I I I. ili?~mg MAKE-A-WISH FOUNDATION OF VERMONT. Financial Statements. August31, 2012 and2oll. (With Independent Auditors Report Thereon)

Transcription

1 I I I ili?~mg MAKE-A-WISH FOUNDATION OF VERMONT Financial Statements August31, 2012 and2oll (With Independent Auditors Report Thereon)

2 Table of Contents Page Independent Auditors Report 1 Statements of Financial Position 2 Statements of Activities 3 Statements of Cash Flows 5 Statements of Functional Expenses 6 8

3 ódà KPMG LLP Suite East Rio Salado Parkway Tempe, AZ Independent Auditors Report Board of Directors Make-A-Wish Foundation of Vermont: We have audited the accompanying statements of financial position of Make-A-Wish Foundation of Vermont (the Foundation) as of August 31, 2012 and 2011, and the related statements of activities, cash flows, and functional expenses for the years then ended. These financial statements are the responsibility of the Foundation s management. 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 of material misstatement. An audit includes consideration of internal control over fmancial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Foundation s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Make-A-Wish Foundation of Vermont as of August 31, 2012 and 2011, and the changes in its net assets and its cash flows for the years then ended in conformity with U.S. generally accepted accounting principles. March 22, 2013 LCP KPMG LLP is a Delaware limited liability partnership, the us. member firm of KPMG International Cooperative I KPMG International ), a Swiss entity.

4 Statements of Financial Position August 31, 2012 and 2011 Assets Cash and cash equivalents $ 558, ,564 Investments 285, ,875 Due from related entities 10,058 17,444 Prepaid expenses 1,650 1,308 Contributions receivable 14,745 10,848 Other assets 1, Investments held for long-term purposes 577, ,722 Property and equipment, net 16,876 15,905 Total assets $ 1,466,053 1,611,578 Liabilities and Net Assets Accounts payable and accrued expenses $ 38,215 18,171 Accrued pending wish costs 137, ,569 Capital lease obligation 5,646 Other liabilities 200 Total liabilities 181, ,940 Commitments and contingencies Net assets: Unrestricted 663, ,824 ) Temporarily restricted 63,470 22,028 Permanently restricted 558, ,786 Total net assets 1,284,964 1,283,638 Total liabilities and net assets $ 1,466,053 1,611,578 See accompanying notes to financial statements. 2

5 Statement of Activities Year ended August 31, 2012 Revenues, gains, and other support: Public support: Contributions Grants Expenses: Program services: Wish granting Total public support Special events Less direct benefit costs to donor Total special events, net Investment income, net (note 3) Other income Net assets released from restrictions Total revenues, gains, and other support Total program services Support services: Fund raising Management and general Total support services - Total program and support services expenses Change in net assets Net assets, beginning of the year Net assets, end of the year Unrestricted $ 306,747 33, , ,314 (51,790) 377,524 99,450 2,372 34, , , , ,081 58, , ,526 (119,690) 782,824 $ 663,134 Temporarily Permanently restricted restricted 14,745 79,574 14,745 79,574 31,256 31,256 29,813 (34,372) 41,442 79,574 41,442 79,574 22, ,786 63, ,360 Total 401,066 33, , ,570 (51,790) 408, ,263 2, , , , ,081 58, , ,526 1,326 1,283,638 1,284,964 See accompanying notes to financial statements. 3

6 Statement of Activities Year ended August 31, 2011 Temporarily Permanently Unrestricted restricted restricted Total Revenues, gains, and other support: Public support: Contributions $ 499,814 10,848 50, ,662 Grants 11,000 11,000 Total public support 510,814 10,848 50, ,662 Special events 138, ,029 Less direct benefit costs to donor (52,681) (52,681) Total special events, net 85,348 85,348 Investment income, net (note 3) 147,803 6, ,479 Other income 1,010 1,010 Net assets released from restrictions 17,200 (17,200) Total revenues, gains, and other support 762, , ,499 Expenses: Program services: Wish granting 632, ,626 Total program services 632, ,626 Support services: Fund raising 110, ,503 Management and general 42,074 42,074 Total support services 152, ,577 Total program and support services expenses 785, ,203 Change in net assets (23,028) ,000 27,296 Net assets, beginning of the year 805,852 21, ,786 1,256,342 Net assets, end of the year $ 782,824 22, ,786 1,283,638 See accompanying notes to financial statements. 4

7 Statements of Cash Flows Years ended August31, 2012 and Cash flows from operating activities: Change in net assets $ 1,326 27,296 Adjustments to reconcile change in net assets to net cash used in operating activities: Depreciation and amortization 6,904 4,788 Contributions restricted for long-term investment (79,574) (50,000) Net realized and unrealized gains on investments (88,077) (127,663) Gain on sale of property and equipment (9,206) Changes in operating assets and liabilities: Due from related entities 7,386 (8,701) Prepaid expenses (342) 20,718 Contributions receivable (3,897) 6,352 Other assets (880) Accounts payable and accrued expenses 20,044 (9,140) Accrued pending wish costs (172,341) 142,539 Other liabilities (200) (37,820) Net cash used in operating activities (309,651) (40,837) Cash flows from investing activities: Purchases of investments (178,792) (1,582,537) Proceeds from sales of investments 701,932 1,783,774 Purchases of property and equipment (1,860) (8,084) Proceeds from sale of property and equipment 12,220 Net cash provided by investing activities 521, ,373 Cash flows from financing activities: Payments on capital lease obligations (369) Contributions restricted for long-term investment 79,574 50,000 Net cash provided by financing activities 79,205 50,000 Net increase in cash and cash equivalents 290, ,536 Cash and cash equivalents, beginning of year 267,564 53,028 Cash and cash equivalents, end of year $ 558, ,564 Supplemental cash flow information: In-kind contributions $ 216,568 75,195 Acquisition of equipment under capital lease 6,015 See accompanying notes to financial statements., 5

8 Statement of Functional Expenses Year ended August 31, 2012 Program services Support services Wish Fund Management Total support granting raising and general services Total Direct costs of wishes $ 548, ,381 Salaries, taxes, and benefits 126,963 63,482 21,160 84, ,605 Printing, subscriptions, and publications 10,730 13,090 1,754 14,844 25,574 Professional fees 12,666 12,110 23,729 35,839 48,505 Rent 11,880 5,940 1,980 7,920 19,800 Postageanddelivery 3,282 3, ,884 7,166 Travel 8,254 7,231 1,707 8,938 17,192 Meetings and conferences 5,822 16,360 1,137 17,497 23,319 Office supplies 6,230 3, ,007 10,237 Communications 2,283 1, ,757 4,040 Repairs and Maintenance Insurance ,341 National partnership dues 30,382 5,997 3,598 9,595 39,977 Miscellaneous 4,883 3,156 1,021 4,177 9,060 Depreciation and amortization 4,142 2, ,762 6,904 $ 776, ,081 58, , ,526 See accompanying notes to financial statements. 6

9 Statement of Functional Expenses Year ended August 31, 2011 Program services Support services Wish Fund Management Total support granting raising and general services Total Direct costs of wishes $ 419, ,604 Salaries, taxes, and benefits 117,346 58,673 21,464 80, ,483 Printing, subscriptions, and publications 8,415 6,633 1,686 8,319 16,734 Professional fees 4,295 2,292 1,716 4,008 8,303 Rent 21,161 10,581 3,527 14,108 35,269 Postage and delivery 3,653 1, ,891 5,544 Travel 3,927 7,196 1,496 8,692 12,619 Meetings and conferences 9,546 10,917 1,173 12,090 21,636 Office supplies 2,765 1, ,238 5,003 Communications 2,498 1, ,665 4,163 Advertising and media (cash) 1, ,029 Advertising and media (in-kind) 1, ,031 2,576 Insurance ,220 National partnership dues 27,104 4,576 3,520 8,096 35,200 Miscellaneous 5,558 2,974 4,500 7,474 13,032 Depreciation and amortization 2,873 1, ,915 4,788 $ 632, ,503 42, , ,203 See accompanying notes to financial statements. 7

10 August 31, 2012 and 2011 (1) Organization Make-A-Wish Foundation of Vermont (the Foundation) is a Vermont not-for-profit corporation, organized for the purpose of granting wishes to children with life-threatening medical conditions. The Foundation is an independently operating chapter of Make-A-Wish Foundation of America (the National Organization), which operates to develop and implement national programs in public relations and fund-raising for the benefit of all local chapters. In addition, the local chapter is obligated to comply with a chapter agreement with the National Organization and such guidelines, resolutions, and policies as may be adopted by the National Organization s board of directors. (2) Summary of Significant Accounting Policies (a) Basis ofpresentation The financial statements of the Foundation are prepared on the accrual basis of accounting in accordance with U.S. generally accepted accounting principles (GAAP). (b) (c) (d) (e) Cash and Cash Equivalents The Foundation considers all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents. Included in cash and cash equivalents at August 31, 2012 and 2011 are $460,280 and $237,545, respectively, of money market funds. Investments Investments are recorded at fair value. Investment income, including realized and unrealized gains and losses on investments, is recorded as increases or decreases in unrestricted net assets unless its use is limited by donor-imposed restrictions or law. Contributions Receivable Contributions receivable are unconditional promises to give. Such promises that are expected to be collected within one year are recorded at expected net realizable value when the promise is received. Unconditional promises to give that are expected to be collected in future years are recorded at the present value of estimated future cash flows. Pledges are discounted using fair value rates. Property and Equipment, Net Property and equipment having a useful life of more than one year are stated at cost when purchased. Donated assets are capitalized at the estimated fair value at the date of receipt and restrictions are released once the asset has been placed into service. Property and equipment under capital leases are stated at the lesser of the leased assets cost or present value of future minimum lease payments at the time of acquisition. Depreciation on property and equipment is provided on a straight-line basis over the estimated useful lives of the assets, generally 3 to 7 years. Leasehold improvements are amortized over the shorter of the estimated useful life of the asset or the remaining terms of the lease. The costs of normal maintenance and repairs that do not add to the value of the asset or materially extend its life are expensed as incurred. 8 (Continued)

11 August31, 2012 and 2011 Long-lived assets, such as property and equipment, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. 0 Fair Value Measurements The Foundation follows the provisions of Accounting Standards Codification (ASC) Topic 820, Fair Value Measurements and Disclosures, for fair value measurements of financial assets and financial liabilities and for fair value measurements of nonfinancial items that are recognized or disclosed at fair value in the financial statements on a recurring basis. ASC Topic 820 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 at the measurement date. ASC Topic 820 also establishes a framework for measuring fair value and expands disclosures about fair value measurements. The Foundation utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible. The Foundation determines fair value based on assumptions that market participants would use in pricing an asset or liability in the principal or most advantageous market. When considering market participant assumptions in fair value measurements, the following fair value hierarchy distinguishes between observable and unobservable inputs, which are categorized in one of the following levels: Level 1 Inputs: Unadjusted quoted prices in active markets for identical assets (or liabilities) that the reporting entity has the ability to access at the measurement date. Level 2 Inputs: Prices for a similar asset (or liability) other than quoted prices included in Level 1 inputs that are observable for the asset (or liability), either directly or indirectly. If the asset (or liability) has a specified term, a Level 2 input must be observable for substantially the full term of the asset (or liability). Level 3 Inputs: Unobservable inputs for the asset (or liability) used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset (or liability) at measurement date. See additional information in note 3. (g) Net Assets The Foundation s net assets and changes therein are classified and reported as follows: Permanently restricted net assets Net assets subject to donor-imposed restrictions or law that the principal be maintained in perpetuity. Generally, the donors of these assets permit the Foundation to use all or part of the income earned on related investments for unrestricted purposes. Temporarily restricted net assets Net assets subject to restrictions imposed by donor or law that may be met either by actions of the Foundation or the passage of time. Unrestricted net assets Net assets that are not subject to donor-imposed restrictions or law. 9 (Continued)

12 August31, 2012 and 2011 (h) Revenue Recognition Unconditional promises to give are recorded as contributions revenue when the promise is received. Conditional promises are recorded as revenue once the conditions are substantially met. Contributions, grants, and bequests are recognized as either temporarily or permanently restricted if they are received with donor stipulations that limit the use of the donated assets. When a donor restriction expires, temporarily restricted net assets are reclassified to unrestricted net assets and reported in the statements of activities as net assets released from restrictions. When restrictions are met in the same period as the contribution is received, the Foundation records the contribution and the expense as unrestricted. Contributions of assets other than cash are recorded at their estimated fair value. Contributions of services are recognized if the services received (a) create or enhance nonfinancial assets or (b) require specialized skills, are provided by individuals possessing those skills, and would typically need to be purchased if not provided by donation. The Foundation received in-kind contributions of assets and services that are included in the accompanying statements of activities. Such in-kind contributions were reported as follows: Wish related $ 167,351 56,272 Professional services 28,011 4,436 Advertising and media 2,500 Internal special events 21,206 11,987 Total $ 216,568 75,195 Advertising and media is used to help the Foundation communicate its message or mission and includes fund raising materials, informational material, or advertising, and may be in the form of an audio or video tape of a public service announcement, a layout for a newspaper, media time or space for public service announcements, or other purposes. Advertising and media are reported as contribution revenue when received and fund raising or public information expense when received and the reporting of such contributions is unaffected by whether the Foundation could afford to purchase or would have purchased the assets at their fair value. An internal special event is an event organized by the chapter that generates income from fundraising functions designed to attract and involve large numbers of people for the purpose of raising awareness, additional funding, and cultivating future donors. Internal special events in-kind amounts are donated items recorded at fair market value that are used in facilitating the event. Examples of such donated items are generally food, beverage, facility costs, and auction items. Program or supporting services expenses were recorded at fair value totaling $216,568 and $75,195 in 2012 and 2011, respectively. (i) Income Taxes The Foundation is a not-for-profit organization exempt from federal income and Vermont taxes under the provisions of Internal Revenue Code Section 501(c)(3). However, the Foundation remains 10 (Continued)

13 August 31, 2012 and 2011 subject to income taxes on any net income that is derived from a trade or business, regularly carried on and not in furtherance of the purpose for which it was granted exemption. No income tax provision has been recorded as the net income, if any, from any unrelated trade or business, in the opinion of management, is not material to the financial statements taken as a whole. The Foundation has adopted ASC Topic 740, Income Taxes, which prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return, and provides guidance on de-recognition, classification, interest and penalties, disclosure, and transition. Management believes that no such uncertain tax position requiring accrual or disclosure exists for the Foundation at August 31, 2012 and t1) Functional Expenses The Foundation performs three functions: wish granting, fundraising, and management and general. Definitions of these functions are as follows: Wish Granting Activities performed by the Foundation that grant wishes to children with life-threatening medical conditions. Fundraising Activities performed by the Foundation to generate funds and/or resources to support its programs and operations. During the fiscal years ended August 31, 2012 and 2011, the Foundation incurred no significant joint costs for activities that include fund raising appeals. Management and General All costs not identifiable with a single program or fundraising activity, but indispensable to the conduct of such programs and activities and to the Foundation s existence, are included as management and general expenses. This includes expenses for the overall direction of the Foundation, business management, general record-keeping, budgeting, financial reporting, and activities relating to these functions such as salaries, rent, supplies, equipment, and other expenses. Expenses that benefit more than one function of the Foundation are allocated among the functions based generally on the amount of time spent by employees on each function. (k) Management Estimates The preparation of financial statements in conformity with U.S. 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. Significant items subject to such estimates and assumptions include the useful lives of property and equipment, valuation of investments and contributions receivable, and accrued pending wish costs, net of attrition on pending wish costs. The current 11 (Continued)

14 August 31, 2012 and 2011 economic environment has increased the degree of uncertainty inherent in those estimates and assumptions. (1) Reclassifications Certain reclassifications have been made to the 2011 financial statement information to conform to the 2012 financial statement presentation. (3) Fair Value Measurements of Cash and Investments (a) Fair Value offinancial Instruments Fair value is defined as the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair values of the financial instruments shown in the following table(s) as of August 31, 2012 and 2011 represent the amounts that would be received to sell those assets or that would be paid to transfer those liabilities in an orderly transaction between market participants at that date. Those fair value measurements maximize the use of observable inputs. However, in situations where there is little, if any, market activity for the asset or liability at the measurement date, the fair value measurement reflects the Foundation s own judgments about the assumptions that market participants would use in pricing the asset or liability. Those judgments are developed by the Foundation based on the best information available in the circumstances, including expected cash flows and appropriately risk adjusted discount rates, available observable and unobservable inputs. The Foundation has 4dopted ASC Topic 820 for fair value measurements of financial assets and financial liabilities and for fair value measurements of nonfinancial items that are recognized or disclosed at fair value in the financial statements on a recurring basis. See note 2 to the Financial Statements. Overall Investment Objective The overall investment objective of the Foundation is to invest its assets in a prudent manner that will achieve a long-term rate of return sufficient to fund a portion of its annual operating activities and increase investment value after inflation. The Foundation places emphasis on minimizing return volatility rather than maximizing return by investing significantly in fixed income vehicles and an appropriate amount in domestic and international equity funds across a variety of managers. Major investment decisions are authorized by the board s Audit and Finance committee, which oversees the Foundation s investment program in accordance with established guidelines. Allocation ofinvestment Strategies At August 31, 2012 and 2011, all of the Foundation s investments were held in either money market accounts or publicly traded mutual funds classified within Level 1 of the fair value hierarchy. All investments held at August 31, 2012 and 2011 are redeemable on a daily basis. 12 (Continued)

15 August31, 2012 and 2011 (b) Fair Value Hierarchy The following tables present the composition of investments and investments held for long-term purposes as well as their placement (Level 1) in the fair value hierarchy of assets that are measured at fair value on a recurring basis at August 31, 2012 and 2011: Investments August31 Description Cash and cash equivalents $ 558, ,564 Investments: Mutual funds: Corporate bonds $ 33,919 73,872 Total mutual funds 33,919 73,872 Equity securities: Domestic equity 256,256 International equity 170,010 Total equity securities 426,266 Debt securities: Corporate debt 251, ,758 Total debt securities 251, ,758 Real estate investment trust 23,979 Total investments $ 285, , (Continued)

16 August31, 2012 and 2011 Investments Heldfor Long-Term Purposes August 31 Description Cash and cash equivalents $ 124,103 52,736 Investments: Mutual funds: Domestic equity 5,455 3,848 International equity 3,352 3,645 Corporate bonds 34,040 29,152 Total mutual funds 42,847 36,645 Exchange-traded funds: International equities Corporatebonds 26,809 30,154 7,443 13,511 Total exchange traded funds 56,963 20,954 Equity securities: US corporate Foreign 91,605 49,212 60,399 36,035 Total equity securities 140,817 96,434 Corporate debt securities 209, ,932 Real estate investment trust 3,492 4,021 Total investments held for long-term purposes $ 577, ,722 The Foundation had no Level 2 or Level 3 investments at August 31, 2012 or There were no transfers into or out of Level 1, Level 2, or Level 3 for the years ended August 31, 2012 and Total investment income, gains, and losses for the years ended August 31, 2012 and 2011 consist of the following: Interest and dividend income $ 48,240 37,650 Realized and unrealized gains, net 88, ,663 Less investment expenses (7,054) (10,834) Investment income, net $ 129, ,479 (4) Contributions Receivable The Foundation s contributions receivable as of August 31, 2012 and 2011 was $14,745 and $10,848 respectively. The contributions receivable at August 31, 2012 is due from a single donor and is all due within the next twelve months. 14 (Continued)

17 August 31, 2012 and 2011 (5) Transactions with Related Entities The Foundation receives funds (cash and in-kind) from the National Organization on a monthly basis. These funds represent revenues associated with: distributions from national partners, individual donation amounts collected via online and white mail donations, amounts for internal grants, travel and training scholarships, amounts to fund the Adopt~A~Wish program and other miscellaneous revenues. These amounts are recorded in the statement of activities as public revenue support. During the years ended August 31, 2012 and 2011, the Foundation received $94,599 and $63,776 from these national revenue streams. These amounts represented 22% and 11% of the Foundation s total public support for 2012 and 2011, respectively. Conversely, the Foundation pays the National Organization annual dues, which were $39,977 and $35,200 for the years ended August 31, 2012 and 2011, respectively. The National Organization supports the Foundation by providing funding and other support for the granting of wishes. Chapters who assist with the organization and granting of wishes from other chapters are paid a fee for service called the wish assist fee. Under this program, the Foundation received $1,800 and $1,010 for the years ended August 31, 2012 and 2011, respectively, which is recorded in the accompanying statements of activities as other income. Amounts due from the National Organization represent contributions remitted to the National Organization that are identified for the Fo.undation s use but were not yet transferred to the Foundation as of year-end. At August 31, 2012 and 2011, $10,058 and $17,444, respectively, were due from the National Organization. During 2012 and 2011, the Foundation received contributions, both cash and in-kind, from board members totaling $4,406 and $9,035, respectively. Amounts paid to related parties for goods and services used in the Foundation s operations totaled $83,174 and $1,000 in 2012 and 2011, respectively. There were no amounts due to related parties as of August 31, 2012 and (6) Property and Equipment, Net Property and equipment as of August 31, 2012 and 2011 consist of the following: Computer equipment and software $ 40,872 32,997 Office furniture 7,742 7,742 48,614 40,739 Less accumulated depreciation and amortization (31,738) (24,834) Property and equipment, net $ 16,876 15,905 Depreciation and amortization expense totaled $6,904 and $4,788 for the years ended August 31, 2012 and 2011, respectively. 15 (Continued)

18 August 31, 2012 and 2011 (7) Accrued Pending Wish Costs The Foundation accrues for the estimated cost of reportable pending wishes as unconditional promises to give when five certain, measurable wish criteria are met. Prior to meeting these five criteria, the wish is considered a conditional promise to give due to the inherent uncertainties surrounding these criteria and is therefore not accrued as a pending wish liability. Reportable pending wish criteria include: 1. Receiving a referral, 2. Obtaining the required medical eligibility form, 3. Contact with the wish family has occurred to determine the prospective wish, 4. Determination that the wish falls within the National Organization s wish granting policy, and 5. The wish is expected to be granted within the next 12 months. As of August 31, 2012 and 2011, the Foundation had approximately 19 and 31 reportable pending wishes, respectively. (8) Leases The Foundation is obligated under capital and operating leases for offices and equipment, which expire at various dates through March 20, As of August 31, 2012 and 2011, the cost of leased property and equipment under capital lease was $6,015 and $0, respectively, and accumulated depreciation was $369 and $0, respectively. Total rent expense for all operating leases for the years ended August 31, 2012 and 2011 totaled $19,800 and $35,269, respectively. Future minimum lease payments under capital and operating leases having remaining terms in excess of one year are as follows: Operating leases Capital leases Year ending August 31: 2013 $ 14,500 1, , , , ,012 Total minimum lease payments $ 14,500 7,544 Less amounts representing interest 1,898 Present value of net minimum lease payments $ 5, (Continued)

19 August31, 2012 and 2011 (9) Endowments The Foundation follows the provisions of ASC 958, Section , Reporting Endowment Funds. These provisions provide guidance on the net asset classification of donor-restricted endowment funds for a not-for-profit organization that is subject to an enacted version of the Uniform Prudent Management of Institutional Funds Act of 2006 (UPIv11FA) and also required disclosures about endowment funds, both donor-restricted endowment funds and board-designated endowment funds. The Foundation s endowment consists of 3 individual donor-restricted funds established for a variety of purposes. Net assets associated with endowment funds, are classified and reported based on the existence or absence of donor-imposed restrictions. (a) Interpretation ofrelevant Law The board of directors of the Foundation has interpreted Vermont s version of UPMIFA as allowing the Foundation to appropriate for expenditure or accumulate as much for the endowment fund as the Foundation determines is prudent for the uses, benefits, purposes and duration for which the endowment is established, subject to the intent of the donor as expressed in the gift instrument. As a result of this interpretation, the Foundation classifies as permanently restricted net assets: (a) the original value of gifts donated to the permanent endowment, (b) the original value of subsequent gifts to the permanent endowment, and (c) accumulations to the permanent endowment made in accordance with the direction of the applicable donor gift instrument at the time the accumulation is added to the fund. The remaining portion of the donor-restricted endowment fund that is not classified in permanently restricted net assets is classified as temporarily restricted net assets until those amounts are appropriated for expenditure by the Foundation in a manner consistent with the standard of prudence prescribed by UPMIFA. In accordance with UPMIFA, the Foundationconsiders the following factors in making a determination to appropriate or accumulate donor-restricted endowment funds: 1. The duration and preservation of the fund 2. The purposes of the Foundation and the donor-restricted 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. Other resources of the Foundation 7. The investment policies of the Foundation 17 (Continued)

20 August 31, 2012 and 2011 Endowment net asset composition by type of fund as of August 31, 2012 and 2011 is as follows: 2012 Temporarily Permanently Unrestricted restricted restricted Total Donor-restricted endowment funds $ 17, , ,829 Total funds $ 17, , , Temporarily Permanently Unrestricted restricted restricted Total Donor-restricted endowment funds $ 11, , ,966 Total funds $ 11, , ,966 Changes in endowment net assets for the years ended August 31, 2012 and 2011 are as follows: 2012 Temporarily Permanently Unrestricted restricted restricted Total Endowment net assets, beginning of year $ 11, , ,966 Investment return: Investment income 16,035 16,035 Net appreciation (realized and unrealized) 13,778 13,778 Total investment return 29,813 29,813 Contributions 79,574 79,574 Appropriation of endowment assets for expenditure (23,524) (23,524) Endowment net assets, end ofyear $ 17, , , (Continued)

21 August 31, 2012 and Temporarily Permanently Unrestricted restricted restricted Total Endowment net assets, beginning of year $ (41,755) 4, , ,535 Investment return: Investment income 4,336 4,172 8,508 Net appreciation (realized and unrealized) 37,419 2,504 39,923 Total investment return 41,755 6,676 48,431 Contributions 50,000 50,000 Endowment net assets, end ofyear $ 11, , ,966 (b) (c) (il) Fund 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 Foundation to retain as a fund of perpetual duration. In accordance with GAAP, there were no deficiencies of this nature that are reported in unrestricted net assets as of August 31, 2012 and Deficiencies may result from unfavorable market fluctuations that occurred shortly after the investment of new permanently restricted contributions and continued appropriation for certain programs that was deemed prudent by the board of directors. Return Objectives and Risk Parameters The Foundation has adopted investment and spending policies for endowment assets that attempt to provide a predictable stream of funding 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 Foundation must hold in perpetuity or for a donor-specified period(s) as well as board-designated funds. The endowment assets are invested in a manner that is intended to produce results that exceed the price and yield results of the S&P 500 index while assuming a moderate level of investment risk. The Foundation expects its endowment funds, over time, to provide an average rate of return of approximately 4% annually. Actual returns in any given year may vary from this amount. Strategies Employedfor Achieving Objectives 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 19 (Continued)

22 August 31, 2012 and 2011 places a greater emphasis on equity-based investments to achieve its long-term return objectives within prudent constraints. (e) Spending Policy and How the Investment Objectives Relate to Spending Policy At the discretion of the audit and finance committee, the Foundation may appropriate for distribution each year up to a maximum of 4% of the prior year end market value. In establishing this policy, the Foundation considered the long-term expected return on its endowment fund. If the endowment fund value drops below corpus, the maximum annual distribution from the endowment fund will be the lesser of its target distribution or realized increase. If the endowment fund value falls below its threshold, the annual distribution will be $0. The Foundation s objective is to maintain the purchasing power of the endowment assets held in perpetuity or for a specified term as well as to provide additional real growth through new gifts and investment return. (10) Temporarily and Permanently Restricted Net Asset Temporarily restricted net assets are available for the following purposes for the years ended August 31, 2012 and 2011: Time restrictions $ 46,001 10,848 Accumulated unspent return on endowment funds 17,469 11,180 Total temporarily restricted net assets $ 63,470 22,028 For the years ended August 31, 2012 and 2011, permanently restricted net assets are restricted to: Investments in perpetuity, the income from which is expendable to support any activities of the Foundation $ 558, ,786 $ 558, ,786 (11) Retirement Plan The Foundation has a defined contribution retirement plan (the Plan). Employees are eligible for participation in the Plan after reaching 21 years of age and upon completion of one year of service. Under the provisions of the Plan, eligible employees may elect to defer a percentage of their salary subject to certain IRC limitations. The Foundation matches employee contributions up to 3% of the employee s salary. Foundation contributions to the Plan for the years ended August 31, 2012 and 2011 were $1,930 and $2,499, respectively. 20 (Continued)

23 August 31, 2012 and 2011 (12) Concentrations of Credit Risk Financial instruments that potentially subject the Foundation to concentration of credit risk consist principally of cash, cash equivalents, and investments. The Foundation places its cash and investments with high credit quality financial institutions and generally limits the amount of credit exposure not to exceed the FDIC insurance coverage limit of $250,000. From time to time throughout the year, the Foundation s cash balances may exceed the amount of the FDIC insurance coverage. In-kind contributions totaling $102,571 and $24,814 were received from a single donor for the years ended August 31, 2012 and 2011, respectively, which represents 24% and 4%, respectively, of total public support. Should these contribution levels decrease, the Foundation may be adversely affected. (13) Litigation and Claims The Foundation is involved in litigation and claims arising in the ordinary course of business. In the opinion of management, the ultimate disposition of these matters will not have a material adverse effect on the Foundation s financial position, change in net assets, or liquidity. (14) Subsequent Events The Foundation has evaluated subsequent events from the statement of financial position date through March 22, 2013, the date at which the financial statements were available to be issued. 21

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