Rare. Financial Report September 30, 2014

Transcription

1 Financial Report September 30, 2014

2 Contents Independent Auditor s Report on the Financial Statements 1-2 Financial Statements Balance sheets 3 Statements of activities 4 Statements of cash flows 5 Notes to financial statements 6-14 Independent Auditor s Report on the Supplementary Information 15 Supplementary Information Statements of functional expenses 16

3 Independent Auditor s Report To the Board of Trustees Rare Arlington, Virginia Report on the Financial Statements We have audited the accompanying financial statements of Rare, which comprise the balance sheets as of September 30, 2014 and 2013, the related statements of activities and cash flows 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. We also conducted our audit of the financial statements as of for the year ended September 30, 2014, in accordance with the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit 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. 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 Rare as of September 30, 2014 and 2013, and the change 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. 1

4 Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated April 20, 2015, on our consideration of Rare s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering Rare s internal control over financial reporting and compliance. McLean, Virginia April 20,

5 Balance Sheets September 30, 2014 and 2013 Assets Cash and Cash Equivalents $ 2,837,947 $ 8,222,769 Grants and Contributions Receivable, Net 14,358,592 16,445,067 Prepaid Expenses and Other Assets 569, ,737 Investments 8,557,895 7,293,259 Assets Held for Deferred Compensation 509, ,616 Property and Equipment, Net 651, ,794 Total assets $ 27,484,294 $ 33,118,242 Liabilities and Net Assets Liabilities Accounts payable and accrued expenses $ 1,770,480 $ 1,957,034 Refundable advances 4,199,365 5,198,667 Deferred compensation liabilities 617, ,780 Total liabilities 6,586,904 7,631,481 Commitments and Contingencies (Notes 7 and 10) Net Assets Unrestricted: Undesignated 2,185,224 3,190,026 Board Designated Fund 7,468,641 7,320,875 Total unrestricted 9,653,865 10,510,901 Temporarily restricted 11,243,525 14,975,860 Total net assets 20,897,390 25,486,761 Total liabilities and net assets $ 27,484,294 $ 33,118,242 See Notes to Financial Statements. 3

6 Statements of Activities Years Ended September 30, 2014 and 2013 Temporarily Temporarily Unrestricted Restricted Total Unrestricted Restricted Total Operating Revenue Grants and contributions $ 16,356,273 $ 27,258 $ 16,383,531 $ 11,420,992 $ 526,961 $ 11,947,953 In-country grants and contributions 236, , , ,350 Contributed services and materials 741, , , ,115 Net assets released from restrictions 3,759,593 (3,759,593) - 8,688,858 (8,688,858) - Total revenue 21,093,489 (3,732,335) 17,361,154 21,228,315 (8,161,897) 13,066,418 Operating Expenses Program services 19,297,968-19,297,968 16,743,803-16,743,803 Fundraising 1,638,958-1,638,958 1,371,438-1,371,438 Administrative 1,177,761-1,177, , ,071 Total expenses 22,114,687-22,114,687 19,037,312-19,037,312 Change in net assets before non-operating activities (1,021,198) (3,732,335) (4,753,533) 2,191,003 (8,161,897) (5,970,894) Other Income Investment income 164, ,162 96,753-96,753 Changes in net assets (857,036) (3,732,335) (4,589,371) 2,287,756 (8,161,897) (5,874,141) Net Assets Beginning of year 10,510,901 14,975,860 25,486,761 8,223,145 23,137,757 31,360,902 End of year $ 9,653,865 $ 11,243,525 $ 20,897,390 $ 10,510,901 $ 14,975,860 $ 25,486,761 See Notes to Financial Statements. 4

7 Statements of Cash Flows Years Ended September 30, 2014 and 2013 Cash Flows From Operating Activities Change in net assets $ (4,589,371) $ (5,874,141) Adjustments to reconcile change in net assets to net cash provided by (used in) operating activities: Depreciation and amortization 128, ,688 Bond premium amortization 100,900 95,475 Decrease in the allowance for doubtful accounts (280,483) (266,410) Decrease in discount on pledges (45,267) (80,106) Unrealized loss on investments 48, ,127 Realized loss (gain) on sale of investments 5,159 (23,511) (Increase) decrease in: Grants and contributions receivables 2,412,225 5,529,949 Prepaid expenses and other assets (166,694) 4,155 Assets held for deferred compensation (155,698) (137,610) Increase (decrease) in: Accounts payable and accrued expenses (186,554) 465,850 Refundable advances (999,302) 4,933,979 Deferred compensation liabilities 141, ,501 Net cash provided by (used in) operating activities (3,586,645) 5,005,946 Cash Flows From Investing Activities Purchase of property and equipment (378,596) (324,118) Purchase of investments (2,701,833) (2,017,108) Proceeds from sale of investments 1,282,252 4,492,393 Net cash provided by (used in) investing activities (1,798,177) 2,151,167 Cash Flows From Financing Activities Principal payments on line of credit - (1,550,000) Proceeds from line of credit - 1,550,000 Net cash provided by financing activities - - Net increase (decrease) in cash and cash equivalents (5,384,822) 7,157,113 Cash and Cash Equivalents Beginning 8,222,769 1,065,656 Ending $ 2,837,947 $ 8,222,769 See Notes to Financial Statements. 5

8 Notes to Financial Statements Note 1. Nature of Organization and Significant Accounting Policies Nature of organization: Rare inspires change so people and nature thrive. Rare looks for proven conservation solutions and trains local leaders to inspire communities to adopt them and make them their own through its signature Pride campaigns. Pride campaigns use proven marketing techniques to move the hearts and minds of local communities, accelerating the adoption and increasing the sustainability of the solutions. Rare has conducted over 300 Pride campaigns in more than 50 countries, empowering local communities across geographies and cultures to shift from resource users to become natural asset managers. Visit Rare on the web at rare.org. A summary of Rare s significant accounting policies follows: Basis of accounting: The accompanying financial statements have been prepared on the accrual basis of accounting, whereby revenue is recognized when earned and expenses are recognized when incurred. Basis of presentation: Rare 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. Unrestricted net assets Contributions and other inflows of assets whose use is not subject to donor-imposed stipulations. The Board of Directors has designated a portion of Rare s unrestricted net assets to provide on-going support from its earnings. The board-designated fund totaled $7,542,873 and $7,395,107 at September 30, 2014 and 2013, respectively. Temporarily restricted net assets Contributions and other inflows of assets whose use is subject to donor-imposed stipulations that either expire by the passage of time or will be met by actions of Rare pursuant to those stipulations, such as usage for specific programs. Permanently restricted net assets Contributions and other inflows of assets whose use is subject to donor-imposed stipulations that the principal must be maintained permanently by Rare. Rare had no permanently restricted net assets at September 30, 2014 and Cash and cash equivalents: Rare considers all cash and other highly-liquid investments with initial maturities of three months or less and which present insignificant risk of change in value to be cash equivalents. As of September 30, 2014 and 2013, this balance included cash, money market funds and demand deposits with the bank. Financial and credit risk: Rare maintains its cash in bank accounts which, at times, may exceed federally insured limits. Rare has not experienced any losses in such accounts. Rare believes it is not exposed to any significant financial risk on cash. Investments: Investments consist primarily of fixed income securities carried at fair market value based on quoted market prices. To adjust the carrying value of these investments, the change in fair market value is recorded as a component of investment income on the statements of activities. Rare invests in corporate bonds, mutual funds and international bonds. These investments are exposed to various risks, such as interest rate, market and credit. Due to the level of risk associated with such investments, and the level of uncertainly related to changes in the value of such investments, it is possible that changes in risks in the near term would materially affect investment balances and amounts reported in the financial statements. Property and equipment: Property and equipment is initially recorded at cost. Property and equipment purchased with a unit cost greater than $1,500 is depreciated on a straight-line basis over the estimated useful lives of the related assets, generally three to ten years. The cost of maintenance and repairs is recorded as expense. 6

9 Notes to Financial Statements Note 1. Nature of Organization and Significant Accounting Policies (Continued) Grants, contributions and contributions receivable: Grants and contributions are recognized as revenue and receivables in the year unconditional promises to give are received from the grantor/donor. They are reported as increases in the appropriate revenue category of net assets. Grants and contributions receivable that will not be collected within one year have been discounted at a rate commensurate with the risks involved at the time the gift was pledged, based upon anticipated payment dates. Rare has established an allowance for uncollectible grants and contributions receivable in the amount of $359,657 and $640,140 at September 30, 2014 and 2013, respectively. Conditional promises to give are not reported as revenue until the conditions are substantially met. On August 31, 2012, Rare entered into a Grant and Pledge Agreement with a grantor to match up to $20 million, on a one-for-one basis, the aggregate amount of unrestricted contributions made to Rare by individual donors making a contribution of $500,000 or more. The matching period is effective for contributions received from March 23, 2012, through September 30, The grantor stipulated that these unrestricted gifts would be combined with its $20 million commitment to create and fundraise for an additional $40 million challenge pool. Individual donors contributing to the $20 million match pool understand that as per the Agreement, revenue recorded and cash received cannot be expended until additional funds are received towards the $40 million challenge. At September 30, 2014, Rare has a $1,950,512 outstanding receivable from this donor for amounts collected on unrestricted donations before year-end. Sub-grants and awards: Rare accrues sub-grants and awards payable and records the related expense at the time the subgrantee submits a request for reimbursement. A subgrant is generally a grant to an organization abroad that uses the funds to further Rare s objectives under the grant. Refundable advances: Represents cash received on conditional grants and contributions prior to the conditions being met or expenses being incurred. These amounts are considered refundable advances and are classified as a liability on the balance sheets. Conditions of a grant agreement may include future funds availability, matching funding, or the completion of project tasks and related expenditures. Revenue is recorded based on expenses incurred for conditional grants. Contributed goods and services: Contributions of services are recognized when they are received if the services either (a) create or enhance non-financial assets, or (b) require specialized skills, and are provided by individuals possessing those skills, and would typically need to be purchased if not donated. Contributed non-cash goods and services are recognized at fair value per the contracts with Rare partners, or as provided by donors. Use of estimates: The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates. Foreign currency transactions: The financial statements and transactions of Rare s foreign operations are generally maintained in the relevant local currency. Monthly expenses that are incurred by field offices in foreign countries are paid at local currency and then translated into U.S. dollars at the rate of exchange in effect during the month of the transaction. Foreign currency translation: The functional currency of Rare is the U.S. dollar. Where local currencies are used, assets and liabilities are translated into U.S. dollars at the balance sheet date at the exchange rate in effect at the fiscal year-end. Gains and losses resulting from these translations are recognized on the statements of activities. 7

10 Notes to Financial Statements Note 1. Nature of Activities and Significant Accounting Policies (Continued) Allocation of functional expenses: The costs of providing the programs and other supporting services have been summarized on a functional basis on the statements of activities. Expenses that relate directly to program or supporting services are allocated to that program or supporting service. The presentation of expenses on the statements of activities is primarily based on Rare s indirect cost rate agreement with the U.S. Government. This presentation does not fully satisfy the functional expense requirements of accounting principles generally accepted in the United States of America (U.S. GAAP). The table below has been added to the financial statements in order to satisfy the requirements of U.S. GAAP: For the Year Ended September 30, 2014 As presented Adjustments to Functional on the Statements arrive at Expense Totals of Activities U.S. GAAP (U.S. GAAP Basis) Program services $ 19,297,968 $ (831,824) $ 18,466,144 Fundraising 1,638,958 (77,991) 1,560,967 Administrative 1,177, ,815 2,087,576 $ 22,114,687 $ - $ 22,114,687 For the Year Ended September 30, 2013 As presented Adjustments to Functional on the Statements arrive at Expense Totals of Activities U.S. GAAP (U.S. GAAP Basis) Program services $ 16,743,803 $ (794,079) $ 15,949,724 Fundraising 1,371,438 (67,012) 1,304,426 Administrative 922, ,091 1,783,162 $ 19,037,312 $ - $ 19,037,312 Tax-exempt status: Rare is exempt from income taxes under Section 501(c)(3) of the Internal Revenue Code (IRC). Rare is subject to unrelated business income taxes under Section 512 of the IRC; however, in the opinion of management, no provision for income taxes is required to be made. Rare follows the accounting standard on accounting for uncertainty in income taxes, which addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under this guidance, Rare may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. The guidance on accounting for uncertainty in income taxes also addresses de-recognition, classification, interest and penalties on income taxes, and accounting in interim periods. Management evaluated Rare s tax positions and concluded that Rare had taken no uncertain tax positions that require adjustment to the financial statements to comply with the provisions of this guidance. Generally, Rare is no longer subject to income tax examinations by the U.S. federal, state or local tax authorities for years before

11 Notes to Financial Statements Note 1. Nature of Activities and Significant Accounting Policies (Continued) Reclassifications: Certain items in the September 30, 2013, financial statements have been reclassified to conform to the September 30, 2014, financial statement presentation. The reclassifications had no effect on the previously reported change in net assets, or net assets. Subsequent events: Rare evaluated subsequent events through April 20, 2015, which is the date the financial statements were available to be issued. Note 2. Investments and Fair Value Measurements Investments at September 30, 2014 and 2013, consist of the following: Corporate bonds $ 4,538,644 $ 3,651,890 Mutual funds-fixed income 3,867,661 3,490,742 International bonds 151, ,627 $ 8,557,895 $ 7,293,259 Investment income for the years ended September 30, 2014 and 2013, consists of the following: Dividends and interest $ 218,207 $ 183,369 Net realized (losses) gains (5,159) 23,511 Net unrealized losses (48,886) (110,127) $ 164,162 $ 96,753 The Codification Topic on Fair Value Measurement requires disclosures of financial position in periods subsequent to initial recognition, whether the measurements are made on a recurring basis or a nonrecurring basis, establishes a framework for measuring fair value in accordance with generally accepted accounting principles (GAAP), and expands disclosures about fair market value measurements. This enables the reader of the financial statements to assess the inputs used to develop those measurements by establishing a hierarchy for ranking quality and reliability of the information used to determine fair value. The provision applies to all assets and liabilities that are being measured and reported on a fair value basis, and are disclosed in one of the following three categories: Level 1 Level 2 Level 3 Quoted market prices in active markets for identical assets or liabilities Observable market-based inputs or unobservable inputs corroborated by market data Unobservable inputs that are not corroborated by market data In determining the appropriate levels, Rare performs a detailed analysis of the assets and liabilities that are subject to the Fair Value Measurement Topic. At each reporting period, all assets and liabilities for which the fair value measurement is based on significant unobservable inputs are classified as Level 3. There were no Level 3 inputs for any assets held by Rare at September 30, 2014 and

12 Notes to Financial Statements Note 2. Investments and Fair Value Measurements (Continued) The tables below present the balances of assets measured at fair value on a recurring basis by level within the hierarchy: 2014 Description Total Level 1 Level 2 Level 3 Corporate bonds $ 4,538,644 $ - $ 4,538,644 $ - Mutual funds 3,867,661 3,867, International bonds 151, ,590 - $ 8,557,895 $ 3,867,661 $ 4,690,234 $ Description Total Level 1 Level 2 Level 3 Corporate bonds $ 3,651,890 $ - $ 3,651,890 $ - Mutual funds 3,490,742 3,490, International bonds 150, ,627 - $ 7,293,259 $ 3,490,742 $ 3,802,517 $ - Mutual funds included in Level 1 assets are actively traded, and fair market values for identical assets are readily obtainable. Corporate and international bonds are included in Level 2 assets as identical assets that are not actively traded. The fair market values are based on quoted prices for similar assets in active markets or quoted prices for identical assets in markets that are not active. Note 3. Property and Equipment Property and equipment, net of accumulated depreciation, at September 30, 2014 and 2013, consists of the following: Office furniture and equipment $ 431,218 $ 393,903 Leashold improvements 228, ,678 Website 1,411,063 1,163,063 2,070,661 1,756,644 Less accumulated depreciation and amortization (1,419,546) (1,355,850) $ 651,115 $ 400,794 10

13 Notes to Financial Statements Note 4. Grants and Contributions Receivable As of September 30, 2014 and 2013, grants and contributions receivable are due as follows: Within one year $ 7,297,874 $ 5,674,770 1 to 2 years 7,560,005 3,937,334 3 to 5 years - 7,658,000 Gross grants and contributions receivable 14,857,879 17,270,104 Less present value discount (139,630) (184,897) Less allowance for doubtful accounts (359,657) (640,140) Net grants and contributions receivable $ 14,358,592 $ 16,445,067 Conditional grants: At September 30, 2014 and 2013, $16,319,279 and $16,512,823, respectively, had been conditionally pledged to Rare. Receipt of the funding is conditional upon Rare incurring expenses to meet the condition stated in the award. As such, these amounts are not reported in the accompanying balance sheets or statements of activities. Note 5. Temporarily Restricted Net Assets Temporarily restricted net assets consisted of the following at September 30, 2014 and 2013: Program Restricted Pride $ - $ 234,240 Global Programs - 95, ,135 Time Restricted 11,243,525 14,645,725 $ 11,243,525 $ 14,975,860 During the years ended September 30, 2014 and 2013, net assets were released from restriction as follows: Program Restricted Pride $ 261,493 $ 3,055,276 Global Programs 95, , ,388 3,539,625 Time Restricted 3,402,205 5,149,233 $ 3,759,593 $ 8,688,858 11

14 Notes to Financial Statements Note 6. Board Designated Fund Rare follows guidance on the net asset classification of board designated funds. Rare is governed subject to its governing documents. The Board of Directors has determined that the majority of Rare s contributions are subject to the terms of its governing documents. Under the terms of the governing documents, the Board of Directors has the ability to distribute so much of the corpus of the Board Designated Fund as the Board of Directors in its sole discretion shall determine. As a result of the ability to distribute corpus, all Board Designated contributions are classified as unrestricted net assets for financial statement purposes. The Board Designated account contains no contributions that are classified as either temporarily restricted or permanently restricted. Investment and spending policies: Board Designated Fund assets are invested to produce maximum total return consistent with prudent risk limits. A target total return figure is determined for internal financial planning purposes; results to market indexes and other funds will also be used to evaluate performance. At present, the target total annual return objective is 4% after inflation over time. Subsequent fund growth will be derived from unrestricted revenue sources and investment earnings. On an annual basis, the staff will recommend a contribution amount that is approved by the Board of Trustees. All investment income will be reinvested in the fund annually. The Board Designated Fund is unrestricted designated for long-term investment net assets. Changes in the Board Designated Fund are as follows for the years ended September 30, 2014 and 2013: Board Designated Fund, beginning of year $ 7,320,875 $ 6,241,385 Investment income 184, ,402 Net unrealized/realized (losses) gains (37,046) (76,912) Contributions - 1,000,000 Board Designated Fund, end of year $ 7,468,641 $ 7,320,875 Note 7. Lease Commitments Rare entered into an eight-year lease agreement with a termination clause after four years, effective September 1, 2011, for office space used for its United States headquarters in Arlington, Virginia. Rare also leases office space at other locations, as well as storage and miscellaneous furnishings and equipment under various non-cancelable operating leases. Future minimum lease payments related to these leases are as follows: Year Ending September 30, 2015 $ 690, , , , ,533 Total $ 2,705,762 During the years ended September 30, 2014 and 2013, rent expense was $744,103 and $688,159, respectively. The Arlington headquarters office rent charges include standard operating expenses. 12

15 Notes to Financial Statements Note 8. Employee Benefit Plan Rare sponsors a defined-contribution retirement plan under Section 401(k) of the Internal Revenue Code for all employees who meet certain service requirements. The plan provides for employee contributions not to exceed annual limits as determined by the IRS. In 2013 and 2014, Rare contributed 3% of base salary for all eligible employees and matched 100% of each employee s contribution up to 4% of their compensation. Employees are vested in the employer contributions after two years of service. Retirement plan expense for the years ended September 30, 2014 and 2013, was $319,635 and $370,540, respectively. During 2011, upon Board approval, Rare accrued expenses for a non-qualified deferred compensation plan, a 457(b) Plan for certain key employees to be eligible to receive the entire amount of Rare s employer contribution. The 401(k) qualified plan is legally limited to a certain contribution for each employee and there is a salary limitation imposed by the Internal Revenue Code. Contributions to this plan for the years ended September 30, 2014 and 2013, were $1,566 and $1,500, respectively. As of September 30, 2014 and 2013, the employer contribution liability amounted to $6,745 and $2,163, respectively. During 2003, Rare established a non-qualified deferred compensation plan, the International Retirement Savings Plan (IRSP), to cover all foreign employees who meet certain service requirements. There are no employee contributions allowed under the IRSP plan. Rare contributes 3% of compensation for all eligible employees and increases its contribution to 7% of compensation after completion of two years of service. New participants to the plan vest over five years. At September 30, 2014 and 2013, the value of the IRSP was $509,314 and $353,616, respectively. There is a corresponding deferred compensation liability in the same amount that is included in the deferred compensation liability on the balance sheets. During 2011, upon Board approval, Rare established a second non-qualified deferred compensation plan, a 457(f) plan for certain key employees. Contributions to this plan for the years ended September 30, 2014 and 2013, were $106,099 and $77,500, respectively. As of September 30, 2014 and 2013, the employer contribution liability amounted to $101,000 and $120,001, respectively. The asset and deferred compensation liability at September 30, 2014 and 2013, are as follows: Asset 2014 Liability IRSP Plan $ 509,314 $ 509, (b) Plan - 6, (f) Plan - 101,000 $ 509,314 $ 617,059 Asset 2013 Liability IRSP Plan $ 353,616 $ 353, (b) Plan - 2, (f) Plan - 120,001 $ 353,616 $ 475,780 13

16 Notes to Financial Statements Note 9. Contributed Services and Materials During the years ended September 30, 2014 and 2013, the value of contributed services and materials were as follows: 2014 Program Services Administrative Total Consulting and contract fees $ 697,140 $ 44,130 $ 741,270 $ 697,140 $ 44,130 $ 741, Program Services Administrative Total Consulting and contract fees $ 829,779 $ 77,513 $ 907,292 Travel $ 830,602 $ 77,513 $ 908,115 In addition to the $741,270 in contributed goods and services, a direct cash contribution of $236,353 was recognized from in-country partners for the year ended September 30, Direct cash contributions are distinguished from in-kind donations when funds are paid directly in-country by a third party on behalf of the project, rather than for the provision of goods and services. For the year ended September 30, 2013, in-country contributions were $210,350. The consulting and contract fees related to program services, represent the local Pride campaign manager salaries provided as an in-kind service. Those consulting and contract fees related to administrative services include donated time for legal and other specialized services to Rare. Note 10. Commitments and Contingencies Rare also has a line of credit totaling $4,000,000 from JP Morgan. The line of credit has a variable interest rate equal to the Bank s Prime Rate plus 1.0% and expires on January 31, As of September 30, 2014, there were no balances due on the line of credit. 14

17 Independent Auditor s Report on the Supplementary Information To the Board of Directors Rare Arlington, Virginia We have audited the financial statements of Rare as of and for the years ended September 30, 2014 and 2013, and have issued our report thereon, which contains an unmodified opinion on those financial statements. See pages 1 and 2. Our audits were conducted for the purpose of forming an opinion on the financial statements as a whole. The accompanying supplementary information is presented for purposes of additional analysis and is not a required part of the financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the financial statements. The information has been subjected to the auditing procedures applied in the audits of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated, in all material respects, in relation to the financial statements as a whole. McLean, Virginia April 20,

18 Statements of Functional Expenses Years Ended September 30, 2014 and 2013 Program Program Services Fundraising Administrative Total Services Fundraising Administrative Total Salaries and Benefits $ 9,798,694 $ 1,176,903 $ 1,202,968 $ 12,178,565 $ 8,093,085 $ 1,043,898 $ 907,068 $ 10,044,051 Consulting and Professional Fees 2,547,327 63, ,750 2,923,871 2,810,571 36, ,331 3,119,593 Travel and Meetings 2,298, , ,803 2,619,409 2,138,457 75,722 83,984 2,298,163 Subgrants and Awards 2,586, ,586,712 1,869, ,869,947 Occupancy Costs 547,736 65, , , , , , ,159 Professional Development 279, , , ,885 Supplies 140,051 22,245 44, , ,283 3,765 38, ,433 Equipment and Materials 95, , ,153 83,097 1,213 84, ,773 Communications 95,946 10,912 47, ,777 96,233 9,986 49, ,151 Depreciation and Amortization 7, , ,275 17, , ,688 Miscellaneous 20, ,393 37,749 20, ,824 81,110 Postage and Printing 30,967 5,623 18,883 55,473 44,483 12,930 10,737 68,150 Bank Fees 5,718 2,122 19,768 27,608 3, ,452 28,785 Insurance 10,757 5,066 14,820 30,643 12,578 3,348 11,498 27,424 Subtotal 18,466,144 1,560,967 2,087,576 22,114,687 15,949,724 1,304,426 1,783,162 19,037,312 Allocation of Administrative Costs 831,824 77,991 (909,815) - 794,079 67,012 (861,091) - Total $ 19,297,968 $ 1,638,958 $ 1,177,761 $ 22,114,687 $ 16,743,803 $ 1,371,438 $ 922,071 $ 19,037,312 16