Ronald McDonald House of Western Michigan, Inc. Years Ended December 31, 2014 and Financial Statements

Transcription

1 Ronald McDonald House of Western Michigan, Inc. Years Ended December 31, 2014 and 2013 Financial Statements

2 TABLE OF CONTENTS Page Independent Auditors' Report 1 Financial Statements for the Years Ended December 31, 2014 and 2013 Statements of Financial Position 3 Statements of Activities 4 Statements of Functional Expenses 6 Statements of Cash Flows 8 Notes to Financial Statements 9

3 Rehmann Robson 2330 East Paris Ave. SE Grand Rapids, MI Ph: Fx: rehmann.com Board of Directors Ronald McDonald House of Western Michigan, Inc. Grand Rapids, Michigan INDEPENDENT AUDITORS' REPORT April 30, 2015 We have audited the accompanying financial statements of Ronald McDonald House of Western Michigan, Inc. (a Michigan not-for-profit corporation) (the "Organization"), which comprise the statements of financial position as of December 31, 2014 and 2013, and the related statements of activities, functional expenses, 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. Independent Auditors' 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 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 auditor 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 Organization 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 Organization 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. 1

4 Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Ronald McDonald House of Western Michigan, Inc. as of December 31, 2014 and 2013, 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. 2

5 STATEMENTS OF FINANCIAL POSITION December ASSETS Current assets Cash and cash equivalents $ 256,528 $ 278,851 Receivables: Accounts, net 10,357 6,309 Contributions 81,485 - Prepaid expenses 11,237 10,049 Total current assets 359, ,209 Cash and cash equivalents held for donor restricted endowment - 527,059 Investments for board designated operating reserve 1,583,384 1,530,772 Investments for donor-restricted endowment 543,325 - Beneficial interest in assets held by foundation for board designated endowment 98,648 95,910 Property and equipment, net 1,113,507 1,212,855 Total assets $ 3,698,471 $ 3,661,805 LIABILITIES AND NET ASSETS Liabilities Accounts payable $ 15,403 $ 12,699 Accrued payroll and other liabilities 15,438 10,452 Total liabilities (all current) 30,841 23,151 Net assets Unrestricted: Board designated endowment 98,648 95,910 Board designated operating reserve 1,583,384 1,530,772 Net investment in property and equipment 1,113,507 1,212,855 Undesignated 319, ,436 Temporarily restricted 31,182 14,431 Permanently restricted 521, ,250 Total net assets 3,667,630 3,638,654 Total liabilities and net assets $ 3,698,471 $ 3,661,805 The accompanying notes are an integral part of these financial statements. 3

6 STATEMENT OF ACTIVITIES For the Year Ended December 31, 2014 Temporarily Permanently Unrestricted Restricted Restricted Total Support and revenue Contributions: Cash $ 227,363 $ 30,072 $ - $ 257,435 Direct mail 4, ,665 In-kind 142, ,516 Special events (net of expenses of $55,724) 56, ,775 Grants 176, ,973 Guest income 108, ,183 Investment income 52,009 18,691-70,700 Net assets released from restrictions 32,117 (32,117) - - Total support and revenue 800,601 16, ,247 Expenses Program services - lodging and assistance 638, ,740 General and administrative 99, ,853 Fundraising 62, ,613 Total expenses 801, ,206 Nonoperating items Realized and unrealized gain on investments, net 10, ,796 Change in fair value of beneficial interest in assets held by foundation 2, ,738 Loss on disposal of property and equipment (599) - - (599) Total nonoperating items 12, ,935 Change in net assets 12,225 16,751-28,976 Net assets - beginning of year 3,102,973 14, ,250 3,638,654 Net assets - end of year $ 3,115,198 $ 31,182 $ 521,250 $ 3,667,630 The accompanying notes are an integral part of these financial statements. 4

7 STATEMENT OF ACTIVITIES For the Year Ended December 31, 2013 Temporarily Permanently Unrestricted Restricted Restricted Total Support and revenue Contributions: Cash $ 175,669 $ 34,847 $ - $ 210,516 Direct mail - True Sense 73, ,012 In-kind 58, ,455 Special events (net of expenses of $56,502) 36, ,014 Grants 174, ,904 Guest income 93, ,405 Investment income 53, ,139 Net assets released from restrictions 31,225 (31,225) - - Total support and revenue 696,489 3, ,445 Expenses Program services - lodging and assistance 499, ,518 General and administrative 114, ,157 Fundraising 155, ,072 Total expenses 768, ,747 Nonoperating items Realized and unrealized gain on investments, net 165, ,021 Change in fair value of beneficial interest in assets held by foundation 7, ,999 Loss on disposal of property and equipment (102) - - (102) Total nonoperating items 172, ,918 Change in net assets 100,660 3, ,616 Net assets - beginning of year 3,002,313 10, ,250 3,534,038 Net assets - end of year $ 3,102,973 $ 14,431 $ 521,250 $ 3,638,654 The accompanying notes are an integral part of these financial statements. 5

8 STATEMENT OF FUNCTIONAL EXPENSES For the Year Ended December 31, 2014 Program Services - lodging and General and assistance Administrative Fundraising Total Salaries, wages and benefits $ 206,551 $ 44,407 $ 40,108 $ 291,066 Depreciation 110,076 8,756 6, ,086 Education 791 2, ,954 Guest services 120, ,207 Insurance 16,096 1, ,291 Marketing 1, ,243 Office 18,506 6,899 1,051 26,456 Occupancy 57,021 4,243 3,031 64,295 Postage, printing and shipping 10, ,458 Professional 19,200 26,431 5,468 51,099 Telephone 18,126 1,442 1,030 20,598 Travel Utilities 23,015 1,831 1,308 26,154 Other expenses 36, ,268 39,489 Total expenses $ 638,740 $ 99,853 $ 62,613 $ 801,206 The accompanying notes are an integral part of these financial statements. 6

9 STATEMENT OF FUNCTIONAL EXPENSES For the Year Ended December 31, 2013 Program Services - lodging and General and assistance Administrative Fundraising Total Salaries, wages and benefits $ 179,169 $ 47,851 $ 86,449 $ 313,469 Depreciation 109,831 8,737 6, ,808 Education 1,052 3, ,261 Guest services 40, ,094 Insurance 15,363 1, ,458 Direct mail - True Sense ,019 42,044 60,603 Office 16,550 1, ,215 Occupancy 47,184 3,230 2,307 52,721 Postage, printing and shipping 3, ,143 Professional 15,184 24,215 6,408 45,807 Telephone 17,144 1, ,482 Travel Utilities 24,747 1,969 1,406 28,122 Other expenses 28,861 1,394 6,545 36,800 Total expenses $ 499,518 $ 114,157 $ 155,072 $ 768,747 The accompanying notes are an integral part of these financial statements. 7

10 STATEMENTS OF CASH FLOWS Year Ended December Cash flows from operating activities Change in net assets $ 28,976 $ 104,616 Adjustments to reconcile change in net assets to net cash (used in) provided by operating activities: Realized and unrealized gain on investments (10,796) (165,021) Depreciation 125, ,808 Loss on disposal of property and equipment Interest income earned on donor restricted endowment 22, Change in value of beneficial interest in assets held by foundation (2,738) (7,999) Changes in operating assets and liabilities that provided (used) cash: Accounts receivable, net (4,048) 1,131 Contributions receivable (81,485) 5,000 Prepaid expenses (1,188) (123) Accounts payable 2,704 (3,183) Accrued payroll and other liabilities 4, Net cash provided by operating activities 84,171 60,581 Cash flows from investing activities Purchases of property and equipment (15,568) (25,202) Proceeds from sales of investments 1,488, ,193 Purchases of investments (2,106,824) (170,050) Net cash used in investing activities (633,553) (71,059) Net decrease in cash and cash equivalents (549,382) (10,478) Cash and cash equivalents, beginning of year 805, ,388 Cash and cash equivalents, end of year $ 256,528 $ 805,910 Classified on the statement of financial position as Cash and cash equivalents $ 256,528 $ 278,851 Cash and cash equivalents held for donor-restricted endowment, noncurrent - 527,059 $ 256,528 $ 805,910 The accompanying notes are an integral part of these financial statements. 8

11 NOTES TO FINANCIAL STATEMENTS 1. NATURE OF ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES Nature of Organization and Mission The accompanying financial statements present the financial position, results of operations and cash flows of Ronald McDonald House of Western Michigan, Inc. (the Organization ). The Organization was organized in Michigan as a not-for-profit corporation in The work of the Organization is to provide temporary lodging and assistance to families who are displaced because of their children's extended medical treatment. The financial statements of the Organization have been prepared on the accrual basis of accounting. The significant accounting policies of the Organization are described below. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the year. Actual results could differ from those estimates. Significant estimates include but are not limited to determining the fair value of investments, donated goods, and the beneficial interest in assets held by the Grand Rapids Community Foundation. Basis of Presentation The Organization has classified information regarding its financial position and activities according to three classes of net assets depending on the existence or absence of donor-imposed restrictions: unrestricted net assets, temporarily restricted net assets, and permanently restricted net assets. Temporarily restricted net assets result from donor-imposed restrictions that expire with the passage of time or can be removed by meeting certain purpose requirements. Permanently restricted net assets result from donor-imposed restrictions that limit the use of net assets in perpetuity. Investment income, gains and losses on restricted net assets are classified as unrestricted unless specifically restricted by the donor or by applicable state law. Fair Value Measurements Fair value refers to the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants in the market in which the reporting entity transacts such sales or transfers based on the assumptions market participants would use when pricing an asset or liability. Assumptions are developed based on prioritizing information within a fair value hierarchy that gives the highest priority to quoted prices in active markets (level 1) and the lowest priority to unobservable data (level 3). For a further discussion of Fair Value Measurements, refer to Note 2 to the financial statements. 9

12 NOTES TO FINANCIAL STATEMENTS Cash and Cash Equivalents Cash and cash equivalents consist of demand deposits in banks, institutional money market funds and cash on hand. For purposes of the statement of cash flows, the Organization considers all highly liquid investments purchased with original maturities of three months or less to be cash equivalents, except that such assets held in endowment are generally classified as noncurrent. The Organization maintains demand deposits in several banks, which are insured by the Federal Deposit Insurance Corporation. At times throughout the year, the cash balances may exceed insured limits. Management believes the Organization is not exposed to any significant interest rate or other financial risk on these deposits. Investments Investments held by the Organization consist of money market funds, mutual funds, and real estate investment trusts. Such investments are carried at fair value, based on quoted market prices. Investments received as donations are initially recorded at fair value on the date of receipt. Realized gains and losses on the sale of investments are determined based on the first-in, first-out method. Unrealized gains and losses are included in nonoperating income on the statement of activities. Contributions Receivable The Organization has received pledges from various donors to contribute monies in the future for various purposes. As these pledges are all due within one year, they are not discounted to the net present value. Property and Equipment and Depreciation Property and equipment is stated at cost. Donated property and equipment is recorded at fair value at the date of donation. Donations are reported as unrestricted support unless the donor has restricted the use of the donated asset to a specific purpose. Absent explicit donor stipulations about how long those long-lived assets must be maintained, the Organization reports expirations of donor restrictions when the donated or acquired long-lived assets are placed in service. Depreciation is computed using the straightline method over the estimated useful lives of the related assets, which range from 3 to 39 years. Major improvements and renewals are capitalized while ordinary maintenance and repairs are expensed. Management annually reviews these assets to determine whether carrying values have been impaired. Beneficial Interest in Assets Held by Foundation The Organization has established two funds with the Grand Rapids Community Foundation ("Foundation") with the transfer of $50,000 of board designated cash and specified itself as beneficiary (See Note 5). Annual revaluation occurs based on changes to the market value and fees charged, and this revaluation is treated as an increase or decrease to unrestricted net assets in the statement of activities. Taking into account additional transfers, investment gains/losses, and fees, the balances totaled $98,648 and $95,910 at December 31, 2014 and 2013, respectively. Variance power remains with the Organization. Distributions of unrestricted amounts will be made as the Foundation deems appropriate. There were distributions of $873 and $768 during 2014 and 2013, respectively. 10

13 NOTES TO FINANCIAL STATEMENTS In addition, the Organization maintains a separate account with the Foundation to allow for direct contributions on the Organization s behalf. While such contributions are earmarked for the Organization, the variance power held by the Foundation precludes their recognition in the accompanying financial statements in accordance with generally accepted accounting principles. The total held in this separate account amounted to $7,409 and $7,168 at December 31, 2014 and 2013, respectively. Revenue Recognition Contributions or other revenue received are recorded as unrestricted, temporarily restricted, or permanently restricted support depending on the existence and/or nature of any donor restrictions. Contributions, special event, and grant revenue are recognized when the donor makes a promise to give that is, in substance, unconditional. Contributions, special event revenue, and grants that are restricted by the donor are reported as increases in unrestricted, temporarily restricted or permanently restricted net assets depending on the nature of the restrictions. When a restriction has been satisfied (that is, when a stipulated time restriction ends or purpose restriction is accomplished), temporarily restricted net assets are reclassified to unrestricted net assets and reported in the statement of activities as net assets released from restrictions. Room rental revenue is recognized when service is provided. Room rental revenue contains amounts both paid and payable by the Federal Government from the Medicaid program. Amounts receivable from Medicaid at December 31, 2014 and 2013 are reported as accounts receivable, net, representing the amount that management expects to collect in the next year. Donated Services and Goods Volunteers have donated time to the Organization s operations during the year; however, these donated services are not reflected in the financial statements to the extent that the services do not require specialized skills. Donated goods are recorded as revenue on the date of the receipt at estimated fair market value. Donated materials of $142,516 and $58,455 were included in support and revenue during 2014 and 2013, respectively. This revenue was offset by expenses shown on the statements of activities and functional expenses according to the nature of the donation. Income Taxes The Organization is a tax-exempt organization under Section 501(c)(3) of the Internal Revenue Code and is exempt from similar state and local taxes. Although the Organization was granted an income tax exemption by the Internal Revenue Service, such exemption does not apply to unrelated business taxable income. Such income, pursuant to the Internal Revenue Code and related regulations, includes investment income, such as interest received from sources other than directly from contributions. The Organization has been classified as not a private foundation. 11

14 NOTES TO FINANCIAL STATEMENTS The Organization has evaluated its income tax filing positions for years 2010 through 2014, the years which remain subject to examination as of December 31, The Organization concluded that there are no significant uncertain tax positions requiring recognition in the Organization s financial statements. The Organization does not expect the total amount of unrecognized tax benefits ( UTB ) (e.g. tax deductions, exclusions, or credits claimed or expected to be claimed) to significantly change in the next twelve months. The Organization does not have any amounts accrued for interest and penalties related to UTBs at December 31, 2014 or 2013, and is not aware of any claims for such amounts by federal or state income tax authorities. Reclassifications Certain amounts in the 2013 financial statements have been reclassified to conform with the 2014 presentation. Functional Allocation of Expenses The costs of providing the program services have been summarized on a functional basis in the statement of activities. Accordingly, certain costs have been allocated among the programs and supporting services benefited as detailed in the statement of functional expenses. Subsequent Events In preparing these financial statements, management has evaluated, for potential recognition or disclosure, significant events or transactions that occurred during the period subsequent to December 31, 2014, the most recent statement of financial position presented herein, through April 30, 2015, the date these financial statements were available to be issued. No such significant events or transactions were identified. 2. FAIR VALUE MEASUREMENTS AND INVESTMENTS The Organization utilizes fair value measurements to record fair value adjustments to certain assets and to determine fair value disclosures. Investments and beneficial interest in assets held by foundation are recorded at fair value on a recurring basis. Following is a description of the valuation methodologies and key inputs used to measure assets recorded at fair value. Investments: Marketable equity securities are recorded at fair value on a recurring basis. Fair value measurement is based upon quoted prices. Level 1 securities include mutual funds and real estate investment trusts traded on an active exchange, such as the New York Stock Exchange, that are traded by dealers or brokers in active over-the-counter markets and money market funds. Beneficial interest in assets held by foundation: Fair value measurements of the underlying investments held by foundation are based upon quoted prices. The underlying Foundation assets cannot be liquidated or redeemed by the Organization. As such, no quoted prices or active market are available for this asset (Level 3). As a practical expedient, the carrying value of this asset is equal to the allocated portion of the total fair values of the underlying investments held by the Foundation. 12

15 NOTES TO FINANCIAL STATEMENTS The Organization groups its investments and beneficial interest in assets held by foundation at fair value into three levels (termed the fair value hierarchy), based on the markets in which the assets are traded and the reliability of the assumptions used to determine fair value. These levels are: Level 1: Valuation is based upon quoted prices for identical instruments traded in active markets. The Organization considers its investment securities to be Level 1 assets. Level 2: Valuation is based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market. Level 3: Valuation is generated from model-based techniques that use at least one significant assumption not observable in the market. These unobservable assumptions reflect estimates of assumptions that market participants would use in pricing the asset or liability. The Organization considers the beneficial interest in assets held by Foundation as Level 3. The preceding methods described may produce a fair value calculation that may not be reflective of future fair values. Furthermore, although the Organization believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date. The following tables set forth by level, within the fair value hierarchy, the Organization s assets measured at fair value on a recurring basis as of December 31: 2014 Total Level 1 Level 2 Level 3 Investment securities Money market and savings certificates $ 80,533 $ 80,533 $ - $ - Mutual bond funds, limited duration 134, , Mutual equity funds, index 578, , Mutual equity funds, value 15,933 15, Mutual equity funds, growth 1,212,618 1,212, Mutual equity funds, energy 22,330 22, Real estate investment trusts 81,455 81, Total investment securities 2,126,709 2,126, Beneficial interest in assets held by foundation Total assets at fair value 98, ,648 $ 2,225,357 $ 2,126,709 $ - $ 98,648 13

16 NOTES TO FINANCIAL STATEMENTS 2013 Total Level 1 Level 2 Level 3 Investment securities Money market and savings certificates $ 55,832 $ 55,832 $ - $ - Mutual bond funds, limited duration 543, , Mutual equity funds, index 114, , Mutual equity funds, value 126, , Mutual equity funds, growth 633, , Real estate investment trusts 57,093 57, Total investment securities 1,530,772 1,530, Beneficial interest in assets held by foundation Total assets at fair value 95, ,910 $ 1,626,682 $ 1,530,772 $ - $ 95,910 The activity of the Level 3 assets (beneficial interest in assets held by foundation) was as follows for the years ended December 31: Beginning balance $ 95,910 $ 87,911 Withdrawals (873) (768) Change in fair value 3,611 8,767 Ending balance $ 98,648 $ 95,910 Net realized and unrealized gain on investments is summarized as follows for the years ended December 31: Net realized gain on investments $ 123,820 $ 22,762 Net unrealized (loss) on investments (113,024) 142,259 Total $ 10,796 $ 165,021 14

17 NOTES TO FINANCIAL STATEMENTS 3. PROPERTY AND EQUIPMENT Net property and equipment consists of the following at December 31: Land $ 201,450 $ 201,450 Buildings and improvements 2,312,732 2,301,059 Office equipment 62,491 68,475 Equipment, furniture, and fixtures 197, ,500 Motor vehicles 32,366 32,366 Total 2,806,817 2,788,850 Less accumulated depreciation 1,693,310 1,575,995 Property and equipment, net $ 1,113,507 $ 1,212, RESTRICTIONS ON NET ASSETS Temporarily restricted net assets consist of the following at December 31: Portion of the donor-restricted endowment not permanently restricted $ 22,075 $ 5,809 Restricted for purpose: Technology 1,695 6,747 Kitchen improvements 4, Other 2,437 1,014 Total temporarily restricted net assets $ 31,182 $ 14,431 The Organization's permanently restricted net assets totaled $521,250 at December 31, 2014 and 2013 and relate to the Organization's permanent endowment fund. 5. ENDOWMENT FUNDS The Organization's endowment fund includes one donor-restricted fund, as well as a board-designated endowment fund. As required by generally accepted accounting principles, net assets associated with endowment funds are classified and reported based on the existence or absence of donor-imposed restrictions. The principal amount of the donor-restricted endowment fund has been permanently restricted by the original donor, whereas the investment income earned on the assets of this fund is temporarily restricted and available for the stated purpose of the fund at the time the Board of Directors appropriates the income for expenditure. The Organization's separate fund held at the local community foundation, has been designated by the Board of Directors as a quasi-endowment fund. Net assets associated with this fund are classified as unrestricted in the accompanying financial statements. 15

18 NOTES TO FINANCIAL STATEMENTS Interpretation of Relevant Law The Organization's Board of Directors has interpreted the State of Michigan Prudent Management of Institutional Funds Act (SMPMIFA) as requiring the preservation of fair value of the original gift as of the gift date for donor-restricted endowment funds absent explicit donor stipulations to the contrary. As a result of this interpretation, the Organization classifies as permanently restricted net assets (a) the historical dollar value of gifts donated to the permanent endowment, (b) the historical dollar 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, if any, at the time the accumulation is added to the fund. The remaining portion of the donor-restricted endowment fund that is not classified in permanently restricted net assets is classified as temporarily restricted net assets until those amounts are appropriated for expenditure by the Organization in a manner consistent with the standard of prudence prescribed by SMPMIFA. For board-designated endowment funds, the entire balances are classified as unrestricted. In accordance with SMPMIFA, the Organization considers the following factors in making a determination to appropriate or accumulate donor-restricted endowment funds: The The General The The Other The duration and preservation of the fund; purposes of the Organization and the donor-restricted endowment fund; economic conditions; possible effect of inflation and deflation; expected total return from income and the appreciation of investments; resources of the Organization; and investment policies of the Organization. Endowment Net Asset Composition by Type of Fund December 31, 2014 Unrestricted Temporarily Restricted Permanently Restricted Total Board-designated endowment fund $ 98,648 $ - $ - $ 98,648 Donor-restricted endowment fund - 22, , ,325 Endowment net assets December 31, 2014 $ 98,648 $ 22,075 $ 521,250 $ 641,973 December 31, 2013 Unrestricted Temporarily Restricted Permanently Restricted Total Board-designated endowment fund $ 95,910 $ - $ - $ 95,910 Donor-restricted endowment fund - 5, , ,059 Endowment net assets December 31, 2013 $ 95,910 $ 5,809 $ 521,250 $ 622,969 16

19 NOTES TO FINANCIAL STATEMENTS Changes in Endowment Net Assets Unrestricted Temporarily Restricted Permanently Restricted Total Endowment net assets, January 1, 2014 $ 95,910 $ 5,809 $ 521,250 $ 622,969 Investment income and gains Investment income, net of expense - 18,691-18,691 Realized and unrealized gains Total investment income and gains Appropriation of endowment assets for expenditure - 18,796-18,796 - (2,530) - (2,530) Change in value of beneficial interest in assets held by foundation 2, ,738 Endowment net assets, December 31, 2014 $ 98,648 $ 22,075 $ 521,250 $ 641,973 Unrestricted Temporarily Restricted Permanently Restricted Total Endowment net assets, January 1, 2013 $ 87,911 $ 5,475 $ 521,250 $ 614,636 Investment income, net of expense Change in value of beneficial interest in assets held by foundation 7, ,999 Endowment net assets, December 31, 2013 $ 95,910 $ 5,809 $ 521,250 $ 622,969 Return Objectives and Risk Parameters The Organization has adopted investment and spending policies for endowment assets that attempt to provide a predictable stream of funding to the program supported by its endowment while seeking to maintain the purchasing power of the endowment assets. Under this policy, as approved by the Board of Directors, the endowment assets should be invested in a manner that no more than 80% will be in fixed income securities and at least 20% will be in money market funds. The total net return based on the policy shall be deemed to be acceptable under the risk/return objectives. Actual returns in any given year may vary from this amount. 17

20 NOTES TO FINANCIAL STATEMENTS Strategies Employed for Achieving Objectives To satisfy its long-term rate-of-return objectives, the Organization relies on a total return strategy in which investment returns are achieved through both capital appreciation (realized and unrealized) and current yield (interest and dividends). The Organization targets a diversified asset allocation that places a greater emphasis on conservative investments to achieve its long-term return objectives within prudent risk constraints. Spending Policy and How the Investment Objectives Relate to Spending Policy Over the long term, the Organization expects the current spending policy to allow its endowment to grow at an average rate equal to or greater than the consumer price index. This is consistent with the Organization s objective to maintain the purchasing power of the endowment assets as well as to provide additional real growth through new gifts and investment return. 6. RETIREMENT PLAN The Organization maintains a deferred compensation plan qualified under Section 401(k) of the Internal Revenue Code. Under this plan, eligible employees are permitted to contribute up to 10% of gross compensation into the retirement plan up to a maximum determined by the Internal Revenue Code. The Organization does not contribute to the plan. 7. RELATED PARTIES The Organization receives grants and contributions from Ronald McDonald House Charities of Outstate Michigan, Inc. An affiliation agreement exists between the two entities and dictates that they share at least two board members. As an affiliate of Ronald McDonald House Charities of Outstate Michigan, Inc., the Organization has historically received grant funding each year, however such funding is not guaranteed. Grant revenue received during 2014 and 2013 was $101,142 and $121,055, respectively. In 2014 and 2013, the Organization also awarded construction projects to a company who employs one of the Organization's board members. Payments in 2014 and 2013 totaled approximately $31,700 and $4,200, respectively. The amount owed to the company at December 31, 2014 and 2013 was $0 and $858, respectively. 18