The Community Foundation for Northern Virginia, Inc. Audited Financial Statements

Transcription

1 Audited Financial Statements Years ended June 30, 2015 and 2014 with Report of Independent Auditors

2 Audited Financial Statements Years ended June 30, 2015 and 2014 Contents Report of Independent Auditors...1 Audited Financial Statements Statements of Financial Position...2 Statements of Activities...3 Statements of Cash Flows...4 Statements of Functional Expenses Notes to Financial Statements

3 Report of Independent Auditors Board of Directors The Community Foundation for Northern Virginia, Inc. Oakton, Virginia We have audited the accompanying statements of financial position of The Community Foundation for Northern Virginia, Inc. (the "Community Foundation") as of June 30, 2015 and 2014 and the related statements of activities, cash flows and functional expenses for the years then ended and the related notes to the financial statements. Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these 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 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 financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the 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 over financial reporting. 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 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 financial statements referred to above present fairly, in all material respects, the financial position of The Community Foundation as of June 30, 2015 and 2014, and the changes in its net assets and its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America. Falls Church, Virginia November 23, 2015

4 Statements of Financial Position June 30, Assets Cash $ 420,693 $ 346,003 Investments 36,242,769 35,577,475 Prepaid expenses and other assets 60,911 55,786 Pledges receivable, net - 29,000 Fixed assets, net of accumulated depreciation of $62,238 and $54,966, respectively 8,744 12,102 Total assets $ 36,733,117 $ 36,020,366 Liabilities and net assets Liabilities: Accounts payable and accrued expenses $ 271,982 $ 344,446 Deferred revenue 122, ,806 Total liabilities 394, ,252 Net assets: Unrestricted net assets 30,605,748 29,522,632 Temporarily restricted net assets 4,351,838 4,670,833 Permanently restricted net assets 1,380,649 1,380,649 Total net assets 36,338,235 35,574,114 Total liabilities and net assets $ 36,733,117 $ 36,020,366 The accompanying notes are an integral part to the financial statements. 2

5 Statements of Activities Years ended June 30, Change in unrestricted net assets Revenue and support: Contributions $ 5,421,272 $ 4,322,210 CFNV Annual Community Leadership Award Gala 479, ,524 Fee income 468, ,804 Donated facilities and administrative support 192,370 50,918 Other income 19,633 - Interest and dividends 634, ,036 7,216,163 5,760,492 Net assets released from restrictions 313, ,886 Total revenue and support 7,529,241 6,132,378 Expenses: Program services 5,362,718 4,866,575 Support services: Fundraising 543, ,869 Management and general 300, ,955 Total expenses 6,206,901 5,603,399 Change in unrestricted net assets from operations before change in fair value of investments 1,322, ,979 Change in fair value of investments (239,224) 2,539,589 Change in unrestricted net assets 1,083,116 3,068,568 Change in temporarily restricted net assets Interest and dividends 170, ,349 Change in fair value of investments (176,231) 582,776 Net assets released from restrictions (313,078) (371,886) Change in temporarily restricted net assets (318,995) 354,239 Change in net assets 764,121 3,422,807 Net assets, beginning of year 35,574,114 32,151,307 Net assets, end of year $ 36,338,235 $ 35,574,114 The accompanying notes are an integral part to the financial statements. 3

6 Statements of Cash Flows Years ended June 30, Cash flow from operating activities Change in net assets $ 764,121 $ 3,422,807 Adjustments to reconcile change in net assets to net cash (used in) operating activities: Depreciation and amortization 7,272 7,649 Change in fair value of investments 415,455 (3,122,365) Donated stock (3,800,362) (2,775,512) Changes in operating assets and liabilities: Prepaid expenses and other assets (5,125) 17,910 Pledges receivable 29,000 45,000 Accounts payable and accrued expenses (72,464) 229,044 Deferred revenue 21,094 58,306 Net cash used in operating activities (2,641,009) (2,117,161) Cash flow from investing activities Purchases of investments (12,899,247) (12,962,774) Proceeds from sales of investments 15,618,860 15,161,313 Purchases of furniture, software and equipment (3,914) - Net cash provided by investing activities 2,715,699 2,198,539 Net change in cash on hand 74,690 81,378 Cash, beginning of year 346, ,625 Cash, end of year $ 420,693 $ 346,003 The accompanying notes are an integral part to the financial statements. 4

7 Statement of Functional Expenses For the year ending June 30, 2015 Program Services Management & General Fundraising Total Grants $ 4,063,877 $ - $ - $ 4,063,877 Salaries and wages 170, , , ,887 Administrative fees 466, ,963 Bank charges 205,836 4,600 7, ,491 Scholarships 215, ,469 In-kind expenses: Donor cultivation 88,850-88, ,700 Accounting services - 6,238-6,238 Legal services - 5,226-5,226 Printing services - - 3,206 3,206 Entertainment 12, , ,489 Contract labor 4,784-46,145 50,929 Other 36,375 12,217 8,377 56,969 Technology subscriptions 12,887 12,883 12,883 38,653 Payroll taxes 10,667 10,663 10,663 31,993 Bad debt 29, ,000 Office expenses 2,463 6,158 19,583 28,204 Printing and postage 5,884 11,004 10,837 27,725 Accounting 9,235 9,232 9,232 27,699 Rent 8,379 8,377 8,377 25,133 Consignment ,235 14,235 Website, network services 4,384 4,383 4,383 13,150 Dues, subs and pubs - 10,754-10,754 Utilities 3,171 3,170 3,170 9,511 Donor relations 3,874-3,874 7,748 Legal - 7,500-7,500 Depreciation - 7,272-7,272 Community partnerships 1,500-5,500 7,000 Conferences and training 2,220 2,219 2,219 6,658 Insurance - 6,512-6,512 Advertising 2,583-2,583 5,166 Payroll services ,094 Marketing Total $ 5,362,718 $ 300,274 $ 543,909 $ 6,206,901 The accompanying notes are an integral part to the financial statements. 5

8 Statement of Functional Expenses Year ended June 30, 2014 Program Services Management & General Fundraising Total Grants $ 3,680,278 $ - $ - $ 3,680,278 Salaries and wages 148, , , ,642 Administrative fees 419, ,516 Bank charges 210,242 3, ,458 Scholarships 225, ,060 In-kind expenses: Regional needs study 31, ,691 Legal services - 7,266-7,266 Accounting services - 7,181-7,181 Marketing 2,390-2,390 4,780 Entertainment 22,430-80, ,978 Contract labor 19,390-82, ,772 Other 3,314 1,280 7,656 12,250 Technology subscriptions 9,317 9,317 9,317 27,951 Payroll taxes 10,555 10,555 10,555 31,665 Office expenses 5,157 8,042 17,446 30,645 Printing and postage 7,358 3,044 17,171 27,573 Accounting 8,750 8,750 8,750 26,250 Rent 8,002 8,002 8,002 24,006 Consignment ,342 31,342 Website, network services 8,424 8,424 8,424 25,272 Dues, subs and pubs - 9,864-9,864 Utilities 3,093 3,093 3,093 9,279 Depreciation - 7,649-7,649 Community Partnerships 30,627 1,986 1,986 34,599 Conferences and training 1,597 1,597 1,597 4,791 Insurance 10,408 16,713 10,408 37,529 Payroll services ,286 Other Giving ,826 21,826 Total $ 4,866,575 $ 264,955 $ 471,869 $ 5,603,399 The accompanying notes are an integral part to the financial statements. 6

9 Notes to Financial Statements Years ended June 30, 2015 and 2014 Note A - Summary of Significant Accounting Policies Organization The Community Foundation for Northern Virginia, Inc. (the "Community Foundation") is a nonprofit public charity that was established in 1978 to meet a wide variety of social, educational, cultural and other charitable needs throughout Northern Virginia. The mission of the Community Foundation is to grow philanthropy to help meet the most critical needs of the region. The Community Foundation accomplishes its mission in two primary ways: First, it develops donor advised funds (both endowed and pass-through) from which grants are recommended by the donors who establish them. Second, it develops discretionary funds for organizational grant making to help meet the most critical needs of the region. The Community Foundation performs all administrative aspects of grant making from both donor advised funds and discretionary funds, including due diligence inquiries to the intended grantees, reporting, managing grant and scholarship programs, accounting and investments. Basis of Accounting The Community Foundation's financial statements have been prepared using the accrual basis of accounting; whereby revenue is recognized when earned and expenses recorded when a liability is incurred, in conformity with accounting principles generally accepted in the United States ("GAAP"). Net Assets The accompanying financial statements were prepared in accordance with GAAP that require not-for-profit organizations to report information regarding their financial position and activities in three classes of net assets as follows: Unrestricted net assets - Unrestricted net assets represent revenue, expenses and contributions received without donor-imposed restrictions. These funds are available for the overall operations of the Community Foundation. All donor agreements that contain variance power language are considered to be unrestricted net assets given that the Community Foundation has board discretion to direct the funds as deemed necessary on behalf of the Community Foundation. Temporarily restricted net assets - Contributions received that are restricted by the donor to a future period or for a specified purpose and investment earnings of permanently restricted net assets are reported as temporarily restricted support. When the funds have been disbursed in accordance with the donor's restriction, temporarily restricted net assets are reclassified to unrestricted net assets and are reported in the statements of activities as net assets released from restrictions. 7

10 Notes to Financial Statements (Continued) Note A - Summary of Significant Accounting Policies (Continued) Net Assets (continued) Permanently restricted net assets - Permanently restricted net assets represent contributions received for which the use is limited by donor-imposed stipulations that neither expire by passage of time nor can be fulfilled or otherwise removed by actions of the Community Foundation. The contributions are required to be invested in perpetuity and the income from such investments to be used for specified purposes. These funds are invested by the Community Foundation and the investment earnings from these investments, where specified by the donor, are classified as temporarily restricted net assets until utilized for their intended purpose. Endowments The Community Foundation's Endowments are accounted for in accordance with the Endowments of Not-for-Profit Organizations accounting guidance, which provides guidance on the net asset classification of donor-restricted endowment funds for a not-for-profit organization that is subject to an enacted version of the Uniform Prudent Management of Institutional Funds Act of 2006 ("UPMIFA"). The Community Foundation has made the required disclosures in Note E, Endowment Funds. As of June 30, 2015 and 2014, the Community Foundation does not have any board designated endowment funds. Estimates The preparation of financial statements in conformity with GAAP requires that management use assumptions, estimates and judgments that affect the reported amounts and classifications of assets, liabilities, revenues and expenses during the reporting period. Accordingly, actual results could differ from those estimates. Subsequent Events The Community Foundation has evaluated subsequent events for disclosure and recognition through November 23, 2015, the date on which these financial statements were available to be issued. Cash The Community Foundation's cash includes cash on hand and cash deposited in banks. Highly liquid money market funds and similar are included within the Community Foundation's investment portfolios and have been classified as investments in the statements of financial position given the intent of those funds are to be used in the routine management of the investment portfolio. Fixed Assets Furniture, leasehold improvements, software and equipment are recorded at cost and are depreciated on the straight-line method based on the estimated useful lives of the respective assets, which range from 3 to 7 years. 8

11 Notes to Financial Statements (Continued) Note A - Summary of Significant Accounting Policies (Continued) Investment Valuation The Community Foundation s investments are stated at fair value as discussed further in Note B. All realized and unrealized gains and losses are reported in the statements of activities. Realized gains and losses are determined on the specific identification basis. The Community Foundation invests in various investment instruments which are exposed to various risks such as interest rate, market and credit risks. Due to the level of risk associated with certain investment securities, changes in the value of investment securities have occurred subsequent to year end that could materially affect the amounts reported in the statements of financial position. Concentration of Credit Risk Throughout the years, the Community Foundation may have cash and cash equivalents held by financial institutions in excess of the Federal Deposit Insurance Corporation ("FDIC") coverage limits. Management does not consider the cash balances above the FDIC insured limit to be a significant credit risk. Pledges Receivable Unconditional promises to give consist of multi-year pledges, grants and contribution receivables and are recorded at their net realizable value. Pledges receivable that are due beyond one year are carried at the estimated present value of the future receipts net of an allowance for doubtful collection. Revenue is recognized in the year in which the pledge was made. Revenue from conditional pledges is recognized in the year in which the condition is met. Deferred Revenue Deferred revenue consists of sponsorships and other monies received in advance for use in future periods. Sponsorships for fundraising events are recognized as revenue when the event is held. Income Taxes The Community Foundation is exempt from income taxation under Section 501(c)(3) and 170(b)(1)(A)(vi) of the Internal Revenue Code and is not a private foundation. Management has concluded that the Community Foundation has properly maintained its exempt status. In accordance with GAAP, the Community Foundation has concluded there are no uncertain tax positions as of June 30,

12 Notes to Financial Statements (Continued) Note A - Summary of Significant Accounting Policies (Continued) In-Kind Contributions The Community Foundation receives donated research, marketing, legal and accounting services. This donate support support is recognized as unrestricted support at their estimated fair values and as an expense in the appropriate functional expense category. See Note F for details of the amount of in-kind contributions provided. Expense Allocation The costs of providing programs and other activities have been summarized on a functional basis in the statements of activities. Accordingly, certain costs have been allocated among the programs and supporting services benefited. Reclassifications Certain prior year amounts have been reclassified to conform with the current year presentation. Note B - Investments and Fair Value Measurement The following table sets forth the Community Foundation's investments at fair value as of June 30: Mutual funds $ 17,818,949 $ 17,607,124 Equities 6,161,162 4,891,428 US government and sponsored agency bonds 659,660 1,320,330 Corporate bonds 4,354,643 4,321,427 Structured securities 18,494 58,375 Alternative investments 129, ,640 29,142,368 28,313,324 Cash and cash equivalents 7,100,401 7,264,151 Total investments $ 36,242,769 $ 35,577,475 Total return on investments reported in the statements of activities for investments and cash and cash equivalents for the years ended June 30 is comprised of the following: Interest and dividends $ 805,173 $ 688,385 Unrealized gains, net (1,153,857) 2,125,420 Realized gains, net 738, ,945 Total return on investments $ 389,718 $ 3,810,750 10

13 Notes to Financial Statements (Continued) Note B - Investments and Fair Value Measurement (Continued) The Community Foundation s classification of fair value for investments is based on the framework established by GAAP. The framework is based on the inputs used in valuation and requires that observable inputs be used in the valuations when available. The disclosure of fair value estimates in GAAP include a hierarchy based on whether significant valuation inputs are observable. The three levels of the hierarchy are as follows: Level 1 Inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities traded in active markets the Community Foundation has the ability to access. Level 2 Inputs to the valuation methodology include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability and market-corroborated inputs. Level 3 Inputs to the valuation methodology are unobservable for the asset or liability and are significant to the fair value measurement. Investments in alternative investments are typically valued, as a practical expedient, utilizing the net asset valuations provided by the underlying private investment companies and their administrators, without adjustment, when the net asset valuations of the investments are calculated in a manner consistent with GAAP for investment companies. The Community Foundation applies the practical expedient to its investments in alternative investments, unless it is probable that the Community Foundation will sell a portion of an investment at an amount different from the net asset valuation. If it is probable that the Community Foundation will sell an investment at an amount different from the net asset valuation or in other situations where the practical expedient is not available, the Community Foundation considers other factors in addition to the net asset valuation, such as features of the investment, including subscription and redemption rights, expected discounted cash flows, transactions in the secondary market, bids received from potential buyers, and overall market conditions in its determination of fair value. Investments in alternative investments are included in Level 3 of the fair value hierarchy. In determining the level, the Community Foundation considers the length of time until the investment is redeemable, including notice and lock-up periods or any other restriction on the disposition of the investment. The Community Foundation also considers the nature of the portfolios of the underlying private investment companies and their ability to liquidate their underlying investments. The Community Foundation recognizes transfers between levels of the fair value hierarchy at the end of the period in which events occur impacting the availability of inputs to the fair value methodology. There were no transfers between fair value hierachy levels for the years ended June 30, 2015 and

14 Notes to Financial Statements (Continued) Note B - Investments and Fair Value Measurement (Continued) The following table shows how the Community Foundation's investments are categorized within the fair value hierarchy, disaggregated into descriptive classifications in accordance GAAP, at June 30: Fair Value Level Equities $ 6,161,162 $ 4,891,428 Level 1 Mutual funds: US equity funds 10,202,528 8,787,995 Level 1 International equity funds 4,172,659 4,945,426 Level 1 Fixed income 3,368,721 3,756,033 Level 1 Commodity funds 75, ,670 Level 1 Total mutual funds 17,818,949 17,607,124 Corporate bonds 4,354,643 4,321,427 Level 2 US government and sponsored agency bonds 659,660 1,320,330 Level 2 Structured securities 18,494 58,375 Level 2 Alternative investments 129, ,640 Level 3 Total investments at fair value 29,142,368 28,313,324 Cash and cash equivalents 7,100,401 7,264,151 N/A Total investments $ 36,242,769 $ 35,577,475 Level 1 securities consist of mutual funds and equity securities. Fair value is determined based on quoted prices for identical assets traded in active markets. Level 2 securities consist of corporate bonds, US government and sponsored agency bonds and structured securities. The structured securities have characteristics of both a bond and equity. The fair value of the securities are derived based upon the performance of a specific international or domestic equity index. The securities are designed to provide exposure to the potential positive performance of the underlying index over the term of the security with some protection from the potential negative performance of the underlying index. Fair value is estimated using current market inputs for similar financial instruments with comparable terms and credit quality, commonly referred to as matrix pricing. 12

15 Notes to Financial Statements (Continued) Note B - Investments and Fair Value Measurement (Continued) The fair value of the alternative investment classified as level 3 is based on the net asset value per share of the underlying fund. The Community Foundation can redeem their investment in this fund as of the last day of any calendar quarter given that they provide at least 97 days written notice to the fund. The following table summarizes changes in Level 3 assets measured at fair value at June 30: Balance - Beginning of Year $ 114,640 $ 104,729 Purchases - - Change in fair value 14,820 9,911 Balance - End of Year $ 129,460 $ 114,640 As of June 30, 2014 and 2013, no adjustments were made to the valuations provided by the underlying private investment companies. Note C - Net Assets Released from Temporary Restrictions Net assets were released from restrictions by incurring expenses for activities in accordance with the restricted purposes specified by the donors for the years ended June 30 as presented below: Scholarships $ 95,000 $ 85,460 Grants 61, ,674 Administrative fees 133, ,868 Bank charges 22,672 22,884 Net assets released from restrictions $ 313,078 $ 371,886 Note D - Temporarily Restricted and Permanently Restricted Net Assets Temporarily restricted net assets are available for the following purposes at June 30: Education programs $ 2,132,329 $ 2,309,762 Health programs 1,883,072 2,024,634 Community specific programs 336, ,437 $ 4,351,838 $ 4,670,833 13

16 Notes to Financial Statements (Continued) Note D - Temporarily Restricted and Permanently Restricted Net Assets (Continued) Permanently restricted net assets are restricted as follows at June 30: Health programs $ 870,024 $ 870,024 Education programs 510, ,625 $ 1,380,649 $ 1,380,649 Note E - Endowment Funds At June 30, 2015, the Community Foundation s endowment consists of 3 donor restricted funds established for educational and health purposes. As required by GAAP, net assets associated with endowment funds are classified and reported based on the existence or absence of donorimposed restrictions. Interpretation of Relevant Law The Board of Directors of the Community Foundation has interpreted 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 Community Foundation classifies as permanently restricted net assets (a) the original value of gifts donated to the permanent endowment, (b) the original value of subsequent gifts to the permanent endowment, and (c) accumulations to the permanent endowment made in accordance with the direction of the applicable donor gift instrument at the time the accumulation is added to the fund. The remaining portion of the donor-restricted endowment fund that is not classified in permanently restricted net assets is classified as temporarily restricted net assets until those amounts are approved for expenditure by the Community Foundation in a manner consistent with its spending policy and with the standard of prudence prescribed by UPMIFA. For the year ended June 30, the endowment funds had the following activity: Unrestricted Temporarily Restricted Permanently Restricted Total Net assets, July 1, 2013 $ - $ 837,181 $ 1,380,649 $ 2,217,830 Interest and dividends - 84,631-84,631 Contributions Change in fair value of investments - 217, ,608 Authorized expenditures - (114,674) - (114,674) Net assets, June 30, ,024,746 1,380,649 2,405,395 Interest and dividends - 113, ,059 Contributions Change in fair value of investments - (80,233) - (80,233) Authorized expenditures - (125,191) - (125,191) Net assets, June 30, 2015 $ - $ 932,381 $ 1,380,649 $ 2,313,030 14

17 Notes to Financial Statements (Continued) Note E - Endowment Funds (Continued) Funds with Deficiencies From time to time, the fair value of assets associated with an individual donor restricted endowment fund may fall below the level that the donor or UPMIFA requires the Community Foundation to retain as a fund of perpetual duration. There were no such deficiencies as of June 30, 2015 and Return Objectives and Risk Parameters The Community Foundation has adopted investment and spending policies for endowment assets that attempt to provide a predictable stream of funding to programs supported by its endowment while seeking to maintain the purchasing power of the endowment assets. However, in some instances the investment or spending policies may be superceded by specific requirements or limitations imposed by a donor in the gift instrument. Endowment assets include those assets of donor-restricted funds that the organization must hold in perpetuity. Under this policy, as approved by the Board of Directors, the endowment assets are invested so as to achieve a reasonable rate of return relative to the broad equity and fixed income markets across the full business cycle. Strategies Employed for Achieving Objectives To satisfy its long-term return objectives, the Community Foundation relies on a total return strategy in which investment returns are achieved through both capital appreciation and current yield. Spending Policy and How the Investment Objectives Relate to Spending Policy The goal of the Community Foundation s spending policy is to provide a reasonable, predictable, and sustainable structure that supports the intentions of the original endowment. The policy is designed to ensure that the Community Foundation remains a perpetual and meaningful provider of funds and services to the community by seeking preservation of its endowment assets. Expenditure requests from endowment funds are submitted to the Community Foundation for approval, and are released for payment upon approval. Expenditures are awarded in accordance with donor stipulations. 15

18 Notes to Financial Statements (Continued) Note F - Related Party Transactions The Community Foundation receives in-kind contributions from members of the Community Foundation's Board of Directors and related companies. The fair value of the services received were: Donor cultivation $ 177,700 $ - Legal and accounting 11,464 14,447 Printing 3,206 - Research - 31,691 Marketing - 4,780 Total $ 192,370 $ 50,918 Note G - Commitments and Contingencies Office Lease The Community Foundation entered into a three-year lease agreement for office space which expires April 30, 2016 with the option to renew for an additional 24 month period ending April 30, Rental expense for the year ending June 30, 2015 and 2014 was $25,133 and $24,006, respectively. Future minimum lease payments, including the renewal option, required under the lease as of June 30, 2015 are as follows: Year Ending June 30, 2016 $ 13, , ,133 Total $ 35,110 16