AMERICAN PSYCHOLOGICAL FOUNDATION, INC.

Transcription

1 FINANCIAL STATEMENTS As of December 31, 2009 and 2008

2 INDEPENDENT AUDITOR S REPORT To the Board of Trustees of the American Psychological Foundation, Inc. CONSULTING ACCOUNTING TECHNOLOGY Certified Public Accountants We have audited the accompanying statements of financial position of the American Psychological Foundation, Inc. (the Foundation) as of December 31, 2009 and 2008, and the related statements of activities and cash flows 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 financial 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 includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and the 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 the American Psychological Foundation, Inc. as of December 31, 2009 and 2008, and the changes in its net assets and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America. RAFFA, P.C. Washington, DC March 30, 2010

3 STATEMENTS OF FINANCIAL POSITION December 31, 2009 and Assets Cash and cash equivalents $ 200,037 $ 159,038 Short-term investments 1,111, ,560 Investments 12,433,589 8,355,199 Contribution receivable - life insurance - 500,000 Contribution receivable - trust 54,922 45,961 Contribution receivable - bequest - 977,561 Contributions receivable, net 500, ,045 Computer software, net of depreciation - 3,717 Due from APA and other assets 51,459 - Total assets $ 14,351,827 $ 10,640,081 Liabilities and Net Assets Accounts payable and accrued liabilities Accounts payable to APA Grants, awards and scholarships payable $ 19,239 $ 19,020-5,972 41,000 8,750 Total liabilities 60,239 33,742 Net assets: Unrestricted 3,134,656 2,231,245 Temporarily restricted 10,618,684 8,375,094 Permanently restricted 538,248 - Total net assets 14,291,588 10,606,339 Total liabilities and net assets $ 14,351,827 $ 10,640,081 The accompanying notes are an integral part of these financial statements

4 STATEMENTS OF ACTIVITIES Temporarily Permanently Temporarily Unrestricted Restricted Restricted Total Unrestricted Restricted Total Revenue and Support: Contributions $ 139,402 $ 422,782 $ 538,248 $ 1,100,432 $ 258,745 $ 1,759,168 $ 2,017,913 Royalties and permissions 60,073 3,868-63,941 48,311 7,637 55,948 Net investment income (loss) 860,475 2,739,733-3,600,208 (1,612,569) (4,050,132) (5,662,701) Net assets released from restrictions 922,793 (922,793) - - 1,310,408 (1,310,408) - Total revenue and support 1,982,743 2,243, ,248 4,764,581 4,895 (3,593,735) (3,588,840) Expenses: Gold Medal awards 16, ,439 12,418-12,418 Teaching awards 3, ,695 2,916-2,916 Awards 70, , , ,000 Lectures 7, ,500 6,500-6,500 Scholarships 187, , , ,779 Research/other grants 147, , , ,620 Other programs 4, ,328 4,893-4,893 Gifted Children Project 2, ,569 3,540-3,540 Total program expenses 440, , , ,666 The accompanying notes are an integral part of these financial statements

5 STATEMENTS OF ACTIVITIES Temporarily Permanently Temporarily Unrestricted Restricted Restricted Total Unrestricted Restricted Total Salaries and benefits $ 450,415 $ - $ - $ 450,415 $ 460,260 $ - $ 460,260 Asset management fees 53, ,128 54,138-54,138 Supplies and printing 28, ,914 36,516-36,516 Miscellaneous 15, ,710 29,954-29,954 Meetings and receptions 11, ,284 19,604-19,604 Travel 20, ,512 26,312-26,312 Advancement activities 2, ,532 14,125-14,125 Consulting fees/contractual services 56, ,606 66,964-66,964 Total general and administrative expenses 639, , , ,873 Total expenses 1,079, ,079,332 1,420,539-1,420,539 Reclassification of unrestricted net assets based on donor's restriction (52,645) 52,645 - Change in net assets Net assets, beginning of year 903,411 2,243, ,248 3,685,249 (1,468,289) (3,541,090) (5,009,379) 2,231,245 8,375,094-10,606,339 3,699,534 11,916,184 15,615,718 Net assets, end of year $ 3,134,656 $ 10,618,684 $ 538,248 $ 14,291,588 $ 2,231,245 $ 8,375,094 $ 10,606,339 The accompanying notes are an integral part of these financial statements

6 STATEMENTS OF CASH FLOWS Cash flows from operating activities: Change in net assets $ 3,685,249 $ (5,009,379) Adjustments to reconcile change in net assets to net cash provided by (used in) operating activities: Net realized and unrealized losses (gains) on sale of investments (3,359,099) 5,994,306 Contributions restricted for long-term investment (538,248) - Donated mutual fund shares (30,188) - Amortization expense 3,717 3,717 Discount on long-term receivables - 3,692 Changes in assets and liabilities: (Increase) decrease in: Contribution receivable - trust (8,961) 36,230 Contribution receivable - life insurance 500,000 (380,990) Contribution receivable - bequest 977,561 (977,561) Contributions receivable (11,730) (183,728) Due from APA and other assets (51,459) 10,879 Increase (decrease) in: Accounts payable and accrued liabilities 219 (30,755) Grants, awards and scholarships payable 32,250 (76,763) Accounts payable to APA (5,972) (126,130) Net cash provided by (used in) operating activities 1,193,339 (736,482) Cash flows from investing activities: Purchase of investments (7,223,600) (1,897,196) Proceeds from sale of investments 5,533,012 2,598,558 Net cash provided by (used in) investing activities (1,690,588) 701,362 Cash flows from financing activities: Proceeds from contributions restricted for investment 538,248 - Net cash provided by (used in) investing activities 538,248 - Increase (decrease) in cash and cash equivalents 40,999 (35,120) Cash and cash equivalents, beginning of year 159, ,158 Cash and cash equivalents, end of year $ 200,037 $ 159,038 Noncash investing activities Receipt of mutual fund shares $ 30,188 $ - The accompanying notes are an integral part of these financial statements

7 1. Organization The American Psychological Foundation, Inc. (the Foundation), is a Delaware nonprofit corporation that is exempt from federal income taxes under Section 501(c)(3) of the Internal Revenue Code. The Foundation is a nonprofit, philanthropic organization that provides financial support for innovative research and programs that enhance the power of psychology to elevate the human condition and advance human potential, both now and in generations to come. These activities are funded primarily through contributions and investment income. 2. Significant Accounting Policies Basis of presentation The Foundation s financial statements are presented using the accrual basis of accounting, which is in accordance with accounting principles generally accepted in the United States of America. New Accounting Pronouncements During the year ended December 31, 2009, the Foundation adopted Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) , FASB Codification (the Codification). The Codification is the single source of authoritative U.S. generally accepted accounting principles (GAAP). Accordingly, references to GAAP have been updated for the appropriate Codification reference. Cash and cash equivalents For financial reporting purposes, the Foundation considers investments with original maturities of three months or less to be cash equivalents except cash held by an investment custodian for investment purposes. Computer software and related amortization Software is recorded at cost and is amortized using the straight-line method over three years, with no salvage value. Recognition of revenue The Foundation s operations are supported primarily by contributions, including bequests. Additional sources include contributions received through a check-off option on the American Psychological Association, Inc. s (APA) dues and dues-exempt statements, the assignment of royalties and a portion of the reprint revenue from the sale of certain APA copyrighted publications. The Foundation reports gifts of cash and other assets as restricted revenue if they are received with donor stipulations that limit the use of the donated assets. When a donor restriction expires, that is, when a stipulated time restriction ends or a purpose restriction is accomplished, temporarily restricted net assets are released to unrestricted net assets. Wills are recorded as contribution revenue when the probate courts declare the wills valid and the proceeds are measurable

8 2. Significant Accounting Polices (continued) Promises to give Unconditional promises to give are recorded as contributions in the period the promise is made. The contributions received are measured at their present value and are included in contributions receivable in the accompanying statements of financial position. The present value calculations assume payments in equal installments over future years. Payments due in future years are considered to have temporary restrictions that expire by the passage of time; the present value of these payments is included in temporarily restricted net assets in the accompanying financial statements. Investments Investments are recorded at fair value based on quoted market prices at December 31, 2009 and Gains and losses arising from the sale, maturity, or other disposition of investments are accounted for on a specific identification basis calculated as of the trade date. Unrealized and realized gains and losses are reported as investment income (loss) on the accompanying statements of activities. Short-term investments consist of an institutional money market fund held for investment purposes. Unrestricted and restricted funds are pooled together into common investment accounts, and investment income (loss) is allocated among unrestricted and temporarily restricted net assets based on the ending individual net asset balances as a percentage of the total of all net assets. In 2009 and 2008, the net investment income (loss) allocated to the temporarily restricted funds was $2,739,733 and ($4,050,132), respectively, and is included within net investment income (losses) on the accompanying statements of activities. Classification of net assets The Foundation s net assets have been grouped into the following three classes: Permanently restricted Permanently restricted net assets are funds whose use is restricted by donors to create a permanent endowment. Earnings on these permanent endowment funds are available to support the Jacquelin Goldman Congressional Fellowship for postdoctoral psychologists trained in developmental and/or clinical psychology. Temporarily restricted Temporarily restricted net assets generally result from contributions and other inflows of assets whose use by the organization is limited by donor-imposed stipulations that either expire by passage of time or can be fulfilled by meeting the purpose of the donation. Unrestricted Unrestricted net assets generally result from revenues derived from providing services and receiving unrestricted contributions, less expenses incurred in providing services, raising contributions, and performing administrative functions

9 2. Significant Accounting Polices (continued) Classification of net assets (continued) Unrealized and realized gains and losses and dividends and interest from investing in incomeproducing assets may be included in any of these net asset classifications, depending on donor restrictions. Functional Expenses The costs of providing the Foundation s various programs and other activities have been summarized on a functional basis. Accordingly, certain costs have been allocated among the programs and supporting services based on the actual amount of time worked on each program or activity or other reasonable basis. Functional expenses are as follows: Program services $ 724,296 $ 1,005,173 Management and general 173, ,657 Fundraising 181, ,709 Total functional expenses $ 1,079,332 $ 1,420,539 Grant, award and scholarship expenses Grant, award and scholarship expenses of the Foundation are recorded in the accompanying financial statements as payables and as expenses at the time that the grant, award, or scholarship has been both approved by the Board of Trustees and accepted by the recipient. Use of estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses, and disclosures. Actual results could differ from those estimates

10 3. Contributions receivable As of December 31, 2009 and 2008, APF has received unconditional promises to give of $500,775 and $489,045, respectively. The contributions are due as follows: Less than one year $ 277,326 $ 253,981 One to five years 240, ,274 Subtotal 517, ,255 Less: present value discount (12,010) (12,010) Total contributions receivable 505, ,245 Less: allowance for uncollectible receivables (5,200) (5,200) Contributions receivable, net $ 500,775 $ 489,045 Discount rates ranging from 2.24% to 4.30% were used to determine the present value discount. Contribution receivable trust In 2003, the Foundation was named beneficiary of an irrevocable charitable remainder trust (the Trust). Under the trust agreement, a third-party trustee will pay the donor a unitrust amount of 6.5% of the net fair market value of the assets of the Trust at the valuation date (as defined). The unitrust amount will be paid in quarterly installments over the lifetime of the donor. Upon the death of the donor, the Foundation will receive the remaining assets of the Trust. At December 31, 2009 and 2008, the fair value of the Trust was $54,922 and $45,961, respectively, which was measured at the present value of the future expected benefit using a rate of 3.2% and 5%, respectively. The amount is recorded as a Contribution Receivable Trust at December 31, 2009 and The gain in market value of the Trust of $8,961 for the year ended December 31, 2009, and the loss in the market value of the Trust of $36,230 for the year ended December 31, 2008, is included in contributions in the accompanying statements of activities. Contribution receivable life insurance In 2004, the Foundation was gifted a life insurance policy (the Policy) with a face value of $500,000. APF was the owner and beneficiary of the Policy. The donor had agreed to an annual cash donation to the Foundation equal to the annual premiums on the Policy for and during the donor s lifetime. In the event that reimbursement was not received from the donor for the payment of the annual premium, the Foundation could continue paying the premiums until the donor s death. The present value of the future expected premium payments, measured using a rate of - 9 -

11 3. Contributions Receivable (continued) Contribution receivable life insurance (continued) 4.75%, was recorded as Contribution Receivable Life Insurance at December 31, In 2008, the donor passed away and the insurance proceeds to be received under the policy were recorded as Contribution Receivable Life Insurance as of December 31, The proceeds were received during the year ended December 31, Contribution receivable bequest In addition to the life insurance policy noted above, the same donor left a bequest of $977,561 to the Foundation that is recorded as Contributions Receivable Bequest in the accompanying statement of financial position as of December 31, The proceeds from the bequest were received during the year ended December 31, Investment Income (loss) Investment income (loss) consists of the following for the years ended December 31, 2009 and 2008, respectively: Dividends and interest $ 241,111 $ 331,605 Net realized and unrealized gains (losses) 3,359,097 (5,994,306) Investment income (loss) $ 3,600,208 $ (5,662,701) 5. Fair Value Measurements FASB ASC Topic Fair Value Measurements and Disclosures defines fair value and establishes a framework for measuring fair value for assets and liabilities that are measured at fair value on a recurring basis. In accordance with the accounting standards for fair value measurements for those assets and liabilities that are measured at fair value on a recurring basis, the Foundation has categorized its applicable financial instruments into a required fair value hierarchy. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). If the inputs used to measure the financial instruments fall within different levels of the hierarchy, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument. Applicable financial assets and liabilities are categorized based on the inputs to the valuation techniques as follows: Level 1 inputs based on quoted prices (unadjusted) in active markets for identical assets or liabilities accessible at the measurement date

12 5. Fair Value Measurements (continued) Level 2 inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly, such as quoted prices for similar assets or liabilities in active markets. Level 3 unobservable inputs for the asset or liability including the reporting entity s own assumptions in determining the fair value measurement. The following table summarizes the Foundation s assets (and liabilities) measured at fair value on a recurring basis as of December 31, 2009 and 2008: December 31, 2009 Level 1 Level 3 Fair Value Inputs Inputs Equities $ 5,622,216 $ 5,622,216 $ - Mutual funds equities 3,448,684 3,448,684 - Mutual funds bonds 2,702,833 2,702,833 - Money market funds 659, ,856 - Contribution receivable trust 54,922-54,922 Total $ 12,488,511 $ 12,433,589 $ 54,922 December 31, 2008 Level 1 Level 3 Fair Value Inputs Inputs Equities $ 3,683,192 $ 3,683,192 $ - Mutual fund equities 2,743,079 2,743,079 - Mutual fund bonds 1,867,492 1,867,492 - Money market funds 61,436 61,436 - Contribution receivable trust 45,961-45,961 Total $ 8,401,160 $ 8,355,199 $ 45,961 A roll forward of the fair value measurements using unobservable inputs (Level 3) is as follows as of December 31, 2009 and 2008: January 1, 2008 balance $ 82,191 Total unrealized loss included in change in net assets (36,230) December 31, 2008 balance 45,961 Total unrealized gain included in change in net assets 8,961 December 31, 2009 balance $ 54,

13 6. Endowment Fund The Foundation has a single permanently restricted donor fund, which is shown as permanently restricted net assets in the accompanying financial statements. 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 December 31, 2009, the permanently restricted net assets totaled $538,248, and the income earned on these net assets is restricted by the donor for a Congressional Fellowship. Earnings from the fund totaled $1,398 in 2009 and have been recorded as an increase in temporarily restricted net assets. Investment earnings on the endowment fund are expended for the restricted purpose required in the year earned. Interpretation of Relevant Law The Board of Trustees of the Foundation has 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 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 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. Any remaining portion of a donorrestricted 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 the UPMIFA. In accordance with the UPMIFA, the Foundation considers the preservation of the fund, the purposes of the donor-restricted endowment fund and the investment policies of the Foundation in making a determination to appropriate or accumulate donor-restricted endowment funds. Return Objectives, Risk Parameters and Strategies Employed The Foundation has adopted investment and spending policies for endowment assets that attempt to provide a predictable stream of funding to the program supported by its endowment while protecting the principal balance. The objective of the permanently restricted assets is the preservation of capital. To achieve the return objectives within the risk parameters, the Foundation has elected to invest in a diversified portfolio that includes equities, equity and fixedincome mutual funds, and money market funds. From time to time, the fair value of assets associated with the donor-restricted endowment fund may fall below the level that the donor or UPMIFA requires the Foundation to retain as a fund of perpetual duration. There were no such deficiencies as of December 31, Spending Policy The earnings on the permanently restricted net assets are released from restricted funds when used in accordance with donor stipulations

14 7. Net Assets Released from Restrictions During 2009 and 2008, the following expenses were incurred once the time restrictions and/or purpose of donor-imposed restrictions on contributions were met. Accordingly, the related temporarily restricted net assets were released to unrestricted net assets in the accompanying statements of activities. Grant, award and scholarship expenses Prizes and awards $ 68,744 $ 110,000 Lectures 7,500 6,500 Scholarships and fellowships 167, ,779 Grants 98, ,020 Gifted Children Project Rosen Fund 2,569 3,540 Subtotal 345, ,839 Operational expenses and release from time restrictions Salaries and benefits 342, ,889 Asset management fees 40,425 39,862 Consulting/contractual services 6,863 6,680 Other expenses and release from time restrictions 187, ,138 Subtotal 577, ,569 Total net assets released from restrictions $ 922,793 $ 1,310, Related-Party Transactions The Foundation reimburses the APA for certain expenses paid by the APA on behalf of the Foundation. These amounts consist primarily of direct salaries and benefits and other general and administrative expenses of the Foundation. During 2009 and 2008, the APA incurred $450,415 and $460,260, respectively, of reimbursable expenses on behalf of the Foundation. In addition, the Foundation receives an annual contribution from the APA. The contribution was $100,000 in 2009 and $112,841 in 2008 and is included in contributions in the accompanying statements of activities. In 2009 and 2008, the Foundation used office space provided by the APA at no charge. As of December 31, 2009, the amount due from the APA to the Foundation was $51,221. As of December 31, 2008, the balance of accounts payable due to the APA from the Foundation was $5,

15 9. Line of Credit During the year ended December 31, 2009, the Foundation obtained a $500,000 revolving line of credit with a local bank for its use to finance short-term working capital needs. The line of credit is payable on demand with interest payable monthly and expires May 1, The line of credit has an interest rate equal to the thirty-day LIBOR rate plus 2%, reset monthly, and not less than 3% per annum. There were no funds drawn on the line of credit as of or during the year ended December 31, Income Taxes The Foundation is exempt from the payment of federal income tax under Section 501(c)(3) of the Internal Revenue Code on income other than net unrelated business income. No provision for income taxes is required for the years ended December 31, 2009 and 2008, as the Foundation had no net taxable unrelated business income. Effective January 1, 2009, the Foundation adopted the authoritative guidance relating to accounting for uncertainty in income taxes included in ASC Topic Income Taxes. These provisions provide consistent guidance for the accounting for uncertainty in income taxes recognized in an entity s financial statements and prescribe a threshold of more likely than not for recognition and derecognition of tax positions taken or expected to be taken in a tax return. The Foundation performed an evaluation of uncertain tax positions for the year ended December 31, 2009, and determined that there were no matters that would require recognition in the financial statements or which may have any affect on its tax-exempt status. As of December 31, 2009, the statute of limitations for tax years 2006 through 2008 remains open with the US federal jurisdiction or the various states and local jurisdictions in which the Foundation files tax returns. It is the Foundation s policy to recognize interest and/or penalties related to uncertain tax positions, if any, in income tax expense. 11. Subsequent Events In preparing the financial statements, the Foundation has evaluated events and transactions for potential recognition or disclosure through March 30, 2010, the date the financial statements were available to be issued