Financial Statements

Transcription

1 Financial Statements June 30, 2011 and 2010 Certified Public Accountants & Consultants 4401 Dominion Boulevard, 2 nd Floor Glen Allen, VA Ridge-McIntire Road, Suite 500 Charlottesville, VA

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, 2011 and 2010, 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, 2011 and 2010, 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. April 19, 2012 Glen Allen, Virginia Certified Public Accountants & Consultants 4401 Dominion Boulevard, 2 nd Floor Glen Allen, VA T: F: Ridge-McIntire Road, Suite 500 Charlottesville, VA T: F:

4 Statements of Financial Position June 30, 2011 and 2010 Assets Current assets: Cash and cash equivalents $ 101,506 $ 246,636 Pledges receivable, net 122,248 78,998 Accounts receivable 20,474 50,989 Grant receivable, net 43,720 62,182 Due from Children's Home Society of Virginia Memorial Fund, Inc. 1,206,123 - Prepaid expenses 9,518 17,165 Total current assets 1,503, ,970 Other assets: Pledges receivable-long term, net 294, ,785 Beneficial interest in trusts 1,163, ,524 Property and equipment, net 141, ,574 Total assets $ 3,103,644 $ 1,718,853 Liabilities and Net Assets Current liabilities: Accounts payable $ 17,885 $ 53,999 Accrued payroll and withholdings 14,064 9,969 Accrued vacation 30,996 29,921 Pension plan payable 1,025,155 94,209 Total current liabilities 1,088, ,098 Long-term liabilities: Pension plan payable - 716,169 Total liabilities 1,088, ,267 Net assets: Unrestricted: Pension plan - unrecognized actuarial loss - (604,960) Other 291, ,946 Net assets (deficit) unrestricted 291,800 (428,014) Temporarily restricted 560, ,076 Permanantly restricted 1,163, ,524 Total net assets 2,015, ,586 Total liabilities and net assets $ 3,103,644 $ 1,718,853 See accompanying notes to financial statements. 2

5 Statements of Activities and Changes in Net Assets Year Ended June 30, 2011 Unrestricted Temporarily Restricted Permanently Restricted Revenues and other support: Public support: Contributions $ 164,397 $ 223,520 $ 188,925 $ 576,842 Allocation and designation from United Way 179, ,599 Gifts from foundations and trust - 10,250-10,250 Grant income - 194, ,164 Special events, net 42, ,970 Total public support 386, , ,925 1,003,825 Revenue: Program service fees 138, , ,252 Investment income, net 1, ,697 Unrealized net gain on investments/trusts , ,024 Total revenue 140, , , ,973 Contribution from Children's Home Society of Virginia Memorial Fund, Inc. for pension plan termination 1,025, ,025,155 Net assets released from restrictions 410,006 (379,042) (30,964) - Total revenues and other support $ 1,962,809 $ 201,159 $ 279,985 $ 2,443,953 Total See accompanying notes to financial statements. 3

6 Statements of Activities and Changes in Net Assets, Continued Year Ended June 30, 2011 Unrestricted Temporarily Restricted Permanently Restricted Expenses: Program services: Adoption $ 649,709 $ - $ - $ 649,709 Pregnancy 74, ,727 Foster care 72, ,671 Total program services 797, ,107 Supporting services: Fundraising 48, ,865 Management and general 182, ,566 Total expenses 1,028, ,028,538 Recognition of unrecognized actuarial gain and plan termination, net 214, ,457 Change in net assets 719, , ,985 1,200,958 Net assets (deficit), beginning of year (428,014) 359, , ,586 Net assets, end of year $ 291,800 $ 560,235 $ 1,163,509 $ 2,015,544 Total See accompanying notes to financial statements. 4

7 Statements of Activities and Changes in Net Assets, Continued Year Ended June 30, 2010 Temporarily Permanently Revenues and other support: Unrestricted Restricted Restricted Total 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, net 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 and other support $ 1,235,940 $ 275,445 $ 48,750 $ 1,560,135 See accompanying notes to financial statements. 5

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

9 Statements of Functional Expenses Year Ended June 30, 2011 Program Services Adoption Pregnancy Foster Care Total Program Fundraising Support Services Management and General Total Support Total Expenses Specific assistance to individuals and families $ - $ - $ 25,518 $ 25,518 $ - $ - $ - 25,518 Professional fees 25,831 3,911 2,469 32,211-9,554 9,554 41,765 Bank fees Office supplies 7, ,255-1,811 1,811 10,066 Telephone and internet services 5, ,518-2,307 2,307 9,825 Postage and shipping 1, , ,685 Occupancy 9,436 1,762 1,112 12,310-4,302 4,302 16,612 Equipment lease ,205 Repairs and maintenance 13,214 2,467 1,558 17,239-6,024 6,024 23,263 Travel 15,544 1, ,078-3,793 3,793 21,871 Conferences and meetings 3, ,013-1,072 1,072 5,085 Meals and entertainment Printing 4, ,529-1,605 1,605 7,134 Advertising 35,023 5,787 3,622 44,432-14,089 14,089 58,521 Licenses and permits Organization dues and subscriptions ,041 Document purchases and search fees 2, , ,527 Insurance 14,428 2,694 1,701 18,823-6,578 6,578 25,401 Moving and recruitment Special event expenses 1, , ,374 Bad debt Contribution to affiliate Government agency 155, , ,358 Total expenses before personnel costs and property expenses 298,250 22,057 39, ,722-53,945 53, ,667 Salaries 255,542 35,806 22, ,957 43,249 87, , ,646 Employee benefits 63,499 11,399 7,197 82,095 2,307 27,835 30, ,237 Payroll taxes 19,826 3,114 1,966 24,906 3,309 7,606 10,915 35,821 Total personnel costs 338,867 50,319 31, ,958 48, , , ,704 Total expenses before depreciation 637,117 72,376 71, ,680 48, , ,691 1,006,371 Depreciation 12,592 2,351 1,484 16,427-5,740 5,740 22,167 Total $ 649,709 $ 74,727 $ 72,671 $ 797,107 $ 48,865 $ 182,566 $ 231,431 $ 1,028,538 See accompanying notes to financial statements. 7

10 Statements of Functional Expenses, Continued Year Ended June 30, 2010 Program Services Adoption Pregnancy Foster Care Total Program Fundraising Support Services 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. 8

11 Statements of Cash Flows Years Ended June 30, 2011 and Cash flow from operating activities: Change in net assets $ 1,200,958 $ 524,450 Adjustments to reconcile change in net assets to net cash from operating activities: Depreciation 22,167 23,033 Unrealized gain on investments/trusts (122,024) (48,750) Realized (gain) loss on sale of equipment - 2,177 Effect of change in beneficial interest in trust (157,961) - Effect of unrecognized actuarial loss - (148,658) Changes in assets and liabilities: Accounts receivable 30,515 (12,444) Pledges receivable, net (112,029) (304,783) Grant receivable, net 18,462 (23,723) Due from Children's Home Society of Virginia Memorial Fund, Inc. (1,206,123) - Prepaid expenses 7,647 (7,498) Accounts payable (36,114) 13,494 Accrued liabilities 5,170 14,361 Pension payable 214, ,708 Net cash (used) provided by operating activities (134,555) 144,367 Cash flow from investing activities: Purchase of equipment (10,575) - Net cash used in investing activities (10,575) - Net (decrease) increase in cash (145,130) 144,367 Cash and cash equivalents, beginning of year 246, ,269 Cash and cash equivalents, end of year $ 101,506 $ 246,636 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 and Fredericksburg, 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, 2011 and 2010, 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 $10,000 in 2011 and $14,238 in 2010 for services meeting these 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 $179,599 or 7% of the Society s total revenue for 2011, and $186,455, or 12% 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 $58,521 for 2011, and $70,641 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. Effective October 31, 2011, the Plan was terminated. 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. See Note 9. 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: The Society follows FASB guidance for how uncertain tax positions should be recognized, measured, disclosed and presented in the financial statements. This requires the evaluation of tax positions taken or expected be taken in the course of preparing the Society's tax returns to determine whether the tax positions are "more-likely-than-not" of being sustained "when challenged" or "when examined" by the applicable tax authority. Tax positions not deemed to meet the more-likely-than-not threshold would be recorded as a tax expense and liability in the current year. Management evaluated the society's tax position and concluded that the Society had taken no uncertain tax positions that require adjustment to the financial statements to comply with the provisions of this guidance. The Society's income tax returns for years since 2008 remain open for examination by tax authorities. The Society is not currently under audit by any tax jurisdiction. Subsequent Events: See Note 9 related to the termination of the pension plan. Management has evaluated subsequent events through April 19, 2012, the date the financial statements were available to be issued, and has determined there are no additional 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: 4. Trusts: Amounts due in: Less than one year $ 122,248 $ 78,998 One to five years 300, ,171 Thereafter 5,500 1,500 Less: Discount for present value (1.76% in 427, , and 1.79% in 2010) (11,111) (12,886) $ 416,812 $ 304,783 The Society is currently the partial beneficiary of several perpetual trusts established by split interest agreements. Split interest agreements are trust agreements established by donors under which the Society receives benefits that are shared with other beneficiaries. The trust agreements established by the donors provide for a third party to hold the assets. The Society s share of the market value, which approximates the present value of expected future cash receipts from the trust assets, was $1,163,509 on June 30, 2011 and $883,524 on June 30, 2010, which is classified as permanently restricted net assets in the financial statements. Income received from these trusts was $30,964 in 2011 and $41,711 in The Society also receives income from various trusts where the Society is an income beneficiary. Income received from these trusts was $7,172 in 2011 and $12,095 in Fair Value Measurements: FASB ASC 820 establishes a framework for fair value measurements of financial assets and financial liabilities and for fair value measurements of nonfinancial items that are recognized or disclosed at fair value in the financial statements on a recurring basis. ASC 820 establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to measurements involving significant unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are as follows: Level 1 Level 2 Inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the Society has the ability to access. Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. 13

16 Notes to Financial Statements, Continued 5. Fair Value Measurements, Continued: Level 3 Inputs are unobservable inputs for the asset or liability. The asset s 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 minimizes the use of unobservable inputs. Assets and liabilities measured at fair value on a recurring basis at June 30, 2011 include the following: Fair Value Using Asset/Liabilities Level 1 Level 3 at Fair Value Assets: Perpetual trusts Money market $ 33,600 $ - $ 33,600 Equities 350, ,505 Mutual funds 302, ,869 Fixed income 393, ,199 Real estate - 83,336 83,336 Pledges receivable, net - 416, ,812 Total assets at fair value $ 1,080,173 $ 500,148 $ 1,580,321 Liabilities: Pension plan assets $ 1,208,204 $ - $ 1,208,204 Pension plan liabilities - (1,775,640) (1,775,640) Additional liability for pension plan termination - (457,719) (457,719) Net pension plan assets (liabilities) at fair value $ 1,208,204 $ (2,233,359) $ (1,025,155) 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, 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 Pledges receivable, net - 304, ,783 Total assets at fair value $ 794,612 $ 393,695 $ 1,099,395 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) 15

18 Notes to Financial Statements, Continued 5. Fair Value Measurements, Continued: 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/(Liabilities) Pledges Real Estate Pension Plan Receivable Balances at July 1, 2009 $ 89,395 $ (1,653,550) $ - Issuance, deemed distributions or settlements, net (483) - - Change in pension plan liabilities - (169,840) - New pledges ,090 Pledge payments received - - (45,307) Write-off of pledges Change in pledge discount Balances at June 30, 2010 $ 88,912 $ (1,823,390) $ 304,783 Issuance, deemed distributions or settlements, net (5,576) - - Change in pension plan liabilities - 47,750 - Additonal liability for pension plan termination - (457,719) - New pledges ,245 Pledge payments received - - (99,991) Write-off of pledges - - (10,000) Change in pledge discount - - 1,775 Balances at June 30, 2011 $ 83,336 $ (2,233,359) $ 416,812 16

19 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 351, ,728 Computers 69,230 60,930 Furniture and equipment 115, , , ,080 Less accumulated depreciation 421, ,506 Property and equipment, net $ 141,982 $ 153,574 The Society closed its Roanoke facility in 2010, and discontinued depreciation of the related building and equipment 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, 2011 and 2010 is $10,473 and $469, 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 $8,051 for 2011 and $8,170 for At June 30, 2011, the future minimum lease payments under these lease agreements are as follows: $9,290, $5,375, and 2014 $

20 Notes to Financial Statements, Continued 8. Temporarily Restricted Net Assets: Temporarily restricted net assets consisted of the following as of June 30: Pledges Receivable $ 416,812 $ 304,783 Wendy's Wonderful Kids Grant 34,175 34,250 Sunshine Lady Foundation Grant 54,417 - Thurman Foundation for Children 9,000 4,000 Robins Foundation - 5,000 Mary Morton Parsons Foundation 4,033 6,533 Reynolds Foundation 17,000 - Altria 19,234 - Other foundations 5,564 4, Retirement Plan: $ 560,235 $ 359,076 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 latest actuarial valuations were as of June 30, As of January 1, 2008, the Society froze the noncontributory defined benefit pension plan. During fiscal year 2011, the Society made the decision to terminate the plan, effective October 31,

21 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 $ 1,775,640 $ 1,823,390 Change in projected benefit obligation: Projected benefit obligation at the beginning of the year $ 1,823,390 $ 1,653,550 Interest cost 93,221 96,344 Actuarial loss (52,801) 161,788 Benefits paid (88,170) (88,292) Projected benefit obligation at the end of the year 1,775,640 1,823,390 Additonal liablity for pension plan termination 457,719 - Change in plan assets: Fair value of plan assets at the beginning of the year 1,013, ,880 Actual return on plan assets 176,281 76,949 Employer contributions 107,081 68,475 Benefits paid (88,170) (88,292) Fair value of plan assets at the end of the year 1,208,204 1,013,012 Reconciliation of accrued costs: Funded status $ (1,025,155) $ (810,378) The Society has recorded a pension plan payable of $1,025,155 on the statement of financial position, which is the amount of funding related to termination of the plan in fiscal year 2012, as reflected in the above reconciliation. Plan assets totaling $942,755 were used to fund the termination of the Plan. The remaining $1,025,155 for termination of the plan was funded by the Children s Home Society of Virginia Memorial Fund. This amount is included in due from Children s Home Society of Virginia Memorial Fund, Inc. on the statement of financial position. 19

22 Notes to Financial Statements, Continued 9. Retirement Plan, Continued: The following table sets forth the weighted average assumptions as of June 30: Discount rate 5.50% 5.25% Expected rate of return on plan assets 1.00% 8.00% Rate of compensation increase N/A N/A 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 $ 93,221 $ 96,344 Expected return on plan assets (81,503) (75,383) Recognized net actuarial loss 16,823 11,564 Net periodic pension cost $ 28,541 $ 32,525 Benefits paid $ 88,170 $ 88,292 Employer contributions $ 107,081 $ 68,475 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 0.00% 73.61% Fixed income 0.00% 22.18% General account % 4.21% 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,

23 Notes to Financial Statements, Continued 9. Retirement Plan, Continued: 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 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. The Society paid $180,968 in 2011 and $184,540 in 2010, in expenses on behalf of the Memorial Fund. The reimbursement for these expenses is shown as due from Memorial Fund on the statement of financial position. In addition, a receivable of $1,025,155 is due from the Memorial Fund to fund the termination of the pension plan as discussed in Note 9. The Memorial Fund contributed $0 in 2011 and $295,459 in 2010 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. 21