THE COMMUNITY FOUNDATION OF GREATER BIRMINGHAM

Transcription

1 THE COMMUNITY FOUNDATION OF GREATER BIRMINGHAM FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION

2 TABLE OF CONTENTS INDEPENDENT AUDITORS REPORT 1 FINANCIAL STATEMENTS Statements of Financial Position 3 Statements of Activities and Changes in Net Assets 4 Statements of Cash Flows 6 Notes to the Financial Statements 8 SUPPLEMENTARY INFORMATION Unaudited Statements of Operating and General Expenses 26

3 INDEPENDENT AUDITORS REPORT Board of Directors The Community Foundation of Greater Birmingham Report on the Financial Statements We have audited the accompanying financial statements of The Community Foundation of Greater Birmingham (a nonprofit organization) as of December 31, 2015 and 2014, and the related statements of activities and changes in net assets 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. Auditors Responsibility Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors 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 auditors consider 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. Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of The Community Foundation of Greater Birmingham as of December 31, 2015 and 2014, 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. 1

4 Report On Supplementary Information Our audits were conducted for the purpose of forming an opinion on the financial statements as a whole. The unaudited statements of operating and general expenses for the years ended December 31, 2015 and 2014, which are the responsibility of management, are presented for purposes of additional analysis and are not a required part of the financial statements. Such information has not been subjected to the auditing procedures applied in the audits of the financial statements and, accordingly, we do not express an opinion or provide any assurance on it. Birmingham, Alabama June 28,

5 STATEMENTS OF FINANCIAL POSITION ASSETS Cash and cash equivalents $ 6,518,712 $ 6,502,293 Pledges receivable, net of allowance for uncollectible accounts of $17,000 ($28,000 at December 31, 2014) 829,536 1,376,280 Marketable securities, at fair value, cost of $222,319,889 ($154,236,214 at December 31, 2014) 226,080, ,443,029 Interest receivable 511, ,004 Other assets, net 52,688 51,375 Investment in real estate 171, ,000 Charitable gift annuities 360, ,127 Receivables from split-interest agreements 2,282,975 3,667,857 Beneficial interest in perpetual trusts 10,753,220 11,294,605 TOTAL ASSETS $ 247,559,698 $ 194,411,570 LIABILITIES AND NET ASSETS LIABILITIES Grants payable $ 3,839,496 $ 3,156,097 Other liabilities 84, ,159 Funds held as agency endowments 11,142,144 12,361,839 Total liabilities 15,066,549 15,623,095 NET ASSETS Unrestricted 212,799, ,084,142 Temporarily restricted 3,861,732 6,331,366 Permanently restricted 15,831,582 16,372,967 Total net assets 232,493, ,788,475 TOTAL LIABILITIES AND NET ASSETS $ 247,559,698 $ 194,411,570 See notes to the financial statements. 3

6 STATEMENT OF ACTIVITIES AND CHANGES IN NET ASSETS FOR THE YEAR ENDED DECEMBER 31, 2015 Temporarily Permanently Unrestricted Restricted Restricted Total REVENUES AND SUPPORT Contributions and bequests $ 75,567,843 $ 23,168 $ - $ 75,591,011 Interest and dividends 4,297, ,412-4,450,492 Net realized gain on sale of marketable securities 6,857, ,646-7,093,939 Net unrealized loss on marketable securities (11,932,070) (402,654) - (12,334,724) Loss on interest in perpetual trusts - - (541,385) (541,385) Net assets released from restrictions 2,278,391 (2,278,391) - - Total revenue and support 77,068,537 (2,267,819) (541,385) 74,259,333 EXPENSES AND LOSSES Grants 16,391, ,391,740 Investment management and custodial fees 751, ,833 Amortization 228, ,954 Other expenses 1,207, ,207,146 Actuarial loss on annuity obligations - 201, ,815 Other loss 96, ,750 Operating and general expenses: Development 641, ,141 Finance, governance, and administration 498, ,669 Grant making and initiatives 536, ,611 Total expenses and losses 20,352, ,815-20,554,659 CHANGE IN NET ASSETS 56,715,693 (2,469,634) (541,385) 53,704,674 NET ASSETS AT BEGINNING OF YEAR 156,084,142 6,331,366 16,372, ,788,475 NET ASSETS AT END OF YEAR $ 212,799,835 $ 3,861,732 $ 15,831,582 $ 232,493,149 See notes to the financial statements. 4

7 STATEMENT OF ACTIVITIES AND CHANGES IN NET ASSETS FOR THE YEAR ENDED DECEMBER 31, 2014 Temporarily Permanently Unrestricted Restricted Restricted Total REVENUES AND SUPPORT Contributions and bequests $ 13,226,205 $ 1,848,006 $ - $ 15,074,211 Interest and dividends 4,329, ,142-4,479,768 Net realized gain on sale of marketable securities 3,893, ,372-4,005,269 Net unrealized gain on marketable securities 297,943 35, ,313 Actuarial gain on annuity obligations - 21,761 21,761 Gain on interest in perpetual trusts , ,215 Net assets released from restrictions 1,252,831 (1,252,831) - - Total revenue and support 23,000, , ,215 24,101,537 EXPENSES AND LOSSES Grants 13,175, ,175,008 Investment management and custodial fees 697, ,774 Amortization 255, ,347 Other expenses 76, ,990 Other loss 133, ,266 Operating and general expenses: Development 618, ,004 Finance, governance, and administration 479, ,766 Grant making and initiatives 564, ,463 Total expenses and losses 16,000, ,000,618 CHANGE IN NET ASSETS 6,999, , ,215 8,100,919 NET ASSETS AT BEGINNING OF YEAR 149,084,258 5,417,546 16,185, ,687,556 NET ASSETS AT END OF YEAR $ 156,084,142 $ 6,331,366 $ 16,372,967 $ 178,788,475 See notes to the financial statements. 5

8 STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED CASH FLOWS FROM OPERATING ACTIVITIES Change in net assets $ 53,704,674 $ 8,100,919 Adjustments to reconcile change in net assets to net cash provided (used) by operating activities: Depreciation 13,326 17,239 Reduction in provision for uncollectible accounts (11,000) (14,000) Net unrealized and realized (gain) loss on investments 5,568,763 (4,669,499) (Gain) loss on annuity obligations 201,815 (21,761) (Gain) loss on interest in perpetual trusts 541,385 (187,215) Contributions of marketable securities, split-interest agreements, other assets, charitable gift annuities, and perpetual trusts (4,581,645) (7,651,255) Change in pledges receivable 557, ,836 Change in interest receivable (16,154) (157,266) Change in other assets (14,639) (14,924) Change in grants payable 683,399 (190,384) Change in other liabilities (20,250) 51,447 Change in funds held as agency endowments (1,219,695) 243,168 Net cash provided (used) by operating activities 55,407,723 (3,835,695) CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from maturities and sales of marketable securities 249,741,842 91,622,636 Purchase of marketable securities (305,133,146) (85,208,945) Net cash (used) provided by investing activities (55,391,304) 6,413,691 See notes to the financial statements. 6

9 STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED NET INCREASE IN CASH AND CASH EQUIVALENTS $ 16,419 $ 2,577,996 CASH AND CASH EQUIVALENTS AT BEGINNING OF OF YEAR 6,502,293 3,924,297 CASH AND CASH EQUIVALENTS AT END OF YEAR $ 6,518,712 $ 6,502,293 See notes to the financial statements. 7

10 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Organization The Community Foundation of Greater Birmingham (the Foundation) is composed of three separate legal entities. Two of the entities, a trust entity and a nonprofit corporation, are governed by a common Board of Directors and operate jointly as a community foundation for a single purpose. In 2004, the Charitable Real Estate Foundation (CREF) was set up as a support organization of the Foundation in order to facilitate gifts of real estate and has a separate Board of Directors approved by the Board of Directors of the Foundation. The Foundation uses its assets primarily to benefit residents of the greater Birmingham area, including Jefferson, Shelby, St. Clair, Blount, and Walker Counties. The Foundation accomplishes its work by leveraging gifts and bequests from many people to drive positive change, by bringing people together to address community issues, build on opportunities, and achieve measurable results, and by serving as a partner with others to improve the life of the region. The Foundation focuses currently on achieving four specific results: children are successful along the education pipeline; people can lead healthy lives; communities are sustainable, livable, and vibrant; and individuals and families are economically secure. Basis of Accounting The accompanying financial statements have been prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America. Financial Statement Presentation The Foundation reports information regarding its financial position and activities according to three classes of net assets: unrestricted net assets, temporarily restricted net assets, and permanently restricted net assets. Unrestricted net assets are those which are subject to variance power (the unilateral power of the Board of Directors to redirect the use of assets). The variance power allows the Board of Directors to modify donor instructions that are incapable of fulfillment or inconsistent with the charitable needs of the community. As a result of variance power, most contributions are classified as unrestricted net assets for financial statement purposes. Although the Board of Directors of the Foundation has variance power, its policy and intention are to comply with the instructions of the donors of each fund. Temporarily restricted net assets are gifts whose use by the Foundation have been limited by donors to a specific time period or purpose. When a donor-imposed restriction expires or is otherwise satisfied, temporarily restricted net assets are reclassified to unrestricted net assets and reported in the statements of activities and changes in net assets as net assets released from restrictions. Currently, these assets consist primarily of split-interest agreements, charitable gift annuities, and pledges receivable. Permanently restricted net assets have been restricted by donors and are to be maintained by the Foundation in perpetuity. Currently, these assets consist primarily of perpetual trusts. 8

11 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CONTINUED Generally accepted accounting principles (GAAP) provide guidance on the net asset classification of donor-restricted endowment funds for a not-for-profit organization that is subject to the Uniform Prudent Management of Institutional Funds Act of 2006 (UPMIFA). GAAP also promulgates disclosures about an organization s endowment funds (both donor restricted endowment funds and board designated endowment funds) whether or not the organization is subject to UPMIFA. See Note 8 regarding the Foundation s endowment funds. Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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 reporting date and revenues and expenses during the reporting period. Actual results could differ from those estimates. Cash and Cash Equivalents The Foundation includes cash equivalents (defined as investments having an original maturity of three months or less when purchased) in cash flows for each year. The Foundation maintains its cash in bank deposit accounts which, at times, may exceed federally insured limits. The Foundation has not experienced any losses in such accounts. Contributions and Bequests Contributions and bequests are accounted for at average fair market value on the date of contribution. All unconditional promises to give are considered to be contributions on the date the promise is made. Allowance for Uncollectible Accounts The allowance for uncollectible accounts is maintained in amounts estimated to provide adequate reserves to cover anticipated losses based on a periodic evaluation of the outstanding pledges. On a continuing basis, management analyzes pledges and, once pledges are determined to be uncollectible, they are written off through a charge against an existing allowance account or operations. Marketable Securities Marketable securities are carried at fair value determined as of the last business day of the year as reported by the financial institution holding the security at quoted market price. The cost of marketable securities represents amounts paid for purchased securities or average market values as of the date the security was donated to the Foundation for contributed securities. Realized gains and losses from the sales of securities are primarily determined by the specific identification method. Net unrealized appreciation or depreciation of marketable securities represents the change in the difference between the Foundation s cost and current market value of securities as determined at the end of each year and includes the effect of amortization expense on securities. 9

12 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CONTINUED Investment in Real Estate Investment in real estate is carried at the estimated fair value at the date of the gift, less depreciation where applicable. Charitable Gift Annuities Charitable gift annuities are assets that are transferred directly to the Foundation in exchange for distributions of a fixed amount for a specified period of time to the donor or beneficiaries. These assets are held as general assets of the Foundation, and the related annuity liability is recorded as a general obligation of the Foundation. The asset is recorded at the fair value on the date of the agreement, and an annuity liability is recorded for an amount equal to the present value of the future distributions to the beneficiary. The difference between the fair value of the assets received and the present value of the liability is recognized as temporarily restricted contribution revenue. Receivables from Split-Interest Agreements The Foundation has certain trust agreements with donors under which both parties derive benefits. These types of arrangements are referred to as split-interest agreements. Split-interest agreements entered into by the Foundation consist primarily of charitable remainder trusts. Contribution revenues are recognized for the present value of the remainder interest and classified as increases in temporarily restricted net assets unless the donor has permanently restricted the Foundation s use of its interest through a perpetual trust. The fair value of contributions receivable from charitable remainder trusts is estimated by discounting the estimated cash flows to be received over the anticipated term of the trusts using the applicable federal discount and mortality rates published by the federal government. The rates currently being used to discount trust funds range from 5% to 6% based on the life expectancy of the beneficiaries. Changes in the value of these contributions receivable are reflected as actuarial gain (loss) on annuity obligations in the accompanying statements of activities and changes in net assets. Beneficial Interest in Perpetual Trusts The perpetual trusts are carried at the present value of the ultimate Foundation interest. The annual gain or loss on interest in perpetual trusts is reflected in the statements of activities and changes in net assets. The funds of the perpetual trusts are held by a local bank. These funds primarily consist of common stocks, governmental bonds, nongovernmental bonds, money market funds, and other investments. Fair Value Measurements The Foundation adheres to the provisions of GAAP for fair value measurement of financial assets and liabilities. Such provisions define fair value, establish a framework for measuring fair value, and expand disclosure about fair value measurement. GAAP also emphasizes that fair value is a market-based measurement, not an entity-specific measurement, and sets out a fair value hierarchy with the highest priority being quoted prices in active markets. Under the provisions of GAAP, fair value measurements are disclosed by level within that hierarchy. 10

13 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CONTINUED The Foundation s assets and liabilities recorded at fair value have been categorized based upon a fair value hierarchy in accordance with the fair value provisions of the Accounting Standards Codification (ASC). The ASC also establishes a fair value hierarchy that prioritizes the inputs used to measure fair value: Level 1 Valuations based on quoted prices in active markets for identical assets or liabilities that the Foundation has the ability to access. Since valuations are based on quoted prices that are readily and regularly available in an active market, valuation of these products does not entail a significant degree of judgment. Level 2 Valuations based on observable inputs, including quoted prices (other than Level 1) in active markets for similar assets or liabilities, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability, such as interest rates, yield curves, volatilities, and default rates, and inputs that are derived principally from or corroborated by observable market data. Level 3 Valuations based on inputs that are unobservable and significant to the overall fair value measurement. Valuation Techniques The fair value of short-term investments is based on quoted market prices in an active market for identical assets and liabilities as of the reporting date. The fair value of trading securities is categorized within Level 1 of the fair value hierarchy. The fair value of the Foundation s interest in certain funds is based on the assessment made by the investment managers for the Foundation of each underlying investment. These interests are included in Level 3 of the fair value hierarchy because the fair values of these investments are determined by the funds and are unobservable (see Note 7). Some of the Foundation s financial instruments are not measured at fair value on a recurring basis. However, these instruments are carried at amounts that approximate fair value due to their liquid, or short-term, nature. Such financial assets and financial liabilities include cash and cash equivalents, accounts receivable, interest receivable, grants payable, and other liabilities. Interest and Dividend Income Dividend income is recorded on the ex-dividend date, and interest is recorded on the accrual basis. Income Taxes The Foundation is exempt from federal income taxes under Section 501(c)(3) of the Internal Revenue Code; accordingly, no provision for federal income taxes has been included in the accompanying financial statements. 11

14 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CONTINUED The Foundation adheres to the provisions of GAAP relating to uncertainty in income taxes. Such provisions require entities to assess their uncertain tax positions for the likelihood that they would be overturned upon Internal Revenue Service (IRS) examination or upon examination by state taxing authorities. In accordance with these provisions, the Foundation has determined that it does not have any positions at December 31, 2015 or 2014 that it would be unable to substantiate. The Foundation has filed its tax returns through December 31, The tax returns for years ended December 31, 2011 and thereafter are subject to audit by the taxing authorities. Subsequent Events Management has evaluated subsequent events and their potential effects on these financial statements through June 28, 2016, the date the financial statements were available to be issued. 2. PLEDGES RECEIVABLE New pledges in 2015 amounted to $8,500 (-0- in 2014). Pledges made in 2015 were discounted to their present value assuming their respective terms at a discount rate of.23%, compounded annually Receivable in less than one year $ 473,075 $ 686,387 Receivable in one to five years 377, ,500 Total pledges receivable 850,475 1,411,887 Less discount to net present value 3,939 7,607 Less allowance for uncollectible pledges receivable 17,000 28,000 Net pledges receivable $ 829,536 $ 1,376,280 12

15 3. MARKETABLE SECURITIES Marketable securities at December 31 consist of the following: Domestic equities $ 64,993,074 $ 53,853,614 International equities 38,486,902 30,146,913 Corporate debt securities 25,148,427 28,341,429 Other domestic bonds 32,602,132 15,611,744 High yield bonds 1,878,913 1,131,219 International bond funds 3,412,385 4,445,106 Private equity 1,060, ,813 Fund of funds 23,211,312 14,175,734 Real estate and REITs 7,642,089 6,352,550 Real assets 8,062,991 8,545,057 Cash and cash equivalents 19,581,760 7,719, CHARITABLE GIFT ANNUITIES $226,080,003 $170,443,029 At December 31, 2015, the Foundation has charitable gift annuities with a combined value of $360,406 ($410,127 at December 31, 2014). The following table summarizes activity in such funds during the years ended December 31: Charitable gift annuities at beginning of year $ 410,127 $ 359,257 Contributions - 100,118 Investment income 12,582 16,981 Investment (loss) gain (15,589) 11,190 Fiduciary fees (4,379) (4,455) Payments to beneficiaries (3,591) (24,396) Annuity liability payments (38,744) (48,568) Charitable gift annuities at end of year $ 360,406 $ 410,127 13

16 5. RECEIVABLES FROM SPLIT-INTEREST AGREEMENTS At December 31, 2015, the Foundation has split-interest agreements with a combined value of $2,282,975 ($3,667,857 at December 31, 2014). The following table summarizes activity in such funds during the years ended December 31: Receivables from split-interest agreements at beginning of year $ 3,667,857 $ 1,968,869 Contributions - 1,790,908 Settlement of receivable (1,198,657) (102,491) Unrealized investment (losses) gains (186,225) 10,571 Receivables from split-interest agreements at end of year $ 2,282,975 $ 3,667, FUNDS HELD AS AGENCY ENDOWMENTS GAAP establishes standards for transactions in which an organization, such as the Foundation, accepts a contribution from a donor and agrees to use those assets on behalf of another organization or transfer those assets, the return of investment of those assets, or both to another entity that is specified by the donor. GAAP specifically requires that if a not-for-profit organization (NPO) establishes a fund at an organization with its own funds and specifies itself as the beneficiary of the fund, the organization must account for the transfer of such assets as a liability. The Foundation refers to such funds as agency endowments. The Foundation maintains variance power over agency endowment funds and continues to report the funds as assets of the Foundation. However, in accordance with GAAP, a liability has been established for the fair value of the funds, which is generally equivalent to the present value of future payments expected to be made to the NPO. At December 31, 2015 and 2014, the Foundation managed 38 agency endowment funds with a combined value of $11,142,144 and $12,361,839, respectively. The following table summarizes activity in such funds during the years ended December 31: Agency endowment fund balances at beginning of year $ 12,361,839 $ 12,118,671 Contributions 620, ,144 Investment income 300, ,859 Unrealized and realized investment gains (losses) (327,978) 330,916 Grants and other (1,687,442) (798,874) Fiduciary fees (125,833) (123,877) Agency endowment fund balances at end of year $ 11,142,144 $ 12,361,839 14

17 7. FAIR VALUE MEASUREMENTS The Foundation s assets and liabilities recorded at fair value have been categorized based upon a fair value hierarchy in accordance with GAAP. See Note 1 for a discussion of the Foundation s policies regarding this hierarchy. The following fair value hierarchy table presents information about the Foundation s assets and liabilities measured or disclosed at fair value on a recurring basis as of December 31, 2015: ASSETS Fair Value Fair Value Measurement at Report Date Using Significant Other Observable Inputs Level 2 Quoted Prices in Active Markets Level 1 Significant Unobservable Inputs Level 3 Marketable securities: Domestic equities $ 64,993,074 $ 64,993,074 $ - $ - International equities 38,486,902 38,486, Corporate debt securities 25,148,427 25,148, Other domestic bonds 32,602,132 32,602, High yield bonds 1,878,913 1,878, International bond funds 3,412,385 3,412, Private equity 1,060, ,060,018 Fund of funds 23,211,312-8,801,930 14,409,382 Real estate and REITs 7,642, ,433-6,856,656 Real assets 8,062,991 5,578,735-2,484,256 Cash and cash equivalents 19,581,760 19,581, ,080, ,467,761 8,801,930 24,810,312 Charitable gift annuities 360, ,406 - Split-interest receivables 2,282,975-2,282,975 - Beneficial interest in perpetual trusts 10,753, ,753,220 Total Assets $ 239,476,604 $ 192,467,761 $ 11,445,311 $ 35,563,532 15

18 7. FAIR VALUE MEASUREMENTS CONTINUED The table below sets forth a summary of changes in the fair value of the Foundation s Level 3 investment assets for the year ended December 31, 2015: Beneficial Interest in Perpetual Trusts Marketable Securities Balance at beginning of year $ 11,294,605 $ 21,995,836 Unrealized (losses) gains relating to instruments held at the reporting date (541,385) 1,686,579 Purchases - 1,371,282 Sales, issuances, and settlements (net) - (243,385) Balance at end of year $ 10,753,220 $ 24,810,312 Management determines the fair value measurement valuation policies and procedures, including those for Level 3 measurements. At least annually, management: (1) determines if the current valuation techniques used in fair value measurements are still appropriate and (2) evaluates and adjusts the unobservable inputs used in the fair value measurements based on current market conditions and third-party information. 16

19 7. FAIR VALUE MEASUREMENTS CONTINUED The following fair value hierarchy table presents information about the Foundation s assets and liabilities measured or disclosed at fair value on a recurring basis as of December 31, 2014: ASSETS Fair Value Fair Value Measurement at Report Date Using Significant Other Observable Inputs Level 2 Quoted Prices in Active Markets Level 1 Significant Unobservable Inputs Level 3 Marketable securities: Domestic equities $ 53,853,614 $ 53,853,614 $ - $ - International equities 30,146,913 30,146, Corporate debt securities 28,341,429 28,341, Other domestic bonds 15,611,744 15,611, High yield bonds 1,131,219 1,131, International bond funds 4,445,106 4,445, Private equity 119, ,813 Fund of funds 14,175, ,864 13,860,870 Real estate investment trusts 6,352, ,313-5,736,237 Real assets 8,545, ,289 5,497,852 2,278,916 Cash and cash equivalents 7,719,850 7,719, ,443, ,634,477 5,812,716 21,995,836 Charitable gift annuities 410, ,127 - Split-interest receivables 3,667,857-3,667,857 - Beneficial interest in perpetual trusts 11,294, ,294,605 Total Assets $ 185,815,618 $ 142,634,477 $ 9,890,700 $ 33,290,441 The table below sets forth a summary of changes in the fair value of the Foundation s Level 3 investment assets for the year ended December 31, 2014 Beneficial Interest in Perpetual Trusts Marketable Securities Balance at beginning of year $ 11,107,390 $ 16,768,800 Realized gains - 143,386 Unrealized gains relating to instruments held at the reporting date 187,215 1,655,230 Purchases - 4,000,000 Sales, issuances, and settlements (net) - (571,580) Balance at end of year $ 11,294,605 $ 21,995,836 17

20 7. FAIR VALUE MEASUREMENTS CONTINUED The following table presents information about the Foundation s investments that have fair values estimated using net asset value per share as of December 31, 2015: Fair Value Measurement of Investments That Calculate Net Asset Value Fair Value 2015 Unfunded Commitments 2015 Redemption Frequency (If Currently Eligible) Redemption Notice Period Alternative Investments Hedge Funds (a) $ 5,578,791 $ - Quarterly 95 days Hedge Funds (b) 8,830,591 - Annual 105 days Real Estate (c) 6,358,706 - Quarterly 60 days Limited Partnership (d) 1,494,000 2,153,169 Currently ineligible Total $ 22,262,088 $ 2,153,169 (a) (b) (c) (d) These funds are hedge funds that invest in multiple strategies to diversify risk and reduce volatility. Investments are in U.S. and non-u.s. markets. The fair values of the investments in this category have been estimated using the net asset value per share of the investments. This fund s investment objective is to achieve capital appreciation through a balanced level of risk primarily by allocating assets to a select number of fundamental long/short equity and credit-focused managers. Underlying investments are in U.S. and non-u.s. markets. The fair values of the investments in this category have been estimated using the net asset value per share of the investments. This is a portfolio of core real estate, which is comprised of participating mortgage loans and equity real estate investments. The fund is diversified by property type and geographic location. The valuation has been estimated based on the net asset value per share. This is a limited partnership to capitalize on changing market conditions or temporary inefficiencies resulting in opportunistic investments in stressed or dislocated areas of the market. The Foundation committed $3,750,000 with payments beginning in The fund term is 10 years. 18

21 7. FAIR VALUE MEASUREMENTS CONTINUED The following table presents information about the Foundation s investments that have fair values estimated using net asset value per share as of December 31, 2014: Fair Value Measurement of Investments That Calculate Net Asset Value Fair Value 2014 Unfunded Commitments 2014 Redemption Frequency (If Currently Eligible) Redemption Notice Period Alternative Investments Hedge Funds (a) $ 5,631,006 $ - Quarterly 95 days Hedge Funds (b) 8,229,864 - Currently ineligible 105 days Real Estate (c) 5,736,237 - Quarterly 60 days Limited Partnership (d) - 3,750,000 Currently ineligible Total $ 19,597,107 $ 3,750,000 (a) These funds are hedge funds that invest in multiple strategies to diversify risk and reduce volatility. Investments are in U.S. and non-u.s. markets. The fair values of the investments in this category have been estimated using the net asset value per share of the investments. (b) This fund s investment objective is to achieve capital appreciation through a balanced level of risk primarily by allocating assets to a select number of fundamental long/short equity and credit-focused managers. Underlying investments are in U.S. and non-u.s. markets. The fair values of the investments in this category have been estimated using the net asset value per share of the investments. There is a lockup period for this fund that will lapse January 1, (c) This is a portfolio of core real estate, which is comprised of participating mortgage loans and equity real estate investments. The fund is diversified by property type and geographic location. The valuation has been estimated based on the net asset value per share. (d) This is a limited partnership to capitalize on changing market conditions or temporary inefficiencies resulting in opportunistic investments in stressed or dislocated areas of the market. The Foundation has committed $3,750,000 with payments beginning in The fund term is 10 years. 8. ENDOWMENTS The Foundation s endowments consist of individual funds established for a variety of purposes. Its endowments include both donor-restricted endowment funds and funds designated by the Board of Directors to function as endowments. As required by GAAP, net assets associated with endowment funds, including funds designated by the Board of Directors to function as endowments, are classified and reported based on the existence or absence of donor-imposed restrictions. Interpretation of Relevant Law UPMIFA requires the purchasing power of donor-restricted endowment funds to be preserved, absent explicit donor stipulations to the contrary. The Board of Directors has determined that the majority of the Foundation s contributions and net assets are subject to the terms of the Foundation s Bylaws and do not meet the definition of endowment under UPMIFA. Certain contributions are received subject to other gift instruments or specific agreements with the Foundation. 19

22 8. ENDOWMENTS CONTINUED Under the terms of the Foundation s Bylaws, the Board of Directors has the ability to distribute as much of the corpus of any trust or separate gift, device, bequest, or fund as the Board of Directors in its sole discretion shall determine. As a result of the ability to distribute the corpus, all contributions not classified as temporarily restricted or permanently restricted are classified as unrestricted net assets for financial statement purposes. The following depicts the endowment funds, as well as the activity for the endowment funds, for the year ended December 31, 2015: Unrestricted Temporarily Restricted Permanently Restricted Total Endowment net assets at beginning of year $ 70,715,364 $ 1,844,232 $ 16,372,967 $ 88,932,563 Interest and dividends, net of investment expenses 1,459, ,720-1,584,426 Net depreciation (1,671,716) (166,009) (541,385) (2,379,110) Contributions 1,443,301 8,500-1,451,801 Amounts appropriated for expenditure (3,535,859) (507,685) - (4,043,544) Other changes payments on pledges 328,110 (328,110) - - Transfers/adjustments 782, ,023 Change in endowment net assets (1,194,435) (868,584) (541,385) (2,604,404) Endowment net assets at end of year $ 69,520,929 $ 975,648 $ 15,831,582 $ 86,328,159 The following depicts the endowment funds, as well as the activity for the endowment funds, for the year ended December 31, 2014: Unrestricted Temporarily Restricted Permanently Restricted Total Endowment net assets at beginning of year $ 69,342,631 $ 2,233,050 $ 16,185,752 $ 87,761,433 Interest and dividends, net of investment expenses 1,244, ,401-1,362,297 Net appreciation 2,208, , ,215 2,542,571 Contributions 944,962 1, ,962 Amounts appropriated for expenditure (4,134,297) (368,872) - (4,503,169) Other changes payments on pledges 285,088 (285,088) - - Transfers/adjustments 823, ,469 Change in endowment net assets 1,372,733 (388,818) 187,215 1,171,130 Endowment net assets at end of year $ 70,715,364 $ 1,844,232 $ 16,372,967 $ 88,932,563 20

23 8. ENDOWMENTS CONTINUED The following depicts the endowment net asset composition by type of fund as of December 31, 2015: Unrestricted Temporarily Restricted Permanently Restricted Total Donor designated endowment funds $ - $ 453,389 $ 15,831,582 $ 16,284,971 Other endowment funds: Donor advised 10,115, ,115,805 Designated 14,006, ,006, th anniversary catalyst 6,498, ,388-6,830,803 Scholarship 10, ,074 Community unrestricted 1,867, ,867,592 Field of interest 4,433,631 6,600-4,440,231 36,931, ,988-37,270,844 Board designated endowment funds 32,589, ,271-32,772,344 $ 69,520,929 $ 975,648 $ 15,831,582 $ 86,328,159 Other endowment funds include funds that are subject to the Foundation s spending policy under the gift agreement. The following depicts the endowment net asset composition by type of fund as of December 31, 2014: Unrestricted Temporarily Restricted Permanently Restricted Total Donor designated endowment funds $ - $ 1,002,363 $ 16,372,967 $ 17,375,330 Other endowment funds: Donor advised 10,587, ,587,740 Designated 14,331, ,331, th anniversary catalyst 5,949, ,454-6,457,386 Scholarship 10, ,992 Community unrestricted 1,970, ,970,160 Field of interest 3,649, ,649,851 36,500, ,454-37,007,694 Board designated endowment funds 34,215, ,415-34,549,539 $ 70,715,364 $ 1,844,232 $ 16,372,967 $ 88,932,563 21

24 8. ENDOWMENTS CONTINUED In addition to endowment net assets, the Foundation also manages other nonendowed funds. The following table summarizes all Foundation net assets as of December 31, 2015: Unrestricted Temporarily Restricted Permanently Restricted Total Endowment funds $ 69,520,929 $ 975,648 $ 15,831,582 $ 86,328,159 Nonendowment funds: Donor advised 133,365,148 11, ,376,751 Designated 4,824, ,824,573 Community catalyst 2,474, ,632-2,763,323 Field of interest 941, ,568 Scholarship 1,377, ,377,074 Other 295, , ,278, , ,579,141 Charitable gift annuities - 302, ,874 Split-interest agreements - 2,282,975-2,282,975 $ 212,799,835 $ 3,861,732 $ 15,831,582 $ 232,493,149 In addition to endowment net assets, the Foundation also manages other nonendowed funds. The following table summarizes all Foundation net assets as of December 31, 2014: Unrestricted Temporarily Restricted Permanently Restricted Total Endowment funds $ 70,715,364 $ 1,844,232 $ 16,372,967 $ 88,932,563 Nonendowment funds: Donor advised 73,436,490 33,583-73,470,073 Designated 5,343, ,343,264 Community catalyst 3,639, ,642-4,087,431 Field of interest 576, ,869 Scholarship 1,507, ,507,151 Other 865, ,215 85,368, ,225-85,850,003 Charitable gift annuities - 338, ,052 Split-interest agreements - 3,667,857-3,667,857 $ 156,084,142 $ 6,331,366 $ 16,372,967 $ 178,788,475 22

25 8. ENDOWMENTS CONTINUED 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. The Foundation s spending and investment policies work together to achieve this objective. The investment policy establishes an achievable return objective through diversification of asset classes. 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 to achieve its long-term objectives within prudent risk parameters. The current spending policy for grant making is to distribute a maximum annual amount of 5% of the quarterly balance of the trailing 12 quarters. This is consistent with the Foundation s objective to maintain the purchasing power of endowment assets, as well as to provide additional real growth through new gifts and investment returns. 9. ADMINISTRATIVE AND FIDUCIARY FEES The Foundation charges an administrative fee to the various grant making funds to cover its operating expenses. The fee is withdrawn from the funds at the beginning of each calendar year and is calculated based on the average daily balance of the prior year s fair market value. The fee of each donor advised and donor designated fund is based on the fair market value on an annual basis as follows: 1% on the first $1,000,000,.75% on the next $1,000,000,.50% on the next $1,000,000, and.25% on funds over $3,000,000. The unrestricted and field of interest funds are assessed at 1.15% of the market value. The fee from the community catalyst funds is calculated at 1.00% of the market value. Scholarship funds that offer one-time scholarships are assessed a 1.50% fee. Those that offer renewable scholarships are assessed a 2% fee. The administrative fee for agency endowment funds opened on or before December 31, 2010 is assessed as follows:.60% on the first $1,000,000 and.50% on the remaining balance. For those funds established after January 1, 2011, the first $1,000,000 is assessed at.75%, and over that at.60%. For any donor advised, designated, or agency endowment fund over $10,000,000, the fee will be determined on an individual basis. The minimum administrative fee charged to any individual fund is $250. In addition, each fund pays an investment management fee to the respective financial institution. 23

26 10. RETIREMENT PLAN The Foundation sponsors a 403(b) retirement plan. All employees of the Foundation who work 20 hours or more per week are eligible to participate. The Foundation makes contributions to the plan at the rate of 5% of salary for each employee who meets the minimum requirement of one year of service and 20 hours of service per week; however, the Foundation does not match any employee contributions. Retirement plan expense for the year ended December 31, 2015 was $40,151 ($34,983 in 2014). 11. TEMPORARILY RESTRICTED NET ASSETS Temporarily restricted net assets at December 31 are designated for the following purposes: Art and culture $ 45,520 $ 47,633 Education 365, ,227 Environmental 12,127 17,408 Health and welfare 242, ,375 Human services 19,149 17,033 Religious 39,787 46,875 Donor advised 1,262,582 2,542,641 Community funds for competitive grant making 1,070,103 1,220, th anniversary catalyst 621, ,096 Leadership/operating 183, ,415 $ 3,861,732 $ 6,331, PERMANENTLY RESTRICTED NET ASSETS Earnings from permanently restricted net assets at December 31 are designated for the following purposes: Community funds for competitive grant making $ 2,515,001 $ 2,616,895 Human services 8,316,581 8,756,072 Health and welfare 5,000,000 5,000,000 $ 15,831,582 $ 16,372,967 24

27 13. COMMITMENTS In June 2012, the Foundation entered into a 60-month operating lease agreement for its current office space, which expires in July Rent expense for 2015 totaled $97,477 ($95,566 in 2014). The Foundation expects to incur future minimum lease payments under this operating lease as follows: 2016 $ 99, ,667 $ 158,091 25

28 SUPPLEMENTARY INFORMATION

29 UNAUDITED STATEMENT OF OPERATING AND GENERAL EXPENSES FOR THE YEAR ENDED DECEMBER 31, 2015 Finance, Governance, and Grant Making Development Administration and Initiatives Total Administrative $ 72,224 $ 46,513 $ 60,763 $ 179,500 Communications/marketing 21, ,445 Development/advancement 28, ,186 Grant cycles/initiatives 1,188-12,703 13,891 Personnel costs 478, , ,502 1,303,436 Professional services 23,939 35,971 11,857 71,767 Travel/development 11,182 27,289 6,399 44,870 Depreciation 4,787 4,152 4,387 13,326 $ 641,141 $ 498,669 $ 536,611 $ 1,676,421 See independent auditors' report. 26

30 UNAUDITED STATEMENT OF OPERATING AND GENERAL EXPENSES FOR THE YEAR ENDED DECEMBER 31, 2014 Finance, Governance, and Grant Making Development Administration and Initiatives Total Administrative $ 66,307 $ 42,435 $ 63,894 $ 172,636 Communications/marketing 30, ,796 Development/advancement 25, ,538 Grant cycles/initiatives ,045 20,045 Personnel costs 456, , ,943 1,275,365 Professional services 21,564 40,732 11,362 73,658 Travel/development 11,078 27,984 7,894 46,956 Depreciation 6,246 4,668 6,325 17,239 $ 618,004 $ 479,766 $ 564,463 $ 1,662,233 See independent auditors' report. 27