CHILDREN S HOME SOCIETY OF VIRGINIA. Financial Statements. June 30, 2010 and 2009

Transcription

1 Financial Statements June 30, 2010 and 2009

2 Table of Contents Report of Independent Accountants 1 Financial Statements: Statements of Financial Position 2 Statements of Activities and Changes in Net Assets 3 Statements of Functional Expenses 7 Statements of Cash Flows 9 Notes to Financial Statements 10 Page

3 The Board of Directors Children s Home Society of Virginia Richmond, Virginia: REPORT OF INDEPENDENT ACCOUNTANTS We have audited the accompanying statements of financial position of Children s Home Society of Virginia (the Society ) as of June 30, 2010 and 2009, and the related statements of activities and changes in net assets, functional expenses, and cash flows for the years then ended. These financial statements are the responsibility of the Society 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. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Children s Home Society of Virginia as of June 30, 2010 and 2009, and the changes in its net assets and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States. January 6, 2011 Glen Allen, Virginia 4401 Dominion Boulevard, 2 nd Floor Mailing Address: P.O. Box Ridge-McIntire Road, Suite 500 Glen Allen, Virginia Richmond, Virginia Charlottesville, Virginia , FAX , FAX

4 Statements of Financial Position June 30, 2010 and 2009 Assets Current assets: Cash and cash equivalents $ 246,636 $ 102,269 Pledges receivable, net 78,998 - Accounts receivable 50,989 38,545 Grant receivable, net 62,182 38,459 Prepaid expenses 17,165 9,667 Total current assets 455, ,940 Other assets: Pledges receivable-long term, net 225,785 - Beneficial interest in trusts 883, ,774 Property and equipment, net 153, ,784 Total assets $ 1,718,853 $ 1,202,498 Liabilities and Net Assets Current liabilities: Accounts payable $ 53,999 $ 40,505 Payroll withholdings 9,969 3,689 Accrued vacation 29,921 21,840 Pension plan payable 94,209 88,506 Total current liabilities 188, ,540 Long-term liabilities: Pension plan payable 716, ,164 Total liabilities 904, ,704 Net assets: Unrestricted: Pension plan - unrecognized actuarial loss (604,960) (456,302) Other 176,946 (23,309) Net deficit unrestricted (428,014) (479,611) Temporarily restricted 359,076 83,631 Permanantly restricted 883, ,774 Total net assets 814, ,794 Total liabilities and net assets $ 1,718,853 $ 1,202,498 See accompanying notes to financial statements. 2

5 Statement of Activities and Changes in Net Assets Year Ended June 30, 2010 Unrestricted Temporarily Restricted Permanently Restricted Revenues and other support: Public support: Contributions $ 211,465 $ 304,783 $ 41,711 $ 557,959 Allocation and designation from United Way 186, ,455 Gifts from foundations and trust - 11,000-11,000 Grant income - 81,950-81,950 Special events 63, ,662 Contribution from Children's Home Society of Virginia Memorial Fund, Inc. 295, ,459 Total public support 757, ,733 41,711 1,196,485 Revenue: Program service fees 165, , ,327 Investment income, net Unrealized net gain (loss) on investments/trusts (1) - 48,750 48,749 Other 2, ,009 Total revenue (loss) 168, ,797 48, ,650 Net assets released from restrictions 310,796 (269,085) (41,711) - Total revenues (losses) and other support $ 1,235,940 $ 275,445 $ 48,750 $ 1,560,135 Total See accompanying notes to financial statements. 3

6 Statement of Activities and Changes in Net Assets, Continued Year Ended June 30, 2010 Unrestricted Temporarily Restricted Permanently Restricted Expenses: Program services: Adoption $ 626,999 $ - $ - $ 626,999 Pregnancy 70, ,028 Foster care 120, ,110 Total program services 817, ,137 Supporting services: Fundraising 55, ,186 Management and general 163, ,362 Total expenses 1,035, ,035,685 Total Change in net assets 200, ,445 48, ,450 Effect of unrecognized actuarial loss (148,658) - - (148,658) Net assets (deficit), beginning of year (479,611) 83, , ,794 Net assets (deficit), end of year $ (428,014) $ 359,076 $ 883,524 $ 814,586 See accompanying notes to financial statements. 4

7 Statement of Activities and Changes in Net Assets, Continued Year Ended June 30, 2009 Unrestricted Temporarily Restricted Permanently Restricted Revenues and other support: Public support: Contributions $ 147,607 $ - $ 137,050 $ 284,657 Allocation and designation from United Way 248, ,474 Gifts from foundations and trust - 13,000-13,000 Grant income - 103, ,011 Special events 45, ,456 Contribution from Children's Home Society of Virginia Memorial Fund, Inc. 380, ,849 Total public support 822, , ,050 1,075,447 Revenue: Program service fees 185, , ,399 Investment income, net Unrealized net gain (loss) on investments/trusts (262) - (163,949) (164,211) Other 2, ,450 Total revenue (loss) 187, ,282 (163,949) 154,773 Net assets released from restrictions 327,259 (296,054) (31,205) - Total revenues and other support $ 1,337,085 $ (48,761) $ (58,104) $ 1,230,220 Total See accompanying notes to financial statements. 5

8 Statement of Activities and Changes in Net Assets, Continued Year Ended June 30, 2009 Unrestricted Temporarily Restricted Permanently Restricted Expenses: Program services: Adoption $ 604,964 $ - $ - $ 604,964 Pregnancy 107, ,612 Foster care 201, ,319 Total program services 913, ,895 Supporting services: Fundraising 44,641 44,641 Management and general 158, ,636 Total expenses 1,117, ,117,172 Total Change in net assets 219,913 (48,761) (58,104) 113,048 Effect of unrecognized actuarial loss (456,302) - - (456,302) Net assets, beginning of year (243,222) 132, , ,048 Net assets, end of year $ (479,611) $ 83,631 $ 834,774 $ 438,794 See accompanying notes to financial statements. 6

9 Statement of Functional Expenses Year Ended June 30, 2010 Program Services Adoption Pregnancy Foster Care Support Services Total Program Fundraising Management and General Total Support Total Expenses Specific assistance to individuals and families $ 3,096 $ - $ 25,373 $ 28,469 $ - $ - $ - $ 28,469 Professional fees 17,841 3,145 4,214 25,200-7,281 7,281 32,481 Bank fees 1, , ,626 Office supplies 3, ,295-1,395 1,395 6,690 Telephone and internet services 5, ,174 7,339-2,028 2,028 9,367 Postage and shipping 2, , ,211 Occupancy 8,979 1,583 2,121 12,683-3,664 3,664 16,347 Equipment lease , ,602 Repairs and maintenance 11,275 1,988 2,663 15,926-4,601 4,601 20,527 Travel 15,404 1,431 1,917 18,752-3,312 3,312 22,064 Conferences and meetings 6,198 1,093 1,464 8,755-2,529 2,529 11,284 Meals and entertainment Printing 5,746 1,013 1,357 8,116-2,345 2,345 10,461 Advertising 42,728 5,996 8,035 56,759-13,882 13,882 70,641 Licenses and permits Organization dues and subscriptions Document purchases and search fees 2, , ,854 Insurance 13,687 2,413 3,233 19,333-5,586 5,586 24,919 Moving and recruitment Special event expenses 1, , ,247 Bad debt 2, , ,665 Contribution to affiliate Government agency 135, , ,633 Total expenses before personnel costs and property expenses 282,165 21,633 54, ,157-50,207 50, ,364 Salaries 260,859 34,864 46, ,439 49,478 80, , ,627 Employee benefits 51,929 8,655 12,502 73,086 1,923 21,157 23,080 96,166 Payroll taxes 19,394 2,646 3,545 25,585 3,785 6,125 9,910 35,495 Total personnel costs 332,182 46,165 62, ,110 55, , , ,288 Total expenses before depreciation 614,347 67, , ,267 55, , ,385 1,012,652 Depreciation 12,652 2,230 2,988 17,870-5,163 5,163 23,033 Total $ 626,999 $ 70,028 $ 120,110 $ 817,137 $ 55,186 $ 163,362 $ 218,548 $ 1,035,685 See accompanying notes to financial statements. 7

10 Statement of Functional Expenses, Continued Year Ended June 30, 2009 Program Services Adoption Pregnancy Foster Care Support Services Total Program Fundraising Management and General Total Support Total Expenses Specific assistance to individuals and families $ - $ - $ 55,279 $ 55,279 $ - $ - $ - $ 55,279 Professional fees 12,584 3,511 4,765 20,860-5,173 5,173 26,033 Bank fees 1, , ,658 Office supplies 7,942 1,843 2,501 12,286-2,715 2,715 15,001 Telephone and internet services 7,926 1,821 2,472 12,219-2,683 2,683 14,902 Postage and shipping 1, , ,544 Occupancy 6,693 1,868 2,535 11,096-2,751 2,751 13,847 Equipment lease , ,423 Repairs and maintenance 13,909 3,881 5,267 23,057-5,718 5,718 28,775 Travel 11,259 2,267 3,077 16,603-3,340 3,340 19,943 Conferences and meetings 5,993 1,526 2,071 9,590-2,248 2,248 11,838 Meals and entertainment Printing 4,938 1,378 1,870 8,186 2,030 2,030 10,216 Advertising 42,930 8,589 11,656 63,175-12,652 12,652 75,827 Licenses and permits Organization dues and subscriptions Document purchases and search fees 1, , ,734 Insurance 11,149 3,111 4,222 18,482-4,583 4,583 23,065 Special event expenses , ,481 Bad debt Contribution to affiliate Government agency 119, , ,533 Total expenses before personnel costs and property expenses 252,241 31,464 97, ,684-46,462 46, ,146 Salaries 289,317 61,683 83, ,710 40,282 90, , ,858 Employee benefits 29,447 7,282 9,882 46,611 1,277 10,727 12,004 58,615 Payroll taxes 23,133 5,016 6,807 34,956 3,082 7,389 10,471 45,427 Total personnel costs 341,897 73, , ,277 44, , , ,900 Total expenses before depreciation 594, , , ,961 44, , ,085 1,098,046 Depreciation 10,826 2,167 2,941 15,934-3,192 3,192 19,126 Total $ 604,964 $ 107,612 $ 201,319 $ 913,895 $ 44,641 $ 158,636 $ 203,277 $ 1,117,172 See accompanying notes to financial statements. 8

11 Statements of Cash Flows Years Ended June 30, 2010 and Cash flow from operating activities: Change in net assets $ 524,450 $ 113,048 Adjustments to reconcile change in net assets to net cash from operating activities: Depreciation 23,033 19,126 Loss on sale of investments Unrealized (gain) loss on investments/trusts (48,750) 163,949 Realized (gain) loss on sale of equipment 2,177 (288) Effect of unrecognized actuarial loss (148,658) (456,302) Contribution of interest in trust - (105,845) Contribution of equipment - (17,667) Changes in assets and liabilities: Accounts receivable (12,444) (12,769) Pledges receivable, net (304,783) - Grant receivable, net (23,723) 43,766 Due to Children's Home Society of Virginia Memorial Fund, Inc. - (48,691) Prepaid expenses (7,498) 6,299 Accounts payable 13,494 (4,911) Accrued liabilities 14,361 (8,836) Pension payable 112, ,273 Net cash provided by operating activities 144,367 88,688 Cash flow from investing activities: Proceeds from sale of investments - 12,742 Proceeds from sale of equipment Purchase of equipment - (45,440) Purchase of investments - (13,278) Net cash used in investing activities - (45,036) Net increase in cash 144,367 43,652 Cash and cash equivalents, beginning of year 102,269 58,617 Cash and cash equivalents, end of year $ 246,636 $ 102,269 See accompanying notes to financial statements. 9

12 Notes to Financial Statements 1. Nature of Organization: Children s Home Society of Virginia (the Society ) is a private, 501(c)(3) licensed adoption agency that serves children in need of permanent loving families. The mission of the Society is to find permanent homes for all children and to provide related services to birth families, adoptive families, and adoptees. The Society s programs include birth parent counseling, a range of adoption services, temporary foster care and postadoption services. The Society primarily provides services through its facilities located in Richmond, Fredericksburg, and Roanoke (through May 2009) Virginia. 2. Summary of Significant Accounting Policies: Financial Statement Presentation: The Society reports 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. In addition, the Society is required to present a statement of cash flows. Unrestricted net assets impose no restriction on the Society as to their use or purpose. Such net assets are expended for purposes deemed appropriate for operating purposes. Temporarily restricted net assets are those whose use by the Society has been limited by donors to a specific time period or purpose. Permanently restricted net assets consist of investments to be held indefinitely, the income from which is expended to support the activities of the Society. Generally, the income from permanently restricted net assets can be used for operating purposes. Cash and Cash Equivalents: The Society's definition of cash equivalents includes items such as short-term, highly liquid investments with maturities of three months or less at the date of acquisition. Recognition of Contributions and Grants: Contributions and grants are recognized when the donor makes a promise to give to the Society that is, in substance, unconditional. Contributions and grants that are restricted by the donor are reported as an increase in unrestricted net assets if the restriction expires in the fiscal year in which the contribution or grant is recognized. All other donor-restricted contributions and grants are reported as an increase in temporarily or permanently restricted net assets, depending on the nature of the restriction. When a restriction expires, temporarily restricted net assets are reclassified as unrestricted. The Society charges off accounts to bad debt expense as they are deemed uncollectible based upon a periodic review of the accounts. At June 30, 2010 and 2009, no allowance for uncollectible accounts was considered necessary. 10

13 Notes to Financial Statements, Continued 2. Summary of Significant Accounting Policies, Continued: Contributed Materials and Services: The value of contributed materials and the value of contributed services that either (a) created or enhanced a nonfinancial asset or (b) required specialized skills, was provided by individuals possessing those skills, and are of a type that would have been purchased if not contributed are recognized in the financial statements. The Society recognized $14,238 in 2010 for services meeting this criteria. Individuals volunteer their time and perform a variety of tasks that assist the Society in achieving its purpose. No value is recognized for these services. Investments: Investments in marketable equity securities with readily determinable fair values and all investments in debt securities are valued at their fair values in the statements of financial position. Unrealized gains and losses are included in the statements of activities. Property and Equipment: Purchased property and equipment are stated at cost. The Society follows the practice of capitalizing all material expenditures for property and equipment. Material donated assets are stated at fair value at the time of the donation. Depreciation is computed on the double declining balance and straight line methods over the estimated useful lives of the assets: 3 to 10 years for equipment and 40 years for buildings and improvements. Concentrations of Credit Risk: Financial instruments which potentially subject the Society to concentrations of credit risk consist primarily of cash and investments. The Society maintains its cash balances in two financial institutions. The balances are insured by the Federal Deposit Insurance Corporation up to $250,000. Revenue earned on allocations and designations from United Way consisted of $186,455 or 12% of the Society s total revenue for 2010, and $248,474, or 28% of the Society s total revenue for A significant reduction in the level of this support may have an effect on the Society s programs and activities. Advertising Costs: Advertising costs are allocated to program and support services as incurred. Advertising costs amounted to $70,641 for 2010, and $75,827 for Pension Benefits: The Society has a noncontributory defined benefit pension plan covering substantially all full-time employees. Effective January 1, 2008, the Plan was frozen. The Plan provides benefits that are based on compensation during the last five years before retirement and total years of service. The Society accounts for the Plan in accordance with Financial Accounting Standards Board ( FASB ) guidance for Employer s Accounting for Defined Benefit Pension and Other Post Retirement Plans. This guidance requires recognition of the funded status of the Society s benefit plan in its statement of financial position and recognition of the gains or losses and prior service costs or credits that arise during the period but are not recognized as components of net periodic benefit cost. These amounts will be adjusted as they are subsequently recognized as components of the net periodic benefit cost. 11

14 Notes to Financial Statements, Continued 2. Summary of Significant Accounting Policies, Continued: Pension Benefits, continued: The Society s funding policy is to make the minimum annual contribution that is required by applicable regulations, plus such amounts as the Society may determine to be appropriate from time to time. Estimates: The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Actual results could differ from those estimates. Tax Status: The Society is exempt from income taxes under Section 501(c)(3) of the Internal Revenue Code. Income Tax Uncertainties: During 2010, the Society adopted FASB guidance related to accounting for uncertainty in income taxes, which clarifies the accounting for income taxes by prescribing the minimum recognition threshold that a tax position is required to meet before being recognized in the Society s financial statements. The interpretation also provides guidance on derecognition, classification, interest and penalties, disclosure and transition. In accordance with the interpretation, the Society discloses the expected future tax consequences of uncertain tax positions presuming the taxing authorities full knowledge of the facts and the Society s position, and records unrecognized tax benefits or liabilities for known, or anticipated tax issues based on the Society s analysis of whether additional taxes would be due to the authority given their full knowledge of the tax position. The Society has completed its assessment and determined that there were no tax positions, which would require recognition under the interpretation. The Society s income tax returns for years since 2007 remain open for examination by tax authorities. Subsequent Events: Management has evaluated subsequent events through January 6, 2011 and has determined there are no subsequent events to be reported in the accompanying financial statements. 12

15 Notes to Financial Statements, Continued 3. Pledges Receivable: Pledges receivable includes the following unconditional promises to give as of June 30, 2010: 4. Trusts: Amounts due in: Less than one year $ 78,998 One to five years 237,171 Thereafter 1, ,669 Less: Discount for present value (1.79% in 2010) $ (12,886) 304,783 The Society is currently the partial beneficiary of several perpetual trusts. The Society s share of the market value was $883,524 on June 30, 2010 and $834,774 on June 30, Income received from these trusts during the year was $41,711 in 2010 and $31,205 in The Society also receives income from various trusts where the Society is an income beneficiary. Income received from these trusts during the year was $12,095 in 2010 and $8,907 in Fair Value Measurements: The Society adopted guidance, related to financial assets and liabilities and any other assets and liabilities that are carried at fair value on a recurring basis in the financial statements. Guidance provides a framework for measuring fair value under generally accepted accouting principles ( GAAP ) and defines fair value 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 for the asset or liability in an orderly transaction between market participants on the measurement date. Guidance requires that valuation techniques maximize the use of observable inputs and minimize the use of unobservable inputs. Guidance also establishes a fair value hierarchy which prioritizes the valuation inputs into three broad levels. Based on the underlying inputs, each fair value measurement in its entirety is reported in one of three levels: Level 1 Unadjusted quoted prices that are available in active markets for the identical assets or liabilities at the measurement date. 13

16 Notes to Financial Statements, Continued 5. Fair Value Measurements, Continued: Level 2 Other observable inputs available at the measurement date, other than quoted prices included in Level 1, either directly or indirectly, including: Quoted prices for similar assets or liabilities in active markets; Quoted prices for identical or similar assets in non-active markets; Inputs other than quoted prices that are observable for the asset or liability; and Inputs that are derived principally from or corroborated by other observable market data. Level 3 Unobservable inputs that cannot be corroborated by observable market data and reflect the use of significant management judgment. These values are generally determined using pricing models for which the assumptions utilize management s estimates of market participant assumptions. Assets and liabilities measured at fair value on a recurring basis at June 30, 2010 include the following: Fair Value Using Asset/Liabilities Level 1 Level 3 at Fair Value Assets: Perpetual trusts: Money market $ 29,093 $ - $ 29,093 Equities 316, ,332 Mutual funds 281, ,695 Fixed income 167, ,492 Real estate - 88,912 88,912 Total perpetual trusts at fair value $ 794,612 $ 88,912 $ 883,524 Liabilities: Pension plan assets $ 1,013,012 $ 1,013,012 Pension plan liabilities - (1,823,390) (1,823,390) Net pension plan assets (liabilities) at fair value $ 1,013,012 $ (1,823,390) $ (810,378) 14

17 Notes to Financial Statements, Continued 5. Fair Value Measurements, Continued: Assets and liabilities measured at fair value on a recurring basis at June 30, 2009 include the following: Fair Value Using Asset/Liabilities Level 1 Level 3 at Fair Value Assets: Perpetual trusts: Money market $ 39,108 $ - $ 39,108 Equities 221, ,034 Mutual funds 329, ,862 Fixed income 155, ,375 Real estate - 89,395 89,395 Total perpetual trusts at fair value $ 745,379 $ 89,395 $ 834,774 Liabilities: Pension plan assets $ 955,880 $ - $ 955,880 Pension plan liabilities - (1,653,550) (1,653,550) Net pension plan assets (liabilities) at fair value $ 955,880 $ (1,653,550) $ (697,670) The table below sets forth a summary of changes in the fair value of the Society s Level 3 assets for the year ended June 30, Level 3 Assets Real Estate Pension Plan Balances at July 1, 2008 $ - $ (300,397) Issuance, deemed distributions or settlements, net 89,395 4,857 Return on plan assets - (216,422) Change in pension plan liabilities - (185,708) Balances at June 30, 2009 $ 89,395 $ (697,670) Issuance, deemed distributions or settlements, net (483) (19,817) Return on plan assets - 76,949 Change in pension plan liabilities - (169,840) Balances at June 30, 2010 $ 88,912 $ (810,378) 15

18 Notes to Financial Statements, Continued 6. Property and Equipment: Property and equipment at June 30 consisted of the following: Land $ 27,876 $ 27,876 Buildings 348, ,728 Computers 60,930 63,107 Furniture and equipment 115, , , ,257 Less accumulated depreciation 399, ,473 Property and equipment, net $ 153,574 $ 178,784 As described in Note 1, The Society closed its Roanoke facility, and stopped recording depreciation on the building and equipment remaining in the office accordingly. During fiscal year 2010 the Society signed a listing agreement for sale or lease of the facility. The net book value of the property, and equipment retained at the property at June 30, 2010 is $10,473 and $469 and at June 30, 2009 is $10,760 and $531, respectively. 7. Operating Leases: The Society leases certain office space and equipment under non-cancelable operating lease agreements. Total rental expense under non-cancelable operating leases was $8,170 for 2010 and $10,324 for At June 30, 2010, the future minimum lease payments under these lease agreements are as follows: $7,194, $5,335, and 2013 $3,

19 Notes to Financial Statements, Continued 8. Temporarily Restricted Net Assets: Temporarily restricted net assets consisted of the following as of June 30: Pledges Receivable $ 304,783 $ - Wendy's Wonderful Kids Grant 34,250 33,517 Dave Thomas Foundation Grant - 1,326 Thurman Foundation for Children 4,000 - Robins Foundation 5,000 11,339 Mary Morton Parsons Foundation 6,533 12,333 Memorial Foundation for Children - 20,334 Other foundations 4,510 4, Retirement Plan: $ 359,076 $ 83,631 The Society has a noncontributory defined benefit pension plan covering all employees meeting certain service requirements. Retirement benefits under this plan are generally based on an employee s years of service and average compensation during the five years preceding retirement. Guidance requires the Society to recognize the funded status (the difference between the benefit obligation and the fair value of plan assets) in its statement of financial position and recognize previously unrecognized gains or losses and prior service costs or credits. The Society adopted guidance as of June 30, The incremental effect of applying the standard was $271,790 as of June 30, The latest actuarial valuations were as of June 30, As of January 1, 2008, the Society froze the noncontributory defined benefit pension plan, and the effect of freezing the Plan is noted in the following table under effects of curtailment. 17

20 Notes to Financial Statements, Continued 9. Retirement Plan, Continued: The following table presents a reconciliation of the beginning and ending balances of the benefit obligation, fair value of plan assets and the funded status of the pension plan to the net amounts measured and recognized in the statements of financial position: Accumulated benefit obligation at the end of the year $ 1,823,390 $ 1,653,550 Change in projected benefit obligation: Projected benefit obligation at the beginning of the year $ 1,653,550 $ 1,467,842 Interest cost 96,344 90,021 Actuarial loss 161, ,459 Benefits paid (88,292) (50,772) Projected benefit obligation at the end of the year 1,823,390 1,653,550 Change in plan assets: Fair value of plan assets at the beginning of the year 955,880 1,167,445 Actual return on plan assets 76,949 (216,422) Employer contributions 68,475 55,629 Benefits paid (88,292) (50,772) Fair value of plan assets at the end of the year 1,013, ,880 Reconciliation of accrued costs: Funded status $ (810,378) $ (697,670) The following table sets forth the weighted average assumptions as of June 30: Discount rate 5.25% 6.00% Expected rate of return on plan assets 8.00% 8.00% Rate of compensation increase N/A N/A 18

21 Notes to Financial Statements, Continued 9. Retirement Plan, Continued: The following table sets forth the other significant plan information for the plan years ended June 30: Components of net periodic pension cost: Interest costs $ 96,344 $ 90,021 Expected return on plan assets (75,383) (93,421) Recognized net actuarial loss 11,564 - Net periodic pension cost $ 32,525 $ (3,400) Benefits paid $ 88,292 $ 50,772 Employer contributions $ 68,475 $ 55,629 Plan assets consist principally of long-term fixed income securities held by an insurance company and several investment funds that invest primarily in equities and corporate obligations. Plan Assets: Equity 73.61% 50.37% Fixed income 22.18% 15.72% General account 4.21% 33.91% Future benefit payments are expected to be $94,209 in 2011, $104,032 in 2012, $104,957 in 2013, $118,289 in 2014, $121,980 in 2015, and $603,977 in the fiscal years thereafter. The Society also maintains a contributory defined contribution plan under IRC Section 403(b), which allows eligible employees to defer a portion of their compensation. Under the terms of the plan, eligible employees may contribute any amount of their compensation, subject to IRS limits, on a pre-tax basis. The Society s contributions are based on 50 percent of the first 7 percent of each participant s pre-tax contribution through March 31, The Society s contributions to the plan were suspended effective January 1, Additionally, the Society provides a discretionary contribution of 3% of participants compensation to the plan, effective January 1, 2008 through December 31, The Society s discretionary contributions to the plan were suspended effective January 1, The total expense for the 403(b) plan was $19,102 for 2010 and $20,995 for

22 Notes to Financial Statements, Continued 10. Related Party: The Children s Home Society of Virginia Memorial Fund, Inc. reimburses certain expenses to the Society. These expenses include salary and benefit expenses for certain shared employees, rent and insurance expense related to the building and other operational expenses primarily related to fundraising activities. All such fundraising activities are performed by the Memorial Fund. During 2010 and 2009, the Society paid $184,540 and $182,842, respectively, in expenses on behalf of the Memorial Fund and was reimbursed by the Memorial Fund. The Memorial Fund contributed $295,459 and $380,849 in 2010 and 2009, respectively to the Society. 11. Guarantees: Pursuant to the Articles of Incorporation, the Society has certain obligations to indemnify its current and former officers and directors for certain events or occurrences while the officer or director is, or was serving, at the Society s request in such capacities. The maximum liability under these obligations is dictated by the Code of the Commonwealth of Virginia; however, the Society s insurance policies serve to limit its exposure. The Society believes that the estimated fair value of these indemnification obligations is minimal. 20