Community Foundation of Greater Flint and Supporting Organizations

Transcription

1 Community Foundation of Greater Flint Combined Financial Statements Years Ended December 31, 2016 and 2015 The report accompanying these financial statements was issued by BDO USA, LLP, a Delaware limited liability partnership and the U.S. member of BDO International Limited, a UK company limited by guarantee.

2 Combined Financial Statements Years Ended December 31, 2016 and 2015

3 Contents Independent Auditor s Report 3-4 Combined Financial Statements: Statements of Financial Position 5-6 Statements of Activities and Changes in Net Assets 7-10 Statements of Cash Flows

4 Independent Auditor s Report Community Foundation of Greater Flint and Supporting Organizations Flint, Michigan We have audited the accompanying combined financial statements of the Community Foundation of Greater Flint (the Community Foundation), Foundation for the Flint Cultural Center (FFCC) and Foundation for Flint (FFF), which comprise the combined statements of financial position as of December 31, 2016 and 2015, and the related combined statements of activities and changes in net assets and cash flows for the years then ended, and the related notes to the combined financial statements. Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these combined 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 combined 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 combined 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 combined financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the combined financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the combined financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Community Foundation s preparation and fair presentation of the combined 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 Community Foundation 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 combined financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. BDO USA, LLP, a Delaware limited liability partnership, is the U.S. member of BDO International Limited, a UK company limited by guarantee, and forms part of the international BDO network of independent member firms. BDO is the brand name for the BDO network and for each of the BDO Member Firms. 3

5 Opinion In our opinion, the combined financial statements referred to above present fairly, in all material respects, the combined financial position of the Community Foundation, FFCC and FFF as of December 31, 2016 and 2015, 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. Kalamazoo, Michigan June 9,

6 Combined Financial Statements

7 Combined Statements of Financial Position December 31, 2016 Community Foundation FFCC FFF Total Assets Current Assets: Cash and cash equivalents $ 1,497,115 $ - $ 964,001 $ 2,461,116 Pledges and other receivables 111,357-52, ,260 Prepaid expenses 72,370 1,692 1,250 75,312 Total Current Assets 1,680,842 1,692 1,018,154 2,700,688 Fixed Assets - Net 248, ,572 Investments 167,361,346 18,367,419 24,378, ,106,765 Total Assets $ 169,290,760 $ 18,369,111 $ 25,396,154 $ 213,056,025 Liabilities and Net Assets Current Liabilities: Grants payable $ 852,070 $ - $ 452,000 $ 1,304,070 Accounts payable and accrued expenses 261, , ,948 Liability to life beneficiaries of planned gifts 109, ,113 Total Current Liabilities 1,222, ,418 1,754,131 Non-Current Liabilities - Funds held on behalf of nonprofit endowments 2,513, ,513,520 Total Liabilities 3,735, ,418 4,267,651 Net Assets: Unrestricted: Undesignated 3,362,504-1,316,147 4,678,651 Board-designated 11,296, ,296,593 Aggregate deficiency - (79,581) - (79,581) Temporarily restricted 51,166,020 2,447,665 23,548,589 77,162,274 Permanently restricted 99,729,765 16,000, ,730,437 Total Net Assets 165,554,882 18,368,756 24,864, ,788,374 Total Liabilities and Net Assets $ 169,290,760 $ 18,369,111 $ 25,396,154 $ 213,056,025 5

8 Combined Statements of Financial Position December 31, 2015 Community Foundation FFCC Total $ 801,443 $ - $ 801, , ,620 51,162 1,692 52, ,225 1, , , , ,135,663 18,060, ,196,326 $ 146,380,777 $ 18,062,355 $ 164,443,132 $ 270,190 $ - $ 270, , , , , , ,429 2,348,462-2,348,462 2,950,891-2,950,891 3,097,639-3,097,639 10,937,752-10,937,752 - (234,396) (234,396) 44,172,432 2,296,079 46,468,511 85,222,063 16,000, ,222, ,429,886 18,062, ,492,241 $ 146,380,777 $ 18,062,355 $ 164,443,132 See accompanying notes to combined financial statements. 6

9 Combined Statements of Activities and Changes in Net Assets Year Ended December 31, 2016 Community Foundation Temporarily Permanently Unrestricted Restricted Restricted Revenues, Gains (Losses), and Other Support: Gifts and pledges $ 9,343,894 $ 3,918,685 $ 1,162,525 Grants received 1,808,000 3,662,595 2,205,402 Net investment income 254,421 2,431,534 - Net realized gain (loss) on investments 122, ,528 (129,764) Net unrealized gain on investments 460,109 2,724,291 11,169,405 Management fees 61, Change in value of liability to life beneficiaries 2, Net assets released from restrictions 6,401,911 (6,502,045) 100,134 Total Revenues, Gains (Losses), and Other Support 18,454,487 6,993,588 14,507,702 Expenses: Program services: Grants 15,035, Program-related expenses 302, Programs and grants administration 700, Investment consulting fees 147, Total program services 16,186, Support services: Fund management and administrative 696, Development and fund-raising 920, Depreciation 27, Total support services 1,644, Total Expenses 17,830, Increase in Net Assets 623,706 6,993,588 14,507,702 Net Assets, beginning of year 14,035,391 44,172,432 85,222,063 Net Assets, end of year $ 14,659,097 $ 51,166,020 $ 99,729,765 7

10 Combined Statements of Activities and Changes in Net Assets Year Ended December 31, 2016 FFCC FFF Temporarily Permanently Temporarily Permanently Eliminating Unrestricted Restricted Restricted Unrestricted Restricted Restricted Entries Total $ - $ - $ - $ - $ 1,742,034 $ - $ - $ 16,167, ,227,500 24,326,264 - (8,265,764) 24,963, , , ,034, , , , , ,144, (40,435) 21, , ,340 (958,340) - 2,526,667 (2,526,667) ,113, ,586-3,754,354 23,548,589 - (8,306,199) 60,217, , ,154, (8,265,764) 9,776, ,608 30, , ,857 27, , , ,198, (8,265,764) 11,030,025 47, , (40,435) 760, , ,103, ,268 47, , (40,435) 1,891, , ,438, (8,306,199) 12,921, , ,586-1,316,147 23,548, ,296,133 (234,396) 2,296,079 16,000, ,492,241 $ (79,581) $ 2,447,665 $ 16,000,672 $ 1,316,147 $ 23,548,589 $ - $ - $ 208,788,374 8

11 Combined Statements of Activities and Changes in Net Assets Year Ended December 31, 2015 Community Foundation Temporarily Permanently Unrestricted Restricted Restricted Revenues, Gains (Losses), and Other Support: Gifts and pledges $ 486,909 $ 1,058,152 $ 812,397 Grants received - 763,819 - Net investment income 281,695 2,499,339 - Net realized loss on investments (28,594) (208,866) (30,198) Net unrealized gain (loss) on investments (702,051) (3,969,582) 5,742,457 Management fees 59, Change in value of liability to life beneficiaries (15,393) - - Net assets released from restrictions 4,958,442 (4,948,442) (10,000) Total Revenues, Gains (Losses), and Other Support 5,040,212 (4,805,580) 6,514,656 Expenses: Program services: Grants 4,236, Program-related expenses 145,961 Programs and grants administration 506, Investment consulting fees 145, Total program services 5,034, Support services: Fund management and administrative 635, Development and fund-raising 650, Depreciation 37, Total support services 1,324, Total Expenses 6,358, Increase (Decrease) in Net Assets (1,318,424) (4,805,580) 6,514,656 Net Assets, beginning of year 15,353,815 48,991,116 78,707,407 Agency Funds Adjustment - Funds held on behalf of nonprofit endowments reclassified - (13,104) - Net Assets, end of year $ 14,035,391 $ 44,172,432 $ 85,222,063 9

12 Combined Statements of Activities and Changes in Net Assets FFCC Year Ended December 31, 2015 Temporarily Permanently Eliminating Unrestricted Restricted Restricted Entries Total $ - $ - $ - $ - $ 2,357, , , ,181,971 - (52,412) - - (320,070) (234,396) (773,631) , (39,698) 19, (15,393) 983,695 (983,695) ,299 (1,408,801) - (39,698) 6,050, , ,112, ,961 32, ,260 28, , , ,971,311 46, (39,698) 642, , ,804 46, (39,698) 1,331, , (39,698) 7,302,633 (234,396) (1,408,801) - - (1,252,545) - 3,704,880 16,000, ,757, (13,104) $ (234,396) $ 2,296,079 $ 16,000,672 $ - $ 161,492,241 See accompanying notes to combined financial statements. 10

13 Combined Statements of Cash Flows Year Ended December 31, 2016 Community Foundation FFCC FFF Total Operating Activities: Increase (decrease) in net assets $ 22,124,996 $ 306,401 $ 24,864,736 $ 47,296,133 Adjustments to reconcile increase (decrease) in net assets to cash provided by (used in) operating activities: Depreciation 27, ,268 Net realized loss (gain) on investments (750,974) (133,380) - (884,354) Net unrealized loss (gain) on investments (14,353,805) (790,238) - (15,144,043) Changes in operating assets and liabilities: Pledges and other receivables 25,263 - (52,903) (27,640) Prepaid expenses (21,208) - (1,250) (22,458) Grants payable 581, ,000 1,033,880 Accounts payable and accrued expenses 56, , ,924 Payables to life beneficiaries of planned gifts (18,102) - - (18,102) Funds held on behalf of nonprofit endowments 165, ,058 Cash Provided by (Used in) Operating Activities 7,836,527 (616,862) 25,342,001 32,561,666 Investing Activities: Purchase of investments (22,246,864) (1,746,140) (24,378,000) (48,371,004) Proceeds from sale and maturity of investments 15,125,960 2,363,002-17,488,962 Purchase of fixed assets (19,951) - - (19,951) Cash Provided by (Used in) Investing Activities (7,140,855) 616,862 (24,378,000) (30,901,993) Increase (Decrease) in Cash 695, ,001 1,659,673 Cash and Cash Equivalents, beginning of year 801, ,443 Cash and Cash Equivalents, end of year $ 1,497,115 $ - $ 964,001 $ 2,461,116 11

14 Combined Statements of Cash Flows Year Ended December 31, 2015 Community Foundation FFCC Total $ 390,652 $ (1,643,197) $ (1,252,545) 37,804-37, ,658 52, ,070 (1,070,824) 1,008,027 (62,797) 68,307-68,307 1,090-1,090 30,721-30,721 19,768-19,768 (12,002) - (12,002) (129,787) - (129,787) (396,613) (582,758) (979,371) (14,692,521) (2,362,139) (17,054,660) 14,759,073 2,944,897 17,703,970 (2,400) - (2,400) 64, , ,910 (332,461) - (332,461) 1,133,904-1,133,904 $ 801,443 $ - $ 801,443 See accompanying notes to combined financial statements. 12

15 1. Nature of Business and Summary of Accounting Policies The Community Foundation of Greater Flint (the Community Foundation) receives gifts from individuals, foundations, and organizations and places them into individual funds that match the giving priorities of the donors. The majority of the gifts are endowment gifts which are preserved into perpetuity, with a portion of the cumulative net appreciation returned to the community through grants to area not-for-profit organizations. The Community Foundation s current priorities include improving literacy rates, increasing access to healthy food, and revitalization of Flint neighborhoods. In everything the Community Foundation accomplishes and supports, it seeks to create a more cohesive and vital sense of community throughout Genesee County. The Foundation for the Flint Cultural Center (FFCC), created in 2001, is a not-for-profit supporting organization of the Community Foundation whose grants are dedicated to specific component organizations of the FFCC (see Note 5). In May 2016, the Foundation for Flint (FFF), a not-for-profit supporting organization of the Community Foundation, was established to assist in Flint s emergency and recovery from the water crisis. FFF raises and distributes resources to serve the long-term health and development needs of Flint children and their families, as well as the economic vitality of the City of Flint, through several charitable funds, including the Flint Child Health and Development Fund and the Moving Flint Forward Fund. Combined Financial Statements The accompanying combined financial statements include the accounts of the Community Foundation of Greater Flint, Foundation for the Flint Cultural Center and Foundation for Flint. Inter-organizational transactions have been eliminated in the combined financial statements. Cash and Cash Equivalents Cash and cash equivalents consist of cash on hand, cash on deposit with banks, and other highly liquid debt investments with an original maturity of three months or less. At December 31, 2016 and 2015, $250,000 of the Community Foundation s cash on deposit was FDIC insured, and $1,247,115 and $551,443 was uninsured, respectively. At December 31, 2016, $248,046 of FFF s cash on deposit was FDIC insured, and $715,955 was uninsured. Investments Investments in government and corporate debt and equity securities are stated at current quoted market value. Investments in partnerships, for which a quoted market value is not available, are stated at fair value as determined by the general partner. Money market investment funds held under the custody of fund managers represent temporarily uninvested monies and are considered short-term investments. Investments in common and preferred stocks, bonds, U.S. Treasury bills, and mutual funds are carried at quoted fair market value whenever available. Realized gains and losses on sales of investments represent the difference between the net sales price and the cost of the securities sold as represented by the custodian. Unrealized gains or losses on investments represent the net change in unrealized appreciation between the balance at the beginning and the end of the year. 13

16 Fixed Assets and Depreciation Fixed assets are recorded at cost. Donated fixed assets are recorded at fair market value at date of donation. Depreciation is computed using the straight-line method over the estimated useful lives of three to ten years for furniture and equipment and 10 to 20 years for leasehold improvements. Risks and Uncertainties The Community Foundation, FFCC, and FFF invest in various securities 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 it is at least reasonably possible that changes in the values of the investment securities will occur in the near term and that such changes could materially affect the amounts reported in the Combined Statements of Financial Position. Funds Held on Behalf of Nonprofit Endowments The Community Foundation follows the accounting standards for transfers of assets to not-forprofit organizations and charitable trusts that raise or hold contributions for others. This statement establishes standards for transactions in which a community foundation accepts a contribution from a donor and agrees to transfer those assets, the return on investment of those assets, or both, to another entity that is specified by the donor. This statement specifically requires that if a not-for-profit organization establishes a fund at a community foundation with its own funds and specifies itself as the beneficiary of that fund, a community foundation must account for the transfer of such assets as a liability. The Community Foundation refers to such funds as nonprofit endowments, or agency funds. The Community Foundation maintains variance power and legal ownership of nonprofit endowment funds and, as such, continues to report the funds as assets of the Community Foundation. However, in accordance with the statement, a liability has been established for the fair value of the funds, which is generally equivalent to the present value of future payments expected to be made to the not-for-profit organizations. Classification of Net Assets To ensure observance of limitations and restrictions placed on the use of resources available to the Community Foundation and its supporting organizations, the accounts of the Community Foundation and its supporting organizations and financial statement presentation are maintained in accordance with the recommendations of the Financial Accounting Standards Board. The Community Foundation and its supporting organizations are required to report information regarding its combined financial position and activities according to three classes of net assets: unrestricted, temporarily restricted, and permanently restricted. 14

17 Resources received by the Community Foundation and its supporting organizations are held in various funds which are classified as follows: Grants Unrestricted net assets consist of resources that are neither permanently restricted nor temporarily restricted by donor-imposed endowment stipulations. This category consists of funds that are non-endowed or are endowed by Board designation. Temporarily restricted net assets consist of undistributed earnings on permanently restricted endowment funds and resources of which the use by the Community Foundation and its supporting organizations is limited by donor-imposed stipulations that: o o o Require the fund be maintained over time and may not be wholly expended; or Expire by the passage of time, including pledges receivable; or May be fulfilled through the completion of projects or programs administered by the Community Foundation and FFF. Permanently restricted net assets consist of resources of which the use by the Community Foundation and FFCC is limited by donor-imposed restrictions which require that the funds be maintained over time and historic gifts may never be spent. The Community Foundation and FFCC earnings on permanently restricted net assets are classified as temporarily restricted until appropriated for expenditure based on the terms of the original gift agreement, unless as in some cases, the donor s gift instrument further requires that any appreciation of the historic gift value be permanently restricted. Grants are recognized as liabilities at the time management authorizes the expenditures, regardless of the year in which the grants are paid. Grants are currently authorized according to the Community Foundation and it supporting organizations spending policy or when a donor restriction supersedes the spending policy, according to the terms of the gift instrument. Contributions Contributions of cash and other assets are reported as revenue as they occur and are measured at fair value. Subsequent gains or losses on the sale and reinvestment of assets received are recognized as they occur. Contributed Services During the years ended December 31, 2016 and 2015, the value of contributed services meeting the requirements for recognition in the financial statements was not material and has not been recorded. In addition, many individuals volunteer their time and perform a variety of tasks that assist the Community Foundation in various capacities. 15

18 Use of Estimates The preparation of combined financial statements in conformity with accounting principles generally accepted in the United States of America (GAAP) 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 revenues and expenses during the reporting period. Actual results could differ from these estimates. Functional Expenses The Community Foundation and its supporting organizations allocate expenses on a functional basis to funding sources, programs, and support services. Expenses that can be identified with a specific funding source, program, and support service are allocated directly according to their natural expenditure classification. Certain expenses such as administration, accounting, and occupancy are allocated and charged to specific programs and/or funding sources where budgetary considerations permit. Although methods used are considered reasonable, methods could be used that would produce different results. Federal Income Taxes The Community Foundation and its supporting organizations are exempt from federal income tax under the provisions of Section 501(c)(3) of the Internal Revenue Code (IRC) of They have been classified as organizations which are not private foundations as defined in Sections 509(a)(1) and 170(b)(1)(A)(vi) of the IRC. The Community Foundation and its supporting organizations apply a more-likely-than-not recognition threshold for all tax uncertainties. Accounting Standards Codification (ASC) Topic 740 only allows the recognition of those tax benefits that have a greater than fifty percent likelihood of being sustained upon examination by the taxing authorities. Based on its evaluation, the Community Foundation and its supporting organizations have concluded there are no significant uncertain tax positions requiring recognition in its financial statements. Subsequent Event Reporting Management has evaluated the period from January 1, 2017, through June 9, 2017, the date the financial statements were available for issuance, for subsequent events requiring recognition or disclosure in the financial statements. During the period, Flint Kids Learn (FKL) was formed as a supporting organization of the Community Foundation of Greater Flint in January 2017 for the purpose of acquiring, constructing and leasing an early childhood education facility. The anticipated cost to construct this facility is $15.9 million and will be financed primarily by loans obtained through New Markets Tax Credits. FKL has applied for 501(c)(3) status with the Internal Revenue Service. Foundation for Flint will master lease the property from FKL and sublease the property to the Genesee Intermediate School District, who will operate the facility. CFGF has agreed to provide up to $2.2 million in bridge funding for the project, and to guarantee the loans. No additional material recognizable subsequent events were identified. 16

19 2. Fixed Assets Fixed assets consist of the following: December 31, Leasehold improvements $ 390,200 $ 384,920 Furniture, fixtures, and equipment 365, ,883 Artwork 6,313 6,313 Total 761, ,116 Less accumulated depreciation 513, ,227 Net Fixed Assets $ 248,572 $ 255,889 Depreciation expense was $27,268 and $37,804 for 2016 and 2015, respectively. This section intentionally left blank. 17

20 3. Unrestricted Net Assets Unrestricted net assets, by fund type, are as follows: December 31, 2016 December 31, 2015 Community Community Foundation FFCC FFF Total Foundation FFCC Total Endowed by Board Designation: Designated $ 1,088,515 $ - $ - $ 1,088,515 $ 1,012,965 $ - $ 1,012,965 Discretionary 2,762, ,762,384 2,708,115-2,708,115 Field of interest 7,121, ,121,936 6,907,275-6,907,275 Scholarship 323, , , ,397 Aggregate deficiency - (79,581) - (79,581) - (234,396) (234,396) Total Endowed Net Assets 11,296,593 (79,581) - 11,217,012 10,937,752 (234,396) 10,703,356 Non-endowed: Designated 751, , , ,662 Discretionary 628,871-1,316,147 1,945, , ,735 Donor advised 1,328, ,328,830 1,249,489-1,249,489 Field of interest 494, , , ,641 Scholarship 159, , , ,112 Total Non-endowed Net Assets 3,362,504-1,316,147 4,678,651 3,097,639-3,097,639 Total Unrestricted Net Assets $ 14,659,097 $ (79,581) $1,316,147 $ 15,895,663 $ 14,035,391 $ (234,396) $ 13,800,995 See Note 7 for detail of the unrestricted aggregate deficiency in FFCC for 2016 and

21 4. Temporarily Restricted Net Assets Temporarily restricted net assets, by fund type, consist of the following: December 31, Community Foundation of Greater Flint: Accumulated aggregate earnings on permanently restricted funds $ 14,003,054 $ 13,464,778 By fund type: Designated 15,929,758 15,159,709 Discretionary 1,343,772 1,329,776 Donor advised 2,083,088 2,033,540 Field of interest 13,788,563 8,498,403 Scholarship 4,017,785 3,686,226 Total Community Foundation of Greater Flint $ 51,166,020 $ 44,172,432 Foundation for the Flint Cultural Center: Accumulated aggregate earnings on the following permanently restricted funds: Flint Cultural Center Corporation (FCCC) $ 691,048 $ 652,339 FCCC - Children's Fund 457, ,465 Flint Institute of Music (FIM) 997, ,264 FIM - Flint Youth Theater 302, ,011 Total Foundation for the Flint Cultural Center $ 2,447,665 $ 2,296,079 Foundation for Flint: By fund type: Designated $ 157,974 $ - Discretionary 8,995,399 - Field of interest 14,395,216 - Total Foundation for Flint $ 23,548,589 $ - 19

22 5. Permanently Restricted Net Assets Permanently restricted net assets, by fund type, are as follows: December 31, Community Foundation of Greater Flint: Designated $ 70,691,599 $ 58,657,432 Discretionary 12,618,485 12,299,924 Donor advised 694, ,063 Field of interest 12,926,100 11,470,091 Scholarship 2,799,191 2,109,553 Total Community Foundation of Greater Flint $ 99,729,765 $ 85,222,063 Foundation for the Flint Cultural Center: Flint Cultural Center Corporation $ 3,000,000 $ 3,000,000 FCCC - Children's Fund 2,000,000 2,000,000 Flint Institute of Music 5,000,000 5,000,000 FIM - Flint Youth Theater 2,000,000 2,000,000 Flint Institute of Arts 4,000,672 4,000,672 Total Foundation for the Flint Cultural Center $ 16,000,672 $ 16,000, Retirement Plans The Community Foundation maintains a 401(k) plan which covers all full-time employees. Employer contributions to the 401(k) plan were $47,326 in 2016 and $42,483 in The Community Foundation has also adopted a Section 457 deferred compensation plan to allow employees to make deferrals. 7. Designated Endowments The Community Foundation s endowment funds include both donor-restricted and funds designated by the board of trustees to function as endowments. The Community Foundation s endowed funds are classified consistent with the Classification of Net Assets Policy in the summary of accounting policies. Within the permanently restricted net assets classification, assets have been classified as donor-restricted if the donor has explicitly indicated that corpus may not be invaded. All other designated endowments have been classified as unrestricted, board-designated, or temporarily restricted. FFCC s endowment funds consist solely of donor-restricted endowment funds. 20

23 Interpretation of Relevant Law The board of trustees of the Community Foundation and the board of directors of the FFCC have interpreted the Uniform Prudent Management of Institutional Funds Act (UPMIFA) as requiring the preservation of the fair value of the original gift as of the gift date of the designated endowment funds absent explicit donor stipulations to the contrary. As a result of this interpretation, the Community Foundation and FFCC classify 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 appropriated for expenditure by the Community Foundation and FFCC in a manner consistent with the standard of prudence prescribed by UPMIFA. In accordance with UPMIFA, the Community Foundation and FFCC consider the following factors in making a determination to appropriate or accumulate designated endowment funds: 1. The duration and preservation of the fund 2. The purposes of the organization and the designated endowment fund 3. General economic conditions 4. The possible effect of inflation and deflation 5. The expected total return from income and the appreciation of investments 6. The other resources of the organization 7. The investment policies of the organization 21

24 Endowment Net Asset Composition by Type of Fund at December 31, 2016 Temporarily Permanently Unrestricted Restricted Restricted Total Community Foundation: Donor-restricted endowment funds $ - $ 48,410,982 $ 99,729,765 $ 148,140,747 Board-designated endowment funds 11,296, ,296,593 Total Community Foundation Endowment Funds $ 11,296,593 $ 48,410,982 $ 99,729,765 $ 159,437,340 FFCC - Donor-restricted endowment funds $ (79,581) $ 2,447,665 $ 16,000,672 $ 18,368,756 Endowment Net Asset Composition by Type of Fund at December 31, 2015 Temporarily Permanently Unrestricted Restricted Restricted Total Community Foundation: Donor-restricted endowment funds $ - $ 43,300,701 $ 85,222,063 $ 128,522,764 Board-designated endowment funds 10,937, ,937,752 Total Community Foundation Endowment Funds $ 10,937,752 $ 43,300,701 $ 85,222,063 $ 139,460,516 FFCC - Donor-restricted endowment funds $ (234,396) $ 2,296,079 $ 16,000,672 $ 18,062,355 22

25 Changes in Endowment Net Assets at December 31, 2016 Temporarily Permanently Unrestricted Restricted Restricted Total Community Foundation: Endowment Net Assets, beginning of year $ 10,937,752 $ 43,300,701 $ 85,222,063 $ 139,460,516 Investment return: Net appreciation (realized and unrealized) 513,650 3,482,819 11,039,641 15,036,110 Net investment income 192,429 2,430,972-2,623,401 Total investment return 706,079 5,913,791 11,039,641 17,659,511 Contributions 129,135 3,961,418 3,367,927 7,458,480 Appropriation for distributions and administrative fees (483,573) (4,986,825) - (5,470,398) Other changes - transfers from other funds 7, , , ,231 Endowment Net Assets, end of year $ 11,296,593 $ 48,410,982 $ 99,729,765 $ 159,437,340 FFCC: Endowment Net Assets, beginning of year $ (234,396) $ 2,296,079 $ 16,000,672 $ 18,062,355 Investment return: Net appreciation (realized and unrealized) 154, , ,618 Net investment income - 341, ,123 Total investment return 154,815 1,109,926-1,264,741 Contributions Appropriation for distributions and administrative fees - (958,340) - (958,340) Endowment Net Assets, end of year $ (79,581) $ 2,447,665 $ 16,000,672 $ 18,368,756 23

26 Changes in Endowment Net Assets at December 31, 2015 Temporarily Permanently Unrestricted Restricted Restricted Total Community Foundation: Endowment Net Assets, beginning of year $ 11,759,223 $ 48,632,972 $ 78,707,407 $ 139,099,602 Investment return: Net appreciation (depreciation) (realized and unrealized) (621,689) (4,178,490) 5,712, ,080 Net investment income 219,178 2,499,359-2,718,537 Total investment return (402,511) (1,679,131) 5,712,259 3,630,617 Contributions 84, , ,397 1,627,918 Appropriation for distributions and administrative fees (502,960) (4,371,557) (10,000) (4,884,517) Other changes - transfers to agency or non-endowed funds - (13,104) - (13,104) Endowment Net Assets, end of year $ 10,937,752 $ 43,300,701 $ 85,222,063 $ 139,460,516 FFCC: Endowment Net Assets, beginning of year $ - $ 3,704,880 $ 16,000,672 $ 19,705,552 Investment return: Net appreciation (depreciation) (realized and unrealized) (234,396) (826,043) - (1,060,439) Net investment income - 368, ,151 Total investment return (234,396) (457,892) - (692,288) Contributions Appropriation for distributions and administrative fees - (950,909) - (950,909) Endowment Net Assets, end of year $ (234,396) $ 2,296,079 $ 16,000,672 $ 18,062,355 24

27 Funds with Deficiencies From time-to-time, the fair value of assets associated with individual donor-restricted endowment funds may fall below the level that the donor or UPMIFA requires the Community Foundation and FFCC to retain as a fund of perpetual duration. At December 31, 2016 and 2015, the fair value of one of FFCC s endowment funds was $3,921,091 and $3,766,276, respectively, compared to an endowment corpus of $4,000,672, leaving a deficiency of $79,581 and $234,396, respectively. In accordance with GAAP, a deficiency of this nature is reported in unrestricted net assets. The deficiencies resulted from unfavorable market fluctuations. Return Objectives and Risk Parameters The Community Foundation, FFCC, and FFF have adopted investment and spending policies for their net assets that attempt to provide a predictable stream of funding to programs supported by its net assets while seeking to maintain purchasing power. Under these policies, as approved by each board of trustees, the Community Foundation, FFCC, and FFF have four objectives: (1) to preserve and grow the assets by focusing on total investment returns from a diversified portfolio of investments; (2) balance long-term growth with appropriate risk and liquidity; (3) achieve market returns using a combination of index and actively managed funds; and (4) comply with applicable laws, rules, and regulations. Strategies Employed for Achieving Objectives To satisfy their long-term rate of return objectives, the Community Foundation, FFCC, and FFF rely 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 Community Foundation, FFCC, and FFF target a diversified asset allocation of domestic and international equities, fixed income funds, and alternative investments with performance benchmarks based on each asset class. Spending Policy and How the Investment Objectives Relate to Spending Policy The Community Foundation has a policy which, subject to the intent of a donor expressed in a gift instrument, calculates the amount to be spent from an endowment fund each year within a range of 4.5% to 5.5% of the average of the fair market value of the fund over the previous twenty (20) trailing quarters ending September 30th of the immediate prior year. The percentage to be distributed within the range of 4.5% to 5.5% is reviewed and approved annually by the Board of Trustees. The rate approved for 2016 and 2015 was 5%. In establishing these policies, the Community Foundation considered the long-term return on its investment portfolio. By limiting its spending policy, the Community Foundation expects its net assets to grow over the long-term. This is consistent with the Community Foundation s objective to maintain the purchasing power of the investment portfolio and net assets, as well as to provide additional real growth through new gifts and investment return. The amount to be spent from FFCC-endowed funds is stipulated by the donor s grant agreement, which for 2016 and 2015 was 5% of the average of the fair market value of the funds over the previous twenty (20) trailing quarters ending September 30th of the immediate prior year. 25

28 8. Fair Value Measurements Generally Accepted Accounting Principals (GAAP) defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. A fair value measurement assumes that the transaction to sell the asset or transfer the liability occurs in the principal market for the asset or liability, or in the absence of a principal market, the most advantageous market for the asset or liability. The price of the principal (or most advantageous) market used to measure the fair value of the asset or liability shall not be adjusted for transaction costs. An orderly transaction is a transaction that assumes exposure to the market for a period prior to the measurement date to allow for marketing activities that are usual and customary for transactions involving such assets and liabilities; it is not a forced transaction. Market participants are buyers and sellers in the principal market that are: (i) independent; (ii) knowledgeable; (iii) able to transact; and (iv) willing to transact. In determining fair value, the Community Foundation uses various valuation approaches. GAAP establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the observable inputs be used when available. Observable inputs are inputs that market participants would use in pricing the asset based on market data obtained from sources independent of the organization. Unobservable inputs are inputs that would reflect an organization s assumptions about the assumptions market participants would use in pricing the asset developed based on the best information available in the circumstances. The hierarchy is broken down into three levels based on the observability of inputs as follows: Level 1: Valuations based on quoted prices in active markets for identical assets that the organization has the ability to access. Since valuations are based on quoted prices that are readily and regularly available in an active market, valuation of these products does not entail a significant degree of judgment. Level 2: Valuations based on one or more quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly. Level 3: Valuations based on inputs that are unobservable and significant to the overall fair value measurement. The availability of observable inputs can vary from instrument to instrument and is affected by a wide variety of factors, including, for example, the liquidity of markets and other characteristics particular to the transaction. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. The Community Foundation uses prices and inputs that are current as of the measurement date, obtained through multiple third-party custodians from independent pricing services. 26

29 The following tables exclude cash equivalents. Disclosures concerning the Community Foundation s assets and liabilities measured at fair value on a recurring basis are as follows: Community Foundation of Greater Flint Fair Value Measurements at December 31, 2016 Quoted Prices Significant in Active Other Significant Markets for Observable Unobservable Identical Assets Inputs Inputs (Level 1) (Level 2) (Level 3) Total Assets: Investments: Money market funds $ 9,009,856 $ - $ - $ 9,009,856 Equity - mutual funds - domestic 25,932,612 4,347,665-30,280,277 Equity - mutual funds - foreign 6,438,894 19,695,954-26,134,848 Fixed income - corporate bond funds - 4,246,251-4,246,251 Fixed income - government bond funds - 2,109,435-2,109,435 Fixed income - foreign - 4,862,707-4,862,707 Hybrid mutual funds 223, ,329 Alternative: Long/short credit hedge fund-of-funds - - 2,681,088 2,681,088 Long/short equity hedge fund-of-funds ,566,579 15,566,579 Multi-strategy hedge fund-of-funds - - 1,145,096 1,145,096 Absolute return hedge fund-of-funds - - 1,685,591 1,685,591 Natural resources fund-of-funds 874,567-2,731,845 3,606,412 Private equity fund-of-funds - - 5,195,074 5,195,074 Real estate fund-of-funds , ,255 Real estate funds , ,262 Closely held stock ,483,970 59,483,970 Split-interest agreements ,316 79,316 Total Assets $ 42,479,258 $ 35,262,012 $ 89,620,076 $ 167,361,346 Liabilities: Liability to life beneficiaries of planned gifts $ - $ - $ 109,113 $ 109,113 Funds held on behalf of nonprofit endowments - - 2,513,520 2,513,520 Total Liabilities $ - $ - $ 2,622,633 $ 2,622,633 27

30 Community Foundation of Greater Flint Fair Value Measurements at December 31, 2015 Quoted Prices Significant in Active Other Significant Markets for Observable Unobservable Identical Assets Inputs Inputs (Level 1) (Level 2) (Level 3) Total Assets: Investments: Money market funds $ 3,575,847 $ - $ - $ 3,575,847 Equity - mutual funds - domestic 20,079,535 6,944,874-27,024,409 Equity - mutual funds - foreign 6,091,712 18,181,284-24,272,996 Fixed income - corporate bond funds - 8,131,174-8,131,174 Fixed income - government bond funds - 1,205,212-1,205,212 Fixed income - foreign - 5,121,035-5,121,035 Hybrid mutual funds 212, ,059 Alternative: Long/short credit hedge fund-of-funds - - 2,993,081 2,993,081 Long/short equity hedge fund-of-funds ,236,844 12,236,844 Multi-strategy hedge fund-of-funds - - 1,737,698 1,737,698 Absolute return hedge fund-of-funds - - 1,537,945 1,537,945 Hedging strategies hedge fund-of-funds , ,068 Natural resources fund-of-funds 953,381-2,931,186 3,884,567 Private equity fund-of-funds - - 5,601,718 5,601,718 Real estate fund-of-funds , ,930 Real estate funds , ,842 Closely held stock ,577,038 46,577,038 Split-interest agreements ,200 77,200 Total Assets $ 30,912,534 $ 39,583,579 $ 74,639,550 $ 145,135,663 Liabilities: Liability to life beneficiaries of planned gifts $ - $ - $ 127,215 $ 127,215 Funds held on behalf of nonprofit endowments - - 2,348,462 2,348,462 Total Liabilities $ - $ - $ 2,475,677 $ 2,475,677 28

31 Disclosures concerning FFCC s assets measured at fair value on a recurring basis are as follows: Foundation for the Flint Cultural Center Fair Value Measurements at December 31, 2016 Quoted Prices Significant in Active Other Significant Markets for Observable Unobservable Identical Assets Inputs Inputs (Level 1) (Level 2) (Level 3) Total Assets: Investments: Money market funds $ 816,283 $ - $ - $ 816,283 Equity - mutual funds - domestic 5,946, ,436-6,630,509 Equity - mutual funds - foreign 1,678,741 2,941,433-4,620,174 Fixed income - corporate bond funds - 552, ,475 Fixed income - government bond funds - 437, ,175 Fixed income - foreign - 858, ,352 Alternative: Long/short credit hedge fund-of-funds , ,064 Long/short equity hedge fund-of-funds - - 2,230,643 2,230,643 Multi-strategy hedge fund-of-funds , ,268 Absolute return hedge fund-of-funds , ,356 Natural resources fund-of-funds 137, , ,744 Private equity fund-of-funds , ,840 Real estate fund-of-funds ,569 87,569 Real estate funds ,967 77,967 Total Assets $ 8,578,777 $ 5,473,871 $ 4,314,771 $ 18,367,419 29

32 Foundation for the Flint Cultural Center Fair Value Measurements at December 31, 2015 Quoted Prices Significant in Active Other Significant Markets for Observable Unobservable Identical Assets Inputs Inputs (Level 1) (Level 2) (Level 3) Total Assets: Investments: Money market funds $ 354,835 $ - $ - $ 354,835 Equity - mutual funds - domestic 5,144,274 1,168,433-6,312,707 Equity - mutual funds - foreign 1,633,290 2,901,449-4,534,739 Fixed income - corporate bond funds - 1,198,054-1,198,054 Fixed income - government bond funds - 383, ,930 Fixed income - foreign - 957, ,560 Alternative: Long/short credit hedge fund-of-funds , ,199 Long/short equity hedge fund-of-funds - - 1,784,222 1,784,222 Multi-strategy hedge fund-of-funds , ,357 Absolute return hedge fund-of-funds , ,750 Hedging strategies hedge fund-of-funds ,061 23,061 Natural resources fund-of-funds 160, , ,555 Private equity fund-of-funds , ,455 Real estate fund-of-funds ,142 34,142 Real estate funds , ,097 Total Assets $ 7,292,800 $ 6,609,426 $ 4,158,437 $ 18,060,663 30

33 FFF s investments at December 31, 2016 consisted solely of money market funds, which are classified as Level 1. Corporate bonds, governmental bonds, and foreign equities and fixed income funds classified as Level 2 are valued using quoted market prices and other market data for the same or comparable instruments and transactions in establishing the prices, discounted cash flow models, and other pricing models. These models are primarily industry-standard models that consider assumptions, including time value and yield curve, as well as other relevant economic measures. Changes in the Community Foundation s Level 3 assets and liabilities measured at fair value on a recurring basis are as follows: Community Foundation of Greater Flint Changes in Level 3 Assets and Liabilities for year ending December 31, 2016 Net Purchases Total Total Fair Value at and Issuances/ Realized Unrealized Other Fair Value at January 1, Sales and Gains/ Gains/ Income/ December 31, 2016 Settlements Losses Losses Expense 2016 Investments - alternative $ 74,562,350 $ 3,999,901 $ 589,997 $ 10,585,712 $ (197,200) $ 89,540,760 Investments - split-interest agreements 77, ,116-79,316 Liability to life beneficiaries of planned gifts (127,215) (31,066) 24,516 24,652 - (109,113) Funds held on on behalf of nonprofit endowments (2,348,462) (53,632) (23,558) (87,868) - (2,513,520) Total $ 72,163,873 $ 3,915,203 $ 590,955 $ 10,524,612 $ (197,200) $ 86,997,443 31

34 Community Foundation of Greater Flint Changes in Level 3 Assets and Liabilities for year ending December 31, 2015 Net Purchases Total Total Fair Value at and Issuances/ Realized Unrealized Other Fair Value at January 1, Sales and Gains/ Gains/ Income/ December 31, 2015 Settlements Losses Losses Expense 2015 Investments - alternative $ 68,990,184 $ (443,142) $ 176,024 $ 5,954,086 $ (114,802) $ 74,562,350 Investments - split-interest agreements 76, ,200 Liability to life beneficiaries of planned gifts (139,217) (15,392) - 27,394 - (127,215) Funds held on on behalf of nonprofit endowments (2,465,145) (2,481) 4, ,972 (13,104) (2,348,462) Total $ 66,462,146 $ (461,015) $ 180,320 $ 6,110,328 $ (127,906) $ 72,163,873 Changes in the FFCC s Level 3 assets and liabilities measured at fair value on a recurring basis are as follows: Foundation for the Flint Cultural Center Changes in Level 3 Assets for year ending December 31, 2016 Net Purchases Total Total Fair Value at and Issuances/ Realized Unrealized Other Fair Value at January 1, Sales and Gains/ Gains/ Income/ December 31, 2016 Settlements Losses Losses Expense 2016 Investments - alternative $ 4,158,437 $ 144,012 $ 35,185 $ (11,789) $ (11,074) $ 4,314,771 Foundation for the Flint Cultural Center Changes in Level 3 Assets for year ending December 31, 2015 Net Purchases Total Total Fair Value at and Issuances/ Realized Unrealized Other Fair Value at January 1, Sales and Gains/ Gains/ Income/ December 31, 2015 Settlements Losses Losses Expense 2015 Investments - alternative $ 4,364,326 $ (141,277) $ 49,076 $ (85,241) $ (28,447) $ 4,158,437 32

35 Both observable and unobservable inputs may be used to determine the fair value of positions classified as Level 3 assets and liabilities. As a result, the unrealized gains and losses for these assets and liabilities presented in the tables above may include changes in fair value that were attributable to both observable and unobservable inputs. Investments categorized as Level 3 assets primarily consist of fund-of-funds, real estate, and closely held stock. The fund-of-funds investments are through fund-of-funds managers and the Community Foundation and FFCC estimate the fair value of these investments based on net asset value, or its equivalent. Real estate and closely held stock investments consist of: a partnership interest in an entity that owns the Community Foundation building in downtown Flint, which is valued based on capital contributions and net earnings of the partnership; and closely-held stock, which is valued based on an independent appraiser s report expressing an opinion on the fair market value of the stock. Of the Level 3 investments held by the Community Foundation the unrealized gain for the year ended December 31, 2016, was $10,585,712, which is recognized in the change in net assets in the Combined Statements of Activities and Changes in Net Assets. Realized gains of $589,997 were recognized in the Combined Statements of Activities and Changes in Net Assets related to capital gains received during the year and hedge funds sold during the year with proceeds totaling $586,966. The Community Foundation purchased $5,379,552 of hedge funds during Of the Level 3 investments held by the Community Foundation the unrealized gain for the year ended December 31, 2015, was $5,954,086, which is recognized in the change in net assets in the Combined Statements of Activities and Changes in Net Assets. Realized gains of $176,024 were recognized in the Combined Statements of Activities and Changes in Net Assets related to capital gains received during the year and hedge funds sold during the year with proceeds totaling $554,502. The Community Foundation purchased $2,773,499 of hedge funds during Of the Level 3 investments held by the FFCC the unrealized loss for the year ended December 31, 2016 was $11,789, which is recognized in the change in net assets in the Combined Statements of Activities and Changes in Net Assets. Realized gains of $35,185 were recognized in the Combined Statements of Activities and Changes in Net Assets related to capital gains received during the year and hedge funds sold during the year with proceeds totaling $90,564. The FFCC purchased $846,882 of hedge funds during Of the Level 3 investments held by the FFCC the unrealized loss for the year ended December 31, 2015 was $85,241, which is recognized in the change in net assets in the Combined Statements of Activities and Changes in Net Assets. Realized gains of $49,076 were recognized in the Combined Statements of Activities and Changes in Net Assets related to capital gains received during the year and hedge funds sold during the year with proceeds totaling $93,292. The FFCC purchased $466,624 of hedge funds during Split-interest agreement assets categorized as Level 3 assets consist of life insurance policies of which the Community Foundation is the beneficiary and estimates the fair value of these splitinterest agreement assets based upon the fair value of the assets provided by the insurance companies unless the facts and circumstances indicate that the fair value would be different from the present value of estimated future distributions. 33