocation. The investment in the private investment funds is an alternative investment strategy with the purpose of increasing the diversity of the Foundation s holdings and is consistent with the Foundation s overall investment objectives. The private investment funds are not traded on an exchange, and accordingly, investments in such funds may not be as liquid as investments in marketable equity or debt securities. The private investment funds may invest in other private investment funds, equity or debt securities, which may or may not have readily available fair values, and foreign exchange or commodity forward contracts. Management relies on various factors to estimate the fair value of these investments. Management believes its processes and procedures for valuing investments are effective, and, that its estimate of value is reasonable. However, the factors used by management are subject to change in the near term, and, accordingly, investment values and performance can be affected. The effect of these changes could be material to the financial statements.

15 14 Note 4 Investments (continued) As a result of investing with these fund managers, the Foundation has $5,497,813 in capital commitments in which no provision has been made. These commitments will be due at various times as called upon by the fund managers. Two of these fund managers, in which the Foundation has invested $33,338,334 at December 31, 2008, have imposed a lock up period of three years expiring in fiscal year Note 5 Pledges receivable Pledges receivable as of are summarized as follows: Receivable in less than one year $ 12,795,175 $ 17,297,754 Receivable in one to five years 17,094,668 23,116,718 29,889,843 40,414,472 Less: allowance for doubtful accounts (425,000) - Less: discount for present value (1,350,396) (1,865,578) $ 28,114,447 $ 38,548,894 Future pledge receipts are discounted using a short-term rate of 2.5% and 4.75% at December 31, 2008 and 2007, respectively. Note 6 Notes receivable The Foundation holds a promissory note for $150,000, including 5% interest payable quarterly, with principal balance due in September The Foundation holds a promissory note for $401,265 ($501,265 as of December 31, 2007), including 4.52% interest payable annually, with principal balance due in December The Turner Family Foundation holds a promissory note for $500,000, including 5% interest payable quarterly, with principal balance due in September 2014.

16 15 Note 7 Property and equipment The following is a summary of property and equipment as of December 31st: Land $ 943,188 $ 943,188 Building and improvements 3,864,226 3,859,376 Furniture and fixtures 1,466,664 1,699,444 Artwork 930, ,514 7,204,092 7,290,522 Less: accumulated depreciation (1,702,849) (1,613,865) $ 5,501,243 $ 5,676,657 Note 8 Grants The following summarizes grants approved and paid and those committed for future payment: Grants payable, beginning of year $ 13,356,231 $ 3,594,029 Unconditional grants expensed 103,329, ,345,459 Payments made (105,679,612) (96,583,257) Grants payable, end of year $ 11,006,493 $ 13,356,231 Grants are approved and made by the Board in accordance with the Foundation s bylaws. Grants and distributions are recorded in the financial statements when approved and all conditions have been met. All grants are payable within one year. Note 9 Fair value measurements of asset and liabilities Effective January 1, 2008, the Foundation adopted the provisions of SFAS No. 157, Fair Value Measurements, for financial assets and liabilities measured at fair value. This statement requires fair value measurements be classified and disclosed in one of the following three categories ( Fair Value Hierarchy ): Level 1: Financial instruments with unadjusted, quoted prices listed on active market exchanges for identical investments as of the reporting date. The types of investments which would generally be included in Level 1 are listed equity securities.

17 16 Note 9 Fair value measurements of asset and liabilities (continued) Level 2: Financial instruments valued using pricing inputs other than quoted prices in active markets, which are either directly or indirectly observable as of the reporting date. Fair value is determined through use of models or other valuation methodologies. The types of investments which would generally be included in Level 2 are governmental and corporate bonds and loans. Level 3: Financial instruments that are not actively traded on a market exchange and require using significant unobservable inputs in determining fair value. The inputs into the determination of fair value require significant judgment or estimation by the Investment Manager. The types of investments which would generally be included in Level 3 are common trust funds, hedge funds, general and limited partnership interests in corporate and private equity and real estate funds, and interest in pooled investments held by a third party. The following table summarizes the valuation of the Foundation s financial assets and liabilities measured at fair value on a recurring basis as of December 31, 2008, based on the level of input utilized to measure fair value: Measurement at fair value on a recurring basis: Description Level 1 Level 2 Level 3 Investments: Money market funds $ 15,765,179 $ 39,943,641 $ 3,000,000 Fixed income funds 143,717, ,245 6,666,262 Marketable securities 105,598, ,474 60,396,937 Equity securities 38,653, Bonds 340,379 55,987, ,041 Private investment funds ,804,937 Closely-held securities - 525,509 - Total investments recurring basis $ 304,075,033 $ 97,229,290 $ 148,595,177 Pledges receivable $ - $ - $ 28,114,447 Beneficial interest in trust $ - $ - $ 8,261 Annuity obligations $ - $ - $ 18,466,268 The following table summarizes the valuation of the Foundation s financial assets and liabilities measured at fair value on a non-recurring basis as of December 31, 2008, based on the level of input utilized to measure fair value:

18 17 Note 9 Fair value measurements of asset and liabilities (continued) Measurement at fair value on a non-recurring basis: Description Level 1 Level 2 Level 3 Investments: Real estate $ - $ - $ 1,740,817 Partnerships - - 1,262,125 Surrender value of life insurance - 5,668,669 - Other Total investments non-recurring basis $ - $ 5,668,669 $ 3,003,017 Notes Receivable $ - $ - $ 1,051,265 The change in beneficial interest in trust is included in the accompanying statement of activities. For assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the period, the following table provides a reconciliation of beginning and ending balances for the year ended December 31, 2008: Annuity Pledges Investments Obligations Receivable Beginning of year $ 175,084,550 $ 27,920,418 $ 38,548,894 Investment return: Investment income (net of fees) 848, ,977 - Realized and unrealized gains (losses) (62,757,151) (11,037,920) - Withdrawals (49,018,801) - - Expenses - (226,977) - Payments to beneficiaries - (2,097,911) - Contributions 84,438, New pledges net of pledge payments - - (10,524,629) Allowance and net present value adjustments on pledges receivable ,182 Actuarial adjustments - 3,143, End of year $ 148,595,177 $ 18,466,268 $ 28,114,447

19 18 Note 9 Fair value measurements of asset and liabilities (continued) For assets and liabilities measured at fair value on a non-recurring basis using significant unobservable inputs (Level 3) during the period, the following table provides a reconciliation of beginning and ending balances for the year ended December 31, 2008: Real Estate Partnerships Other Beginning of year $ 1,901,817 $ 1,586,417 $ 71,075 Investment return: Investment income (net of fees) - 72,393 - Realized and unrealized gains (losses) - (172,124) - Contributions 229, ,113 - Sales of investment (390,000) (411,674) (71,000) End of year $ 1,740,817 $ 1,262,125 $ 75 Note 10 Retirement plans Effective January 1, 2003, the Foundation established an age-graded 403(b) plan that covers all eligible employees, as defined. The Foundation makes contributions on behalf of each employee based on age. Foundation contributions to this plan were $343,972 and $333,996 during 2008 and 2007, respectively. The Foundation also established a supplemental 403(b) plan that covers all employees. Employees may make elective deferrals out of salary. Note 11 Endowment assets Effective January 1, 2008, the Foundation adopted the provisions of FASB Staff Position ( FSP ) No , Endowments of Not-for-Profit Organizations: Net Asset Classification of Funds Subject to an Enacted Version of the Uniform Prudent Management of Institutional Funds Act, and Enhanced Disclosures for All Endowment Funds. FSP No provides guidance on the net asset classification of donor restricted endowment funds for a not-for-profit organization that is subject to an enacted version of the Uniform Prudent Management of Institutional Funds Act of 2006 ( UPMIFA ) and also required disclosures about endowment funds, both donor-restricted endowment funds and board designated endowment funds. The State of North Carolina enacted a version of UPMIFA subsequent to December 31, The Foundation has not determined the effect of FSP on the classification of net assets.

20 19 Note 11 Endowment assets (continued) The Foundation s endowment consists of approximately 800 individual funds established for a variety of purposes including both donor-restricted endowment funds and funds designated by the Board of Directors to function as endowments. Net assets associated with endowment funds, including funds designated by the Board of Directors to function as endowments, are classified and reported based on the existence or absence of donor-imposed restrictions. Interpretation of Relevant Law The Board of Directors of the Foundation has interpreted current law (Uniform Management of Institutional Funds Act ( UMIFA ) since UPMIFA did not become law in North Carolina until March 19, 2009) 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 stipulation to the contrary. As a result of this interpretation, the Foundation 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. The remaining portion of the donor-restricted endowment fund that is not classified in permanently restricted net assets is classified as unrestricted or temporarily restricted net assets based upon whether donor-imposed restrictions on net appreciation exist. Endowment net assets consists of the following at December 31, 2008: Temporarily Permanently Unrestricted Restricted Restricted Total Donor-restricted endowment funds $ 24,721,512 $ 304,449 $ 107,867,854 $ 132,893,815 Board-designated endowment funds 32,320, ,320,083 Total endowed net assets $ 57,041,595 $ 304,449 $ 107,867,854 $ 165,213,898 Endowment net assets consists of the following at December 31, 2007: Temporarily Permanently Unrestricted Restricted Restricted Total Donor-restricted endowment funds $ 51,422,172 $ 24,852,096 $ 101,472,956 $ 177,747,224 Board-designated endowment funds 46,082, ,082,540 Total endowed net assets $ 97,504,712 $ 24,852,096 $ 101,472,956 $ 223,829,764

21 20 Note 11 Endowment assets (continued) Changes in Endowment net assets for the year ended December 31, 2008 are as follows: Temporarily Permanently Unrestricted Restricted Restricted Total Endowment net assets, January 1, 2008 $ 97,504,712 $ 24,852,096 $ 101,472,956 $ 223,829,764 Investment return: Investment income 2,243,215 1,101,705-3,344,920 Net appreciation (depreciation) (40,263,445) (20,311,880) 905,612 (59,669,713) Total investment return (38,020,230) (19,210,175) 905,612 (56,324,793) Contributions 2,075,411-5,489,286 6,010,536 Appropriation of endowment assets for expenditure (4,518,298) (5,337,472) - (8,301,609) Endowment net assets, December 31, 2008 $ 57,041,595 $ 304,449 $ 107,867,854 $ 165,213,898 Changes in Endowment net assets for the year ended December 31, 2007 are as follows: Temporarily Permanently Unrestricted Restricted Restricted Total Endowment net assets, January 1, 2007 $ 65,446,778 $ 22,326,526 $ 96,060,813 $ 183,834,117 Investment return: Investment income 4,276,322 1,763,992-6,040,314 Net appreciation (depreciation) 6,371,444 4,145,065 5,791 10,522,300 Total investment return 10,647,766 5,909,057 5,791 16,562,614 Contributions 26,138, ,298 5,406,352 31,718,014 Appropriation of endowment assets for expenditure (4,728,196) (3,556,785) - (8,284,981) Endowment net assets, December 31, 2007 $ 97,504,712 $ 24,852,096 $ 101,472,956 $ 223,829,764

22 21 Note 11 Endowment assets (continued) 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 UMIFA requires the Foundation to retain as a fund of perpetual duration. Deficiencies of this nature that are reported in unrestricted net assets were $6,921,186 as of December 31, These deficiencies resulted from unfavorable market fluctuations that occurred after the investment of permanently restricted contributions. Subsequent gains that restore the fair value of the assets of the endowment fund to the required level will be classified as an increase in unrestricted net assets. There were no such deficiencies as of December 31, Return Objectives and Risk Parameters The Foundation 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 Foundation must hold in perpetuity or for a donor-specified period as well as board designated funds. Under this policy, as approved by the Board of Directors, the endowment assets are invested in a manner that is intended to produce results that exceed the price and yield results of a weighted benchmark composed of 15% of the S&P 500 Index, 17.5% of the Russell 2000 Index, 12.5% of the MSCE EAFE Index, 5% of the MSCE EAFE Small Cap Index, 5% of the MSCE Emerging Markets Index, 10% of the HFRI Fund-of-Funds Index, 2.5% of the CS/Tremont HFI Long/Short Index, 2.5% of the CS/Tremont HFI Multi-Strategy Index, 15% of the LB Aggregate Bond Index, 5% of the LB TIPS Index, 5% of the NCREIF Property Index, and 5% of CPI + 8%, while assuming a moderate level of investment risk. The Foundation expects endowment funds, over a full market cycle (5 years), to provide an average annual real rate of return, net of fees, equal to or greater than spending, administrative fees, and inflation (Consumer Price Index + 6%). Actual returns in any given year may vary from this amount. Strategies Employed for Achieving Objectives To satisfy its long-term rate-of-return objectives, the Foundation relies on a total return strategy in which investment returns are achieved through both capital appreciation (realized and unrealized) and current yield (interest and dividends). The Foundation targets a diversified asset allocation that places emphasis on investment in equities, fixed income, and alternative investments in a percent ratio to achieve its long-term objectives within prudent risk constraints.

23 22 Note 11 Endowment assets (continued) Spending Policy and How the Investment Objectives Relate to Spending Policy The Foundation and its supporting organizations have a policy of appropriating for distribution each year 5% of its endowment funds average fair value using the prior 3 years through the calendar year-end preceding the fiscal year in which the distribution is planned. In establishing these policies, the Foundation considered the expected return on its endowment. Accordingly, the Foundation expects the current spending policy to allow its endowment to maintain its purchasing power by growing at a rate equal to planned payouts. Additional real growth will be provided through new gifts and any excess investment return. Beginning in 2009, the Foundation and its supporting organizations (with the exception of The Greater Charlotte Cultural Trust) policy for the endowment funds is to spend up to a maximum of 4% of the average fair value over the prior three years through the calendar year preceding the fiscal year in which the distribution is planned. Beginning in 2009, The Greater Charlotte Cultural Trust s policy for endowment funds is to spend up to a maximum of 4% of the average fair value over the prior twelve quarters through the calendar year preceding the fiscal year in which the distribution is planned. Note 12 Concentration of credit risk and other concentrations The Foundation places its cash and cash equivalents on deposit with financial institutions in the United States. In October and November 2008, the Federal Deposit Insurance Corporation (FDIC) temporarily increased coverage to $250,000 for substantially all depository accounts and temporarily provides unlimited coverage for certain qualifying and participating non-interest bearing transaction accounts. The increased coverage is scheduled to expire on December 31, 2013 at which time it is anticipated amounts insured by the FDIC will return to $100,000. During the year, the Foundation from time to time may have had amounts on deposit in excess of the insured limits. A substantial amount of the Foundation s support is generated through contributions and pledges from other organizations or individuals, primarily in Charlotte, North Carolina and the surrounding area. Changes in economic conditions can directly affect a donor s ability and willingness to make future contributions to the Foundation. Also the limited geographic area in which the Foundation s contributors reside, increases the Foundation s exposure to certain business concentrations.

24 23 Note 13 Fair value of financial instruments The following methods and assumptions were used by the Foundation in estimating its fair value disclosures of financial instruments: Cash, cash equivalents, and accounts receivable: The carrying amounts reported in the statement of financial position approximate fair value because of the short maturities of these financial instruments. Short-term and long-term investments: The carrying amount of investments (which is fair value) is based upon quoted market values. Pledges receivable: The pledges receivable are carried at estimated fair value. Notes receivable: The fair value of notes receivable approximates carrying value. Beneficial interest in trust: The beneficial interest in trust is carried at estimated fair value Grants payable: Due to the short nature of these instruments, the fair value of grants payable approximates carrying value. Annuity obligations and other liabilities: Annuity obligations and other liabilities are recorded at their fair value. The Foundation s financial instruments at are as follows: Carrying Amount Fair Value December 31, 2008 Cash and cash equivalents $ 13,802,367 $ 13,802,367 Accounts receivable 2,026,982 2,026,982 Pledges receivable 28,114,447 28,114,447 Notes receivable 1,051,265 1,051,265 Beneficial interest in trust 8,261 8,261 Investments 558,571, ,571,186 Grants payable 11,006,493 11,006,493 Liabilities for amounts held on behalf of others 173,643, ,643,632 Annuity obligations 18,466,268 18,466,268 Other liabilities 246, ,095

25 24 Note 13 Fair value of financial instruments (continued) Carrying Amount Fair Value December 31, 2007 Cash and cash equivalents $ 8,358,358 $ 8,358,358 Accounts receivable 7,434,735 7,434,735 Pledges receivable 38,548,894 38,548,894 Notes receivable 1,151,265 1,151,265 Beneficial interest in trust 7,924 7,924 Investments 740,251, ,251,886 Grants payable 13,356,231 13,356,231 Liabilities for amounts held on behalf of others 216,469, ,469,231 Annuity obligations 27,920,418 27,920,418 Other liabilities 337, ,369