ERIE COMMUNITY COLLEGE FOUNDATION, INC. FINANCIAL STATEMENTS FOR THE YEARS ENDED AUGUST 31, 2016 AND 2015

Transcription

1 ERIE COMMUNITY COLLEGE FOUNDATION, INC. FINANCIAL STATEMENTS FOR THE YEARS ENDED AUGUST 31, 2016 AND 2015

2 TABLE OF CONTENTS Independent Auditors' Report Statements of Financial Position... 3 Statements of Activities... 4 Statements of Functional Expenses... 6 Statements of Cash Flows... 8 Notes to the Financial Statements

3 SKROBACZ & COMPANY CERTIFIED PUBLIC ACCOUNTANTS, P.C MAIN STREET WILLIAMSVILLE, NEW YORK (716) FAX: (716) Joseph L. Skrobacz, CPA Robert D. Yalowich, CPA Sherry A. Mueller, CPA INDEPENDENT AUDITORS' REPORT To the Board of Directors of the Erie Community College Foundation, Inc. We have audited the accompanying financial statements of the Erie Community College Foundation, Inc. (a nonprofit organization), which comprise the statements of financial position as of, 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. Auditor s Responsibility Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the 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.

4 Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Erie Community College Foundation, Inc. as of, 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. Buffalo, New York December 1, 2016 SKROBACZ & COMPANY CERTIFIED PUBLIC ACCOUNTANTS, P.C.

5 Statements of Financial Position Assets Assets: Cash and cash equivalents $ 731,304 $ 471,970 Accounts receivable - special events 7,290 9,350 Unconditional promises to give 160, ,245 Investments 4,101,328 3,930,419 Total assets $ 5,000,479 $ 4,672,984 Liabilities and Net Assets Liabilities: Accounts payable and accrued liabilities $ 3,475 $ 3,356 Obligations related to charitable remainder annuity trust Annuity and life income payable 138, ,318 Due to remaindermen 24,193 30,831 Total liabilities 165, ,505 Net Assets: Unrestricted 1,293,231 1,103,532 Temporarily restricted 1,597,370 1,451,837 Permanently restricted 1,943,971 1,942,110 Total net assets 4,834,572 4,497,479 Total liabilities and net assets $ 5,000,479 $ 4,672,984 See accompanying notes and independent auditors' report - 3 -

6 Statement of Activities For the Year Ended August 31, 2016 Support and Revenue Temporarily Permanently Unrestricted Restricted Restricted Total Contributions $ 37,083 $ 385,829 $ 1,673 $ 424,585 Program service revenue - 38,241-38,241 Special events 174, ,951 Support from Erie Community College 266, ,467 Administrative and management fees 31, ,884 Interest and dividends 85,560 41, ,232 Net realized and unrealized gains 44,317 69, ,799 Change in value of split interest agreements - (4,425) - (4,425) Reclassification of college support funds (6,629) 6, Reclassification of scholarship funds (5,300) 5, Net assets released from restrictions Satisfaction of purpose restrictions 397,007 (397,007) - - Total support and revenue 1,025, ,533 1,861 1,172,734 Expenses Programs 450, ,597 Fundraising 67, ,415 Administration 317, ,629 Total expenses 835, ,641 Change in net assets 189, ,533 1, ,093 Net assets at beginning of year 1,103,532 1,451,837 1,942,110 4,497,479 Net assets at end of year $ 1,293,231 $ 1,597,370 $ 1,943,971 $ 4,834,572 See accompanying notes and independent auditors' report - 4 -

7 Statement of Activities For the Year Ended August 31, 2015 Support and Revenue Temporarily Permanently Unrestricted Restricted Restricted Total Contributions $ 28,223 $ 343,265 $ 52,558 $ 424,046 Program service revenue - 67,808-67,808 Special events 146, ,002 Support from Erie Community College 224, ,074 Administrative and management fees 23, ,784 Interest and dividends 116,241 54, ,345 Net realized and unrealized losses (157,049) (67,407) - (224,456) Change in value of split interest agreements - (7,600) - (7,600) Net assets released from restrictions Satisfaction of purpose restrictions 429,446 (429,446) - - Total support and revenue 810,721 (39,276) 52, ,003 Expenses Programs 493, ,123 Fundraising 44, ,770 Administration 286, ,599 Total expenses 824, ,492 Change in net assets (13,771) (39,276) 52,558 (489) Net assets at beginning of year 1,117,303 1,491,113 1,889,552 4,497,968 Net assets at end of year $ 1,103,532 $ 1,451,837 $ 1,942,110 $ 4,497,479 See accompanying notes and independent auditors' report - 5 -

8 Statement of Functional Expenses For the Year Ended August 31, 2016 Fund- Programs Raising Administration Total College Facility Improvements $ 2,770 $ - $ - $ 2,770 Contract services 195 2,170-2,365 Educational services 68, ,372 Meetings, conferences, meals 19,258-10,269 29,527 Scholarships 250, ,630 Special events 60, ,248 Supplies 6,567-6,882 13,449 Other 42,557 3, ,890 Payroll - 31, , ,810 Payroll processing - - 2,112 2,112 Benefits - 16,087 58,281 74,368 Bank service charges - - 2,076 2,076 Database maintenance Dues - - 2,429 2,429 Facility and maintenance ,852 11,852 Insurance - - 2,454 2,454 Postage - 1, ,317 Printing - 12,855 2,157 15,012 Professional services: Audit ,432 16,432 Financial consultant Project consultant - - 1,095 1,095 Travel - - 2,895 2,895 $ 450,597 $ 67,415 $ 317,629 $ 835,641 See accompanying notes and independent auditors' report - 6 -

9 Statement of Functional Expenses For the Year Ended August 31, 2015 Fund- Programs Raising Administration Total Contract services $ - $ 2,858 $ - $ 2,858 Educational services 119, ,580 Meetings, conferences, meals 28,165-7,943 36,108 Scholarships 251, ,028 Special events 65, ,470 Supplies 11,552-7,069 18,621 Other 17, ,223 19,128 Payroll - 19, , ,206 Payroll processing - - 1,954 1,954 Benefits - 6,545 42,142 48,687 Bank service charges - - 2,995 2,995 Database maintenance Dues - - 2,721 2,721 Facility and maintenance ,852 11,852 Insurance - - 2,051 2,051 Postage - 1, ,818 Printing - 13,583 2,081 15,664 Professional services: Audit ,175 10,175 Financial consultant - - 5,221 5,221 Travel - - 1,680 1,680 $ 493,123 $ 44,770 $ 286,599 $ 824,492 See accompanying notes and independent auditors' report - 7 -

10 Statements of Cash Flows For the Years Ended Operating activities Change in net assets $ 337,093 $ (489) Adjustments to reconcile change in net assets to net cash provided by operating activities: Receipt of donated investments (10,551) - Proceeds on sale of donated investments 10,551 - Realized and unrealized (gain) loss on investments (113,799) 224,435 (Increase) decrease in operating assets: Accounts receivable - special events 2,060 (8,550) Unconditional promises to give 100,688 89,809 Increase (decrease) in operating liabilities: Accounts payable and accrued liabilities 119 (625) Net obligations related to charitable remainder annuity trust (9,717) (19,269) Contributions restricted for long-term purposes: Cash contributions (1,673) (52,558) Net cash provided by operating activities 314, ,753 Investing activities Purchases of investments (994,183) (179,316) Proceeds on sale of investments 937, ,740 Net cash provided by (used for) investing activities (57,110) 15,424 Financing activities Collections of contributions restricted for long-term purposes: Endowment funds 1,673 52,558 Net cash provided by financing activities 1,673 52,558 Net increase in cash and cash equivalents 259, ,735 Cash and cash equivalents at beginning of year 471, ,235 Cash and cash equivalents at end of year $ 731,304 $ 471,970 Supplemental disclosure of cash flow information Cash paid for: Interest $ - $ - Income taxes $ - $ - See accompanying notes and independent auditors' report - 8 -

11 Notes to the Financial Statements 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The Erie Community College Foundation, Inc. (the Foundation) uses the accrual basis of accounting for reporting purposes. Organization The Foundation is a New York State nonprofit corporation established to support Erie Community College. Its purpose is to raise, receive, and administer all private gifts and program services for the College, its programs and its students. 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 revenues and expenses during the reporting period. Actual results could differ from those estimates. Financial Statement Presentation The Foundation follows the Not-For-Profit Entities subtopic of the FASB Accounting Standards Codification with respect to financial statement presentation. Under this subtopic, the Foundation is required to report information regarding its financial position and activities according to the three classes of net assets: unrestricted net assets, temporarily restricted net assets and permanently restricted net assets. In addition, the Foundation is required to present a statement of cash flows. Investment and Spending Policy The Foundation has adopted investment and spending policies for endowment assets that attempt to provide a predictable stream of funding to programs supported by its endowment while seeking to maintain the purchasing power of the endowment assets. Endowment assets include those assets of donor-restricted funds that the organization must hold in perpetuity. Under this policy, as approved by the Board of Directors, the endowment assets are invested in a manner that is intended to produce results that meet or exceed the price and yield results of appropriate market indices while assuming a moderate level of investment risk. The Foundation expects its endowment funds, over time, to provide an average real rate of return of approximately 5 percent annually. Actual returns in any given year may vary from this amount. To satisfy its long-term rate-of-return objectives, the Foundation 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 Foundation targets a diversified asset allocation that places a greater emphasis on fixed-income investments to achieve its long-term return objectives within prudent risk constraints. See independent auditors report - 9 -

12 Notes to the Financial Statements The Foundation has a policy of appropriating for distribution each year a selected percentage up to 5 percent of its endowment funds average fair value. Average fair value is based on the prior 5 years through the fiscal year-end preceding the year in which the distribution is planned. Contributions The Foundation follows the Not-For-Profit Entities subtopic and Revenue Recognition subtopic of the FASB Accounting Standards Codification with respect to contributions. In accordance with these subtopics, contributions received are recorded as unrestricted, temporarily restricted, or permanently restricted support depending on the existence or nature of any donor restrictions. Investments The Foundation follows the Not-For-Profit Entities subtopic of the FASB Accounting Standards Codification with respect to investments. Under this subtopic, investments in marketable securities with readily determinable fair values and all investments in debt securities are reported at their fair values in the statement of financial position. Unrealized gains and losses are included in the change in net assets. Investment revenues are reported net of related investment expenses. Investment expenses that were included in the net investment revenues were $37,917 and $29,985 during the years ended, respectively. Cash and Cash Equivalents For purposes of the statements of cash flows, the Foundation considers all money market mutual funds and highly liquid investments available for current use with an initial maturity of three months or less to be cash equivalents. Accounts Receivable Special Events Accounts receivable are stated in the balance sheet at their estimated realizable value. The Foundation accounts for bad debts using the direct charge-off method, directly expensing receivables for which management deems uncollectible, or realizable at less than full value. The direct charge-off method provides results similar to the reserve method in all material respects. Unconditional Promises to Give Unconditional promises to give are stated in the balance sheet at their estimated realizable value. The Foundation accounts for bad debts using the direct charge-off method, directly expensing promises to give which management deems uncollectible, or realizable at less than full value. The direct charge-off method provides results similar to the reserve method in all material respects. Concentration of Risk Financial instruments that potentially subject the Foundation to off-balance-sheet credit risk include cash and cash equivalents on deposit with financial institutions See independent auditors report

13 Notes to the Financial Statements which were insured for up to $250,000 by the U.S. Federal Deposit Insurance Corporation. At various times throughout the years ended, the Foundation s balance in its accounts has exceeded these federally insured limits. Property and Equipment Property and equipment is recorded at cost and is depreciated using the straight-line method over the estimated useful life of the asset. 2. PROMISES TO GIVE Unconditional promises to give at are as follows: Receivable in less than one year $ 102,125 $ 139,000 Receivable in one to five years 60, ,375 Receivable in more than five years - - Total unconditional promises to give 162, ,375 Less discounts to net present value 1,568 1,130 Net unconditional promises to give $ 160,557 $ 261,245 Discount rates utilized ranged from.61% to 1.19% based upon rates in effect as of the fiscal year-end. 3. INVESTMENTS The portfolio of investments is carried at their fair market value. For donated investments, cost is determined to be fair market value at the date of gift. Market values and net unrealized gains and losses pertaining to the investment portfolio as of are as follows: Cost Market Cost Market Fixed income $ 1,250,352 $ 1,272,865 $ 1,404,091 $ 1,391,452 Domestic equities 1,692,733 2,124,852 1,631,111 1,976,643 International equities 580, , , ,398 Real estate investment trust equities 22,787 31,140 55,221 62,926 $ 3,546,696 $ 4,101,328 $ 3,502,950 $ 3,930,419 Unrealized gain (loss) $ 554,632 $ 427,469 See independent auditors report

14 Notes to the Financial Statements 4. FAIR VALUE OF FINANCIAL INSTRUMENTS The Foundation s financial instruments are cash, accounts receivable, investments, unconditional promises to give, accounts payable and accrued liabilities, and obligations related to the charitable remainder annuity trust. The recorded values of cash, accounts receivable, unconditional promises to give, accounts payable and accrued liabilities approximate their fair values based on their short-term nature. The recorded values of obligations related to the charitable remainder annuity trust approximate fair values, as the present value discount rate approximates current market rates. 5. FAIR VALUE MEASUREMENTS The Fair Value Measurements and Disclosures subtopic of the FASB Accounting Standards Codification establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. This hierarchy consists of three broad levels: Level 1 inputs consist of unadjusted quoted prices in active markets for identical assets and have the highest priority, Level 2 consist of observable inputs other than quoted prices for identical assets, and Level 3 inputs have the lowest priority. The Foundation uses appropriate valuation techniques based on the available inputs to measure the fair value of its investments. When available, the Foundation measures fair value using Level 1 inputs because they generally provide the most reliable evidence of fair value. Level 3 inputs would be used only when Level 1 or Level 2 inputs were not available. The Foundation s investments are reported at fair value in the accompanying statement of financial position as of, respectively: Fair Value Measurements at August 31, 2016 Financial Assets: Fair Value Quoted Market Prices (Level 1) Investments, at fair value: Fixed income $ 1,272,865 $ 1,272,865 Domestic equities 2,124,852 2,124,852 International equities 672, ,471 Real estate investment trust equities 31,140 31,140 $ 4,101,328 $ 4,101,328 See independent auditors report

15 Notes to the Financial Statements Fair Value Measurements at August 31, 2015 Financial Assets: Fair Value Quoted Market Prices (Level 1) Investments, at fair value: Fixed income $ 1,391,452 $ 1,391,452 Domestic equities 1,976,643 1,976,643 International equities 499, ,398 Real estate investment trust equities 62,926 62,926 $ 3,930,419 $ 3,930,419 The following methods and assumptions were used to estimate the fair value for each class of financial investment measured at fair value: Fixed Income Investments in certain fixed income securities represent investments in debt securities and commingled funds that invest primarily in debt and fixed income securities. These investments are classified as level 1 as they are traded in an active market for which daily closing prices are available. Domestic Equities Investments in domestic equities represent investments in commingled funds that invest primarily in equity securities of companies based in the United States. These investments are classified as level 1 as they are traded in an active market for which daily closing prices, measured primarily on a net asset value basis are available. International Equities Investments in international equities represent investments in commingled funds that primarily invest in equity securities of companies based around the world. These investments are classified as level 1 as they are traded in an active market for which daily closing prices, measured primarily on a net asset value basis are available. Real Estate Investment Trust Equities Investments in real estate investment trust equities represent investments in exchange traded funds that invest in publicly traded real estate investment trusts, which own a portfolio of real estate properties and/or mortgages. These investments are classified as level 1 as they are traded in an active market for which daily closing prices, measured primarily on a net asset value basis are available. See independent auditors report

16 Notes to the Financial Statements 6. UNRESTRICTED NET ASSETS Unrestricted net assets are assets that are either not restricted by donors, or assets in which the donor-imposed restrictions have been satisfied and for which the Foundation has unrestricted discretionary control. Certain unrestricted net assets have been designated by the Board of Directors to be maintained as a scholarship reserve. As of August 31, 2016, the Board designated scholarship reserve totaled $26, TEMPORARILY RESTRICTED NET ASSETS Temporarily restricted net assets are available for the following purposes: See independent auditors report Scholarships and specific program support $ 1,597,370 $ 1,451,837 Net assets were released from donor restrictions by incurring expenses satisfying the purpose restrictions specified by donors as follows: Scholarships $ 245,733 $ 251,027 Educational programs 66, ,580 Supplies and other 84,747 58,839 $ 397,007 $ 429, PERMANENTLY RESTRICTED NET ASSETS Net assets were permanently restricted for the following purposes at August 31, 2016 and 2015: Scholarships and awards $ 1,943,971 $ 1,942, ENDOWMENT The Foundation s endowment consists of approximately 40 individual funds established for a variety of purposes. Its endowment is made up of donor-restricted endowment funds. As required by GAAP, net assets associated with endowment funds are classified and reported based on the existence or absence of donor-imposed restrictions. As of August 31, 2016, the fair values of approximately 8 funds were less than the original donated value by a total of $4,808. As of August 31, 2015, the fair values of approximately 36 funds were less than the original donated value by a total of $20,196. These deficiencies resulted from unfavorable market fluctuations

17 Notes to the Financial Statements and from the continued appropriation for certain programs that was deemed prudent by the Board of Directors. In September 2010, New York State enacted the New York Prudent Management of Institutional Funds Act. The act requires the prudent spending of donor-restricted endowment funds absent explicit donor stipulations to the contrary. As a result of this interpretation, the Foundation classifies as permanently restricted net assets (a) the original value of the 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. Appreciation, net of the underwater amount of endowment funds, is reported as either temporarily restricted or unrestricted net assets. The following is a summary of the Foundation s endowment net asset composition by type of fund as of : Temporarily Restricted 2016 Permanently Restricted Unrestricted Total Donor restricted endowment funds $ - $ 16,398 $ 1,943,971 $ 1,960,369 Board-designated endowment funds Total Net Assets $ - $ 16,398 $ 1,943,971 $ 1,960,369 Temporarily Restricted 2015 Permanently Restricted Unrestricted Total Donor restricted endowment funds $ (17,717) $ - $ 1,917,110 $ 1,899,393 Board-designated endowment funds Total endowment net assets (17,717) - 1,917,110 1,899,393 Contributions receivable ,000 25,000 Total Net Assets $ (17,717) $ - $ 1,942,110 $ 1,924,393 See independent auditors report

18 Notes to the Financial Statements Changes in the Foundation s endowment net assets for the years ended August 31, 2016 and 2015 are as follows: Temporarily Restricted 2016 Permanently Restricted Unrestricted Total Endowment net assets, beginning of year $ (17,717) $ - $ 1,917,110 $ 1,899,393 Investment return: Investment income - 41,672-41,672 Net realized and unrealized gains on endowment funds 17,717 69,482-87,199 Total investment return 17, , ,871 Contributions ,861 26,861 Appropriation of endowment assets for expenditure - (94,756) - (94,756) Endowment net assets, end of year $ - $ 16,398 $ 1,943,971 $ 1,960,369 Temporarily Restricted 2015 Permanently Restricted Unrestricted Total Endowment net assets, beginning of year $ - $ 103,699 $ 1,889,552 $ 1,993,251 Investment return: Investment income - 54,104-54,104 Net realized and unrealized gains on endowment funds (17,717) (67,407) - (85,124) Net investment losses (17,717) (13,303) - (31,020) Contributions ,558 27,558 Appropriation of endowment assets for expenditure - (90,396) - (90,396) Endowment net assets, end of year $ (17,717) $ - $ 1,917,110 $ 1,899,393 See independent auditors report

19 Notes to the Financial Statements 10. DONATED FACILITIES AND OTHER SUPPORT The Foundation receives the rent-free use of their facility and other direct support from the Erie Community College. The total value of the support for the year ended of $266,467 and $224,074, respectively, are comprised of the following: Payroll, payroll taxes and benefits $ 247,138 $ 204,066 Facility and maintenance 11,852 11,852 Other operating expenses 7,477 8,156 $ 266,467 $ 224, FUNCTIONAL ALLOCATION OF EXPENSES The costs of providing the various programs and activities 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. 12. INCOME TAXES The Foundation is exempt from income taxes under Internal Revenue Code Section 501(c)(3) and is classified as an organization other than a private foundation. 13. CHARITABLE REMAINDER ANNUITY TRUST The Foundation entered into a trust agreement and is the trustee of a charitable remainder annuity trust. The Foundation is also a 40% remainderman of the trust principal. The trust was funded with real estate which was subsequently sold and invested in the Foundation s investment portfolio. The trust assets are reflected in investments in the Foundation s Statement of Financial Position and total $178,560 and $192,703 as of, respectively. The present value of actuarial liability to the income beneficiary was $138,239 and $141,318 as of August 31, 2016 and 2015, respectively. The value of the liability is based on applicable mortality tables and an applicable federal rate used as the discount rate. The liability to the other 60% charitable remaindermen was $24,193 and $30,831 as of August 31, 2016 and 2015, respectively. 14. SUBSEQUENT EVENTS The Foundation has evaluated events and transactions that occurred between September 1, 2016 and December 1, 2016, which is the date the financial statements were available to be issued, for possible disclosure and recognition in the financial statements. No subsequent events were noted by the Company. See independent auditors report