WORLD CHRISTIAN BROADCASTING CORPORATION AND AFFILIATES

Transcription

1 WORLD CHRISTIAN BROADCASTING CORPORATION AND AFFILIATES CONSOLIDATED FINANCIAL STATEMENTS As of and for the Years Ended December 31, 2017 and 2016 And Report of Independent Auditor

2 TABLE OF CONTENTS REPORT OF INDEPENDENT AUDITOR... 1 CONSOLIDATED FINANCIAL STATEMENTS Consolidated Statements of Financial Position... 2 Consolidated Statements of Activities Consolidated Statements of Functional Expenses Consolidated Statements of Cash Flows... 7 Notes to Consolidated Financial Statements

3 Report of Independent Auditor To the Board of Directors of World Christian Broadcasting Corporation and Affiliates Franklin, Tennessee We have audited the accompanying consolidated financial statements of World Christian Broadcasting Corporation and Affiliates (a nonprofit organization), which comprise the consolidated statement of financial position as of December 31, 2017, and the related consolidated statements of activities, functional expenses, and cash flows for the year 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. Auditor s Responsibility Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit 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 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. Opinion In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of World Christian Broadcasting Corporation and Affiliates as of December 31, 2017, and the changes in their net assets and their cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America. Prior Period Financial Statements The financial statements as of December 31, 2016, were audited by other auditors whose report dated July 19, 2017 expressed an unmodified opinion on those statements. Nashville, Tennessee August 6, 2018

4 CONSOLIDATED STATEMENTS OF FINANCIAL POSITION ASSETS Current Assets: Cash and cash equivalents $ 312,303 $ 497,860 Prepaid expenses 16,766 21,917 Total Current Assets 329, ,777 Investments 947, ,480 Beneficial interest in trusts 165, ,140 Property and equipment, net 10,030,512 10,675,531 Total Assets $ 11,472,393 $ 12,183,928 LIABILITIES AND NET ASSETS Current Liabilities: Accounts payable and accrued expenses $ 45,672 $ 41,041 Payroll taxes and related items 21,308 27,448 Line of credit, current 368,580 - Note payable, current 81,664 78,759 Annuities payable, current 7,833 9,609 Total Current Liabilities 525, ,857 Line of credit, long-term - 191,349 Note payable, long-term 843, ,063 Annuities payable, long-term 22,789 40,873 Total Liabilities 1,390,937 1,313,142 Net Assets: Unrestricted 8,131,298 8,734,975 Temporarily restricted 1,025,691 1,231,344 Permanently restricted 924, ,467 Total Net Assets 10,081,456 10,870,786 Total Liabilities and Net Assets $ 11,472,393 $ 12,183,928 The accompanying notes to the consolidated financial statements are an integral part of this statement. 2

5 CONSOLIDATED STATEMENT OF ACTIVITIES YEAR ENDED DECEMBER 31, 2017 Temporarily Permanently Unrestricted Restricted Restricted Total Support and Revenues: Contributions, individuals $ 1,755,615 $ 29,675 $ 20,000 $ 1,805,290 Contributions, churches 775,048 13, ,311 Bequests and trusts 268, ,761 Realized and unrealized gain on investments 85,787 26, ,816 Change in value of split-interest trusts - 25,224-25,224 Other 14, ,726 Investment income 7, ,314 Net assets released from restrictions 299,844 (299,844) - - Total Support and Revenues 3,207,095 (205,653) 20,000 3,021,442 Expenses: Broadcasting program services 2,764, ,764,107 General and administrative 371, ,685 Development and public relations 674, ,980 Total Expenses 3,810, ,810,772 Change in net assets (603,677) (205,653) 20,000 (789,330) Net assets, beginning of year 8,734,975 1,231, ,467 10,870,786 Net assets, end of year $ 8,131,298 $ 1,025,691 $ 924,467 $ 10,081,456 The accompanying notes to the consolidated financial statements are an integral part of this statement. 3

6 CONSOLIDATED STATEMENT OF ACTIVITIES YEAR ENDED DECEMBER 31, 2016 Temporarily Permanently Unrestricted Restricted Restricted Total Support and Revenues: Contributions, individuals $ 1,679,453 $ 29,494 $ - $ 1,708,947 Bequests and trusts 669, ,775 1,200,043 Contributions, churches 733,057 1, ,057 Other 52, ,210 Realized and unrealized gain on investments 37,623 2,558-40,181 Investment income 16, ,054 Change in value of split-interest trusts - (15,513) - (15,513) Net assets released from restrictions 94,436 (94,436) - - Total Support and Revenues 3,282,101 (76,897) 530,775 3,735,979 Expenses: Broadcasting program services 2,531, ,531,550 General and administrative 354, ,109 Development and public relations 645, ,846 Total Expenses 3,531, ,531,505 Change in net assets (249,404) (76,897) 530, ,474 Net assets, beginning of year 8,984,379 1,308, ,692 10,666,312 Net assets, end of year $ 8,734,975 $ 1,231,344 $ 904,467 $ 10,870,786 The accompanying notes to the consolidated financial statements are an integral part of this statement. 4

7 CONSOLIDATED STATEMENT OF FUNCTIONAL EXPENSES YEAR ENDED DECEMBER 31, 2017 Supporting Services Broadcasting General Development Program and and Public Total Services Administrative Relations Expenses Salaries $ 1,054,874 $ 206,784 $ 381,924 $ 1,643,582 Depreciation 636,918 4,341 3, ,019 Transmitter power and fuel 545, ,176 Travel 71,211 1,209 59, ,240 Payroll taxes 75,928 12,962 22, ,258 Repairs and maintenance 82, ,735 Contracted services 46,617-24,000 70,617 Employee benefits 16,866 42,257 1,634 60,757 Newsletter ,720 59,720 Recordings 59, ,600 Office space and utilities 52,902 2,325 3,955 59,182 Interest ,126-50,756 Legal and professional 21,982 22,616-44,598 Insurance 18,902 13, ,906 Dinners and meetings ,764 31,088 Direct mail services ,049 30,049 Printing and promotional material ,311 23,758 Postage and shipping 7,324 1,333 10,807 19,464 Telephone 15, ,020 17,000 Banking and trustee fees 4,879 7,677 1,485 14,041 Miscellaneous 10, ,901 13,213 Seminars and training 12, ,594 Office supplies 6, ,804 10,424 Computer expenses 5,835-4,388 10,223 Audiovisual materials 40-7,854 7,894 Membership 2,836 3, ,286 Small equipment purchases 3, ,822 Subscriptions and publications 3, ,924 Community projects 3, ,099 Equipment lease 1, ,944 Real estate taxes 1, ,803 Total Expenses $ 2,764,107 $ 371,685 $ 674,980 $ 3,810,772 The accompanying notes to the consolidated financial statements are an integral part of this statement. 5

8 CONSOLIDATED STATEMENT OF FUNCTIONAL EXPENSES YEAR ENDED DECEMBER 31, 2016 Supporting Services Broadcasting General Development Program and and Public Total Services Administrative Relations Expenses Salaries $ 993,470 $ 203,460 $ 337,533 $ 1,534,463 Depreciation 492,342 3,837 3, ,503 Transmitter power 404, ,720 Travel 60, , ,355 Payroll taxes 75,420 14,885 22, ,950 Repairs and maintenance 110, ,618 Foreign broadcast fee 96, ,000 Contracted services 35,932 9,000 27,100 72,032 Recordings 60, ,950 Newsletter 13,544-42,126 55,670 Interest - 54,673-54,673 Postage and shipping 25, ,834 50,819 Legal and professional 23,891 26,583-50,474 Printing and promotional material 1,945-39,980 41,925 Dinners and meetings ,686 38,799 Office space and utilities 31,318 3,656 2,776 37,750 Direct mail services ,110 29,110 Insurance 18,660 5, ,073 Employee benefits 12,771 9,521 1,730 24,022 Miscellaneous 13,854 6,982 2,165 23,001 Telephone 15, ,373 Banking and trustee fees 6,934 7,713 2,151 16,798 Fuel 14, ,027 Audiovisual materials 104-9,014 9,118 Computer expenses 4, ,614 8,330 Office supplies 5, ,952 7,462 Membership 2,284 4, ,770 Small equipment purchases 4, ,149 Equipment lease 2, ,674 Community projects 2, ,546 Real estate taxes 1, ,900 Subscriptions and publications 1, ,451 Total Expenses $ 2,531,550 $ 354,109 $ 645,846 $ 3,531,505 The accompanying notes to the consolidated financial statements are an integral part of this statement. 6

9 CONSOLIDATED STATEMENTS OF CASH FLOWS YEARS ENDED Cash flows from operating activities: Change in net assets $ (789,330) $ 204,474 Adjustments to reconcile change in net assets to net cash (used in) provided by operating activities: Contributions restricted for long-term purposes (20,000) (530,775) Depreciation 645, ,503 Realized/unrealized gain on investments (111,816) (40,181) Change in value of split-interest trusts (28,159) 4,420 Changes in operating assets and liabilities: Prepaid expenses 5,151 (444) Accounts payable and accrued expenses 4,631 23,327 Payroll taxes and related items (6,140) 7,837 Net cash (used in) provided by operating activities (300,644) 168,161 Cash flows from investing activities: Purchases of property and equipment and construction in progress - (106,283) Distributions from beneficial interests in trusts 14,664 14,939 Purchases of investments (5,731,017) (956,491) Sale of investments 5,732, ,958 Net cash provided by (used in) investing activities 15,783 (351,877) Cash flows from financing activities: Proceeds from borrowings 567, ,349 Payments on borrowings (468,067) (780,914) Proceeds from contributions restricted for long-term investment 20, ,775 Annuities payable, net (19,860) (56,454) Net cash provided by financing activities 99, ,756 (Decrease) increase in cash and cash equivalents (185,557) 101,040 Cash and cash equivalents, beginning of year 497, ,820 Cash and cash equivalents, end of year $ 312,303 $ 497,860 Supplemental disclosure of cash flow information: Cash paid during the year for interest $ 50,756 $ 54,673 The accompanying notes to the consolidated financial statements are an integral part of this statement. 7

10 Note 1 Nature of business and summary of significant accounting policies Nature of Business World Christian Broadcasting Corporation and Affiliates (the Organization ) was incorporated in 1977 as a not-for-profit entity with the purpose of developing the capability of broadcasting religious messages primarily into communist countries. Pursuant to this purpose, a shortwave radio broadcasting station was constructed at Anchor Point, Alaska to broadcast into Eastern Asia. The Organization then put together a staff to produce and record its messages in both the Russian and Chinese languages. Broadcasts from the Anchor Point facility began on July 23, In 1990, the Organization built a facility in Franklin, Tennessee to house its programming center, recording studios, and administrative offices. During 2004, the Organization began to review the possibility of broadcasting into Africa, India, and the Middle East. This review led to contacts which opened doors in Madagascar. A 50-year lease was acquired in Madagascar for the site of a new broadcast station with multidirectional capabilities. The Organization began broadcasting from the Madagascar facility in March Between the two broadcast stations, the Organization should be able to broadcast shortwave signals to the majority of the world s population. As part of the Madagascar project, the Organization created a Madagascar corporation under the name Madagascar World Radio (dba Madagascar World Voice ). This wholly-owned entity is intended to be the Organization s alter ego in Madagascar and was designed to facilitate conducting business in that country. The accounts and activities of Madagascar World Radio have been consolidated into these financial statements. The Light of Life Corporation was established by the Organization in Hong Kong before control of Hong Kong was transferred to China. As an existing entity, Light of Life was grandfathered when China took control. This wholly-owned entity was created with the expectation that it could provide the Organization with a corporate presence for operating inside China at some point in the future. This entity is currently dormant. Basis of Presentation In accordance with Financial Accounting Standards Board ( FASB ) Accounting Standards Codification ( ASC ) guidelines, the Organization is required to report information regarding its financial position and activities according to three classes of net assets: unrestricted net assets, temporarily restricted net assets, and permanently restricted net assets. Accordingly, net assets and changes therein are classified and reported as follows: Unrestricted Net Assets Net assets that are not subject to donor-imposed stipulations. Temporarily Restricted Net Assets Net assets subject to donor-imposed stipulations that may or will be met, either by actions of the Organization and/or the passage of time. When a restriction expires, temporarily restricted net assets are reclassified to unrestricted net assets and reported in the statements of activities as net assets released from restrictions. Permanently Restricted Net Assets Net assets subject to donor-imposed stipulations that they be maintained permanently by the Organization. Generally, donors of these assets may permit the Organization to use all or part of the income earned for general or specific purposes. Contributions In accordance with FASB ASC guidelines, contributions and grants are recognized when the donor makes a promise to give to the Organization that is, in substance, unconditional. Contributions are recorded as unrestricted, temporarily restricted, or permanently restricted support depending on the existence or nature of any donor restrictions. When a restriction expires (that is, when a stipulated time restriction ends or purpose restriction is accomplished), temporarily restricted net assets are reclassified to unrestricted net assets and reported in the statements of activities as net assets released from restrictions. 8

11 Note 1 Nature of business and summary of significant accounting policies (continued) In-Kind Contributions The Organization records various types of in-kind support including contributed materials, equipment, and professional services. Contributed professional services are recognized if the services received (a) create or enhance long-lived assets or (b) require specialized skills, are provided by individuals possessing those skills, and would typically need to be purchased if not provided by donation. Contributions of tangible assets are recognized at fair market value when received. In-kind contributions meeting the criteria for recognition totaled $500 and $1,044 during 2017 and 2016, respectively. Cash and Cash Equivalents For purposes of the statements of cash flows, the Organization considers all cash funds, cash bank accounts, and highly liquid debt instruments purchased with an original maturity of three months or less to be cash and cash equivalents. Investments Investments are reported under the various captions of fixed income securities, mutual funds, and trusts held by third parties. These separately presented assets are invested in a variety of ways. In general, investments are composed of mutual funds (that, in turn, invest in debt and equity securities), stocks and bonds, and trusts (that invest mostly in debt and equity securities). In accordance with FASB ASC guidelines, investments in marketable securities with readily determinable fair values and all investments in debt securities are reported at their fair values in the statements of financial position. Realized and unrealized gains and losses are included in the change in net assets. Investment income and gains restricted by a donor are reported as increases in unrestricted net assets if the restrictions are met (either by passage of time or by use) in the reporting period in which the income and gains are recognized. Restricted Endowment Funds The Uniform Prudent Management of Institutional Funds Act ( UPMIFA ) was enacted in Tennessee effective July 1, The FASB ASC provides guidance on the net asset classification of donor-restricted endowment funds for a nonprofit organization that is subject to an enacted version of UPMIFA. It also requires disclosure of a description of the governing board s interpretation of the law that underlies the organization s net asset classification of donor-restricted endowment funds, a description of the organization s policies for the appropriation of endowment assets for expenditures (its endowment spending policies), a description of the organization s endowment investment policies, and additional disclosures not previously required. Property and Equipment Property and equipment are recorded at cost and are depreciated over their estimated useful lives using the straight-line method. Estimated useful lives of major classes of property and equipment are as follows: Buildings and improvements Equipment and furniture Vehicles 7-30 years 3-15 years 3-7 years Valuation of Long-Lived Assets Long-lived assets and certain identifiable intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Management reviews all material assets annually for possible impairment. If such assets are considered to be impaired, the impairment recognized is measured as the amount by which the carrying amount of the assets exceeds the estimated fair value of the assets. Functional Expenses Certain expenses have been allocated between program and supporting services based on estimates made by management. 9

12 Note 1 Nature of business and summary of significant accounting policies (continued) Income Taxes The Organization is exempt from federal income taxes under Section 501(c)(3) of the Internal Revenue Code and has been classified as other than a private foundation. Accordingly, no provision has been made for income taxes in the accompanying financial statements. The Organization follows FASB ASC guidance related to unrecognized tax benefits. The guidance clarifies the accounting for uncertainty in income taxes recognized in an organization s financial statements. This interpretation prescribes a minimum probability threshold that a tax position must meet before a financial statement benefit is recognized. The minimum threshold is defined as a tax position that is more likely than not to be sustained upon examination by the applicable taxing authority, including resolution of any related appeals or litigation processes, based on the technical merits of the position. The tax benefit to be recognized is measured as the largest amount of benefit that is greater than 50% likely of being realized upon ultimate settlement. The Organization has no tax penalties or interest reported in the accompanying financial statements. Estimates The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America ( GAAP ) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Subsequent Events The Organization evaluated subsequent events through August 6, 2018, when these financial statements were available to be issued. The Organization is not aware of any significant events that occurred subsequent to the statement of financial position date but prior to the filing of this report that would have a material impact on the financial statements. Note 2 Fair value measurements and investments The Organization follows the Fair Value Measurement Topic of the FASB ASC, which establishes a framework for measuring fair value. The 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 (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are described below: Level 1 Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the Organization has the ability to access. Level 2 Inputs to the valuation methodology include the following: 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. 10

13 Note 2 Fair value measurements and investments (continued) 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. There have been no changes in the methodologies during 2017 or A description of the valuation methodologies used for assets measured at fair value is as follows: Mutual Funds Valued at the net asset value of shares in active markets held by the Organization at year end. Equities Valued at the closing price reported in the active market in which the individual securities are traded. Trust Held by Third Party Valued at the Organization s proportionate share of the net asset value of shares in active markets. The methods described above may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, while the Organization 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. The following tables set forth by level, within the fair value hierarchy, the Organization s investments at fair value as of December 31: 2017 Level 1 Level 2 Level 3 Total Mutual Funds: Fixed income $ 25,845 $ - $ - $ 25,845 Total Mutual Funds 25, ,845 11

14 Note 2 Fair value measurements and investments (continued) 2017 Level 1 Level 2 Level 3 Total Equities: Consumer goods $ 213,747 $ - $ - $ 213,747 Industrial goods 210, ,911 Technology 192, ,711 Financial 171, ,147 Energy 57, ,365 Healthcare 40, ,293 Basic materials 19, ,678 Miscellaneous 9, ,395 Total Equities 915, ,247 Other Investments: Other assets - 6,085-6,085 Total Other Investments - 6,085-6,085 Total investments at fair value $ 941,092 $ 6,085 $ - $ 947, Level 1 Level 2 Level 3 Total Mutual Funds: Fixed income $ 48,375 $ - $ - $ 48,375 Large value 40, ,270 Large blend 38, ,746 Moderate allocation 23, ,073 World allocation 19, ,370 Real estate 12, ,106 Mid-cap value 8, ,989 World stock 7, ,824 Large growth 7, ,585 Europe stock 5, ,791 Foreign large blend 5, ,270 Small blend 4, ,296 Total Mutual Funds 221, ,695 12

15 Note 2 Fair value measurements and investments (continued) 2016 Level 1 Level 2 Level 3 Total Equities: Services $ 121,223 $ - $ - $ 121,223 Technology 86, ,668 Financial 58, ,111 Consumer goods 45, ,045 Basic materials 44, ,675 Healthcare 35, ,720 Industrial goods 30, ,742 Real estate 4, ,831 Total Equities 427, ,015 Other Investments: Trust held by third party - 184, ,020 Other assets 3, ,750 Total Other Investments 3, , ,770 Total investments at fair value $ 652,460 $ 184,020 $ - $ 836,480 The following schedule summarizes the investment return for 2017 and 2016 based on its sources: 2017 Temporarily Permanently Unrestricted Restricted Restricted Total Dividends and interest $ 1,541 $ - $ - $ 1,541 Trust income 5, ,773 Total investment income 7, ,314 Realized/unrealized gains 85,787 26, ,816 Total investment return $ 93,101 $ 26,029 $ - $ 119,130 13

16 Note 2 Fair value measurements and investments (continued) 2016 Temporarily Permanently Unrestricted Restricted Restricted Total Dividends and interest $ 10,991 $ - $ - $ 10,991 Trust income 5, ,063 Total investment income 16, ,054 Realized/unrealized gains 37,623 2,558-40,181 Total investment return $ 53,677 $ 2,558 $ - $ 56,235 Note 3 Beneficial interest in trusts The Organization is a beneficiary of various split-interest trusts. Projected maturities of these trusts vary from 2016 to The estimated future values for all split-interest trusts totaled $218,729 and $211,726 at December 31, 2017 and 2016, respectively. The total estimated present values at December 31, 2017 and 2016, as presented in the consolidated statements of financial position were $165,635 and $152,140, respectively. Note 4 Property and equipment Property and equipment is summarized as follows at December 31: Land $ 308,329 $ 308,329 Buildings and improvements 4,890,623 4,890,623 Transmitting and programming equipment 8,491,377 8,491,377 Heavy equipment 1,009,400 1,009,400 Office equipment and furniture 110, ,255 Vehicles 90,432 90,432 14,900,416 14,900,416 Less accumulated depreciation (4,869,904) (4,224,885) Net property and equipment $ 10,030,512 $ 10,675,531 Note 5 Annuities payable Annuities payable are a special form of split-interest trust in which the donor makes a contribution and the nonprofit organization agrees to make payments to the donor over either their lifetime (or a combination of their life plus that of a subsequent beneficiary) or over a shorter specified period. Under this type of agreement, a portion of the amount received is recorded as a liability based on the expected payout period of the agreement (using actuarial tables and assumed discount rates). This liability is then amortized over the estimated term of the payments. 14

17 Note 5 Annuities payable (continued) The Organization has received various charitable gift annuities that require payments to the donor over their lifetime or a combination of their life plus the life of a subsequent beneficiary. Liabilities representing the present value of the expected future payments totaled $30,622 and $50,482 at December 31, 2017 and 2016, respectively. Although not required by the agreements, management has placed the proceeds of these gifts in separate accounts to ensure the availability of funds to meet the requirements of the annuity portion of the gifts. Note 6 Debt The Organization has a note payable with a financial institution secured by a deed of trust on the Organization s property. The note payable bears interest at 3.99% and requires monthly principal and interest payments of $9,778. The note matures March Balances outstanding under this note payable totaled $924,755 and $1,002,822 at December 31, 2017 and 2016, respectively. During 2016 the Organization entered into a line of credit agreement with a financial institution to provide for maximum borrowings of $400,000. During 2017, maximum borrowings were increased to $500,000. Interest accrues at the prime rate as published by the Wall Street Journal (4.50% at December 31, 2017) and matures October The line of credit is secured by the Organization s assets. Balances outstanding under this agreement totaled $368,580 and $191,349 at December 31, 2017 and 2016, respectively. Scheduled principal requirements are as follows: Year Ending December 31, 2018 $ 450, , , , ,266 Thereafter $ 499,736 1,293,335 Note 7 Temporarily restricted net assets The Organization has received contributions from donors with the stipulation that such contributions are to be used for specific purposes. Temporarily restricted net assets are available as follows at December 31: Time restricted contributions $ 165,635 $ 336,159 Madagascar construction 860, ,185 $ 1,025,691 $ 1,231,344 15

18 Note 7 Temporarily restricted net assets (continued) During 2017 and 2016, net assets were released from donor restrictions by incurring expenses satisfying the restricted purposes stipulated by donors as follows: Madagascar construction $ 78,067 $ 80,913 Time restriction satisfied 195,748 10,965 Broadcasting technology/station maintenance 26,029 2,558 $ 299,844 $ 94,436 Note 8 Permanently restricted net assets Permanently restricted net assets consist of the following endowment fund at December 31: Investments to be held for production of income: General endowment $ 373,692 $ 373,692 Lowell G. Perry endowment 530, ,775 Avery Tyson endowment 20,000 - $ 924,467 $ 904,467 Earnings on general endowment and Avery Tyson endowment net assets are available to the Organization on an unrestricted basis. Half of the earnings on the Lowell G. Perry endowment net assets are restricted for broadcasting technology equipment and maintenance on the stations in Alaska and Madagascar with the remaining half being available to the Organization on an unrestricted basis. The Organization s endowment consists of donor restricted gifts held in investment accounts and split-interest trusts. As required by GAAP, net assets associated with endowment funds are classified and reported based upon the existence or absence of donor-imposed restrictions. Interpretation of Relevant Law The Board of Directors of the Organization has interpreted the UPMIFA 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 Organization 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 temporarily restricted net assets until those amounts are appropriated for expenditure by the Organization in a manner consistent with the standard of prudence prescribed by UPMIFA. 16

19 Note 8 Permanently restricted net assets (continued) Changes in endowment net assets for the year ended December 31, 2017: Temporarily Permanently Unrestricted Restricted Restricted Total Endowment net assets, beginning of year $ (41,579) $ - $ 904,467 $ 862,888 Contributions ,000 20,000 Investment return: Net realized and unrealized appreciation 71, ,320 Endowment net assets, end of year $ 29,741 $ - $ 924,467 $ 954,208 Changes in endowment net assets for the year ended December 31, 2016: Temporarily Permanently Unrestricted Restricted Restricted Total Endowment net assets, beginning of year $ (80,776) $ - $ 373,692 $ 292,916 Contributions , ,775 Investment return: Net realized and unrealized appreciation 39, ,197 Endowment net assets, end of year $ (41,579) $ - $ 904,467 $ 862,888 Funds with Deficiencies From time to time, the fair value of assets associated with individual donor-restricted endowment funds may fall below the level that the donor or UPMIFA requires the Organization to retain as a fund of perpetual duration. Deficiencies of this nature totaled $41,579 at December 31, Endowment Investment Policy and Risk Parameters The Organization 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 Organization must hold in perpetuity or for a donorspecified period. Under this policy, as approved by the Board of Directors, the endowment assets are not to be invested in margin, private placements, restricted security, commodities, futures, options, illiquid investments, venture capital, or ownership of more than 5% of outstanding shares of any one company. They are also not to allow more than 70% of investments to be in equities. Strategies Employed for Achieving Investment Objectives To satisfy its long-term rate-of-return objectives, the Organization 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 Organization targets a diversified asset allocation that places a greater emphasis on equity-based investments to achieve its long-term return objectives within prudent risk constraints. 17

20 Note 8 Permanently restricted net assets (continued) Spending Policy and How the Investment Objectives Relate to Spending Policy The Organization has a policy of appropriating, no more often than quarterly, dividend and interest income from the endowment fund. Appropriations shall not leave the endowment fund with less than the previous twelve months principal increased by the rate of inflation as measured by the average Consumer Price Index for the past three years. Specific agreements with donors for income taken relative to their specific endowment gifts are exempted. Note 9 Concentrations The Organization may at times have cash amounts at financial institutions in excess of the amount insured by Federal Deposit Insurance Corporation. The Organization has not experienced any losses in such accounts and management believes it is not exposed to any significant credit risk related to cash. During 2016, the Organization received a bequest from one major donor comprising 21% of total support and revenue for the year ended December 31,