WHITEROCK CONSERVANCY. FINANCIAL REPORT (Reviewed) YEAR ENDED DECEMBER 31, 2016

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1 WHITEROCK CONSERVANCY FINANCIAL REPORT (Reviewed) YEAR ENDED DECEMBER 31, 2016

2 C O N T E N T S INDEPENDENT ACCOUNTANT S REVIEW REPORT 1 FINANCIAL STATEMENTS Statement of financial position 2 Statement of activities 3 Statement of functional expenses 4 Statement of cash flows 5 Notes to financial statements 6-22 Page

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4 WHITEROCK CONSERVANCY STATEMENT OF FINANCIAL POSITION December 31, 2016 See Independent Accountant s Review Report ASSETS Cash and cash equivalents $ 101,905 Accounts and other receivables 6,857 Contributions receivable 6,000 Grants receivable 12,346 Inventories 5,041 Prepaid expenses 2,988 Cash restricted for various purposes 110,655 Property and equipment, net of accumulated depreciation 16,174,851 Cash equivalents - long-term investments 47,728 Long-term investments 328,262 Restricted for permanent endowment: Long-term investments 1,202,000 Residence subject to life interest 456,000 Total assets $ 18,454,633 LIABILITIES AND NET ASSETS Accounts payable $ 12,474 Line of credit 117,432 Customer deposits and gift certificates payable 6,319 Refundable advances 1,587 Accrued property taxes 50,656 Interest payable 7,370 Payroll 5,207 Payroll taxes and sales taxes payable 5,543 Mortgage and notes payable 101,285 Beneficiary use of life interest of residence 90,209 Total liabilities $ 398,082 NET ASSETS Unrestricted Board designated $ 228,000 Undesignated 15,996,114 Total unrestricted $ 16,224,114 Temporarily restricted 630,437 Permanently restricted 1,202,000 Total net assets $ 18,056,551 Total liabilities and net assets $ 18,454,633 See Notes to Financial Statements

5 WHITEROCK CONSERVANCY STATEMENT OF ACTIVITIES For the Year Ended December 31, 2016 See Independent Accountant s Review Report Temporarily Permanently Unrestricted Restricted Restricted Total REVENUES Cash contributions $ 144,921 $ 103,050 $ - $ 247,971 Donated property, equipment, securities, and supplies 55, ,092 Donated services 8, ,305 Grants 230, ,761 Farm revenues 509, ,034 Guest service revenues 80, ,314 Events and tours 21, ,308 Gift shop and food sales 1, ,738 Miscellaneous revenues 26, ,404 Net gain on disposal of property and equipment 18, ,042 Change in value of residence subject to life interest - 4,437-4,437 Net investment income 12, , ,032 Total revenues, gains, and losses $ 1,107,950 $ 209,488 $ - $ 1,317,438 Net assets released from restrictions 157,587 (157,587) - - Total revenues, gains, and losses, and net assets released from restrictions $ 1,265,537 $ 51,901 $ - $ 1,317,438 EXPENSES Program services: Land stewardship/conservation $ 478,782 $ - $ - $ 478,782 Outdoor recreation/education 444, ,461 Supporting services: Management and general 150, ,763 Fund raising 112, ,838 Total expenses $ 1,186,844 $ - $ - $ 1,186,844 Change in net assets $ 78,693 $ 51,901 $ - $ 130,594 NET ASSETS AT BEGINNING OF YEAR AS RESTATED 16,145, ,536 1,202,000 17,925,957 NET ASSETS AT END OF YEAR $ 16,224,114 $ 630,437 $ 1,202,000 $ 18,056,551 See Notes to Financial Statements

6 WHITEROCK CONSERVANCY STATEMENT OF FUNCTIONAL EXPENSES For the Year Ended December 31, 2016 See Independent Accountant s Review Report Program Services Land Outdoor Stewardship/ Recreation/ Conservation Education Supporting Services Management and General Fund Raising Total Salaries $ 125,085 $ 134,140 $ 63,393 $ 72,932 $ 395,550 Payroll taxes 11,063 10,109 5,747 5,756 32,675 Employee benefits 8, ,257 3,869 14,091 Travel and vehicle expense 8,792 3,814 2, ,979 Training and development 1,086 1,685 1, ,459 Contract services - 18, ,432 Cost of sales - gift shop, food, special events Supplies and materials 124,631 17,198 2,980 1, ,985 Outside services 27,937 2,575-7,061 37,573 Postage and freight ,380 3,164 Legal and accounting ,166-26,166 Investment management fees - - 8,906-8,906 Other professional services and fees 999 1,251 5,415 1,019 8,684 Equipment rental and office space expense 3,613 1, ,936 Utilities 5,883 13,723 1,329 1,532 22,467 Communications 2,387 5,721 1,512 2,173 11,793 Advertising and marketing - 6,767 2,158 2,450 11,375 Repairs and maintenance 26,794 17, ,037 Insurance 23,965 14,375 13,471 6,528 58,339 Property taxes 49, ,428 Miscellaneous 1,127 3,564 1, ,430 Bad debt expense Depreciation 55, ,957 3,563 5, ,442 Interest expense 990-8,428-9,418 Total $ 478,782 $ 444,461 $ 150,763 $ 112,838 $ 1,186,

7 WHITEROCK CONSERVANCY STATEMENT OF CASH FLOWS For the Year Ended December 31, 2016 See Independent Accountant s Review Report CASH FLOWS FROM OPERATING ACTIVITIES Change in net assets $ 130,594 Adjustments to reconcile change in net assets to net cash provided by operating activities: Depreciation 254,442 Donated property and equipment (20,502) Net (gain) on disposal of property and equipment (18,042) Change in value of residence subject to life interest (4,437) Net realized/unrealized (gains) on investments (114,032) Decrease in accounts and other receivables 8,684 (Increase) in contributions receivable (5,500) Decrease in grants receivables 160,832 Decrease in inventories 3,288 (Increase) in prepaid expenses (377) (Decrease) in accounts payable (2,757) (Decrease) in excess grant reimbursement (39,004) (Decrease) in customer deposits and gift certificates payable (534) (Decrease) in refundable advances (5,913) (Decrease) in accrued property taxes (2,506) (Decrease) in interest payable (8,711) Increase in payroll, payroll taxes and sales taxes payable 756 Net cash provided by operating activities $ 336,281 CASH FLOWS FROM INVESTING ACTIVITIES Decrease in short-term investments $ 2,000 Proceeds from sale of investments 382,138 Purchase of investments (291,998) Proceeds from sale of property and equipment 71,998 Purchase of property and equipment (361,949) Net cash (used in) investing activities $ (197,811) CASH FLOWS FROM FINANCING ACTIVITIES Net borrowings (used in) on line of credit $ (72,361) Principal repayment of mortgage and notes payable (27,546) Net cash (used in) financing activities $ (99,907) INCREASE IN CASH AND CASH EQUIVALENTS $ 38,563 CASH AND CASH EQUIVALENTS Beginning 221,725 Ending $ 260,288 Composition of ending cash and cash equivalents Cash and cash equivalents $ 101,905 Cash restricted for long-term purposes 110,655 Cash equivalents - long-term investments 47,728 $ 260,288 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION Cash payments for interest $ 18,129 SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES Donated property and equipment received as a gift $ 20,502 Equipment acquired with note payable from bank and equipment dealer $ 29,325 See Notes to Financial Statements

8 WHITEROCK CONSERVANCY NOTES TO FINANCIAL STATEMENTS Note 1. Nature of Activities and Significant Accounting Policies Nature of activities: Whiterock Conservancy (the Organization ), located near Coon Rapids, Iowa, was incorporated in November The Organization is an Iowa nonprofit land trust dedicated to achieving a sustainable, resilient rural landscape, and transforming people s connection with agriculture and nature. The Organization exists solely to assist and support the Iowa Department of Natural Resources, the Leopold Center for Sustainable Agriculture, and the Iowa Natural Heritage Foundation (the Supported Organizations ) by carrying out their purposes relating to land preservation, land restoration, conservation, sustainable agriculture, education and recreation. Program services descriptions: The Organization accomplishes its purposes under the following program services: Land Stewardship/Conservation The Land Stewardship program is dedicated to conducting and demonstrating sustainable land stewardship techniques with land that has been gifted, purchased or eased to the Organization. The Organization works with neighbors, project partners, and other rural landowners to find, implement, and demonstrate rural land management techniques that help to foster a healthy and resilient environment, while at the same time, remaining economically viable. The Conservation program is dedicated to protecting, restoring and enhancing the natural resources of the Middle Raccoon River Valley in Iowa. To achieve these goals, the Organization engages in research and modeling of economically and environmentally sustainable agro-ecosystems and also provides opportunities and programs for natural resource preservation and restoration. Outdoor RecreationIEducation The Organization provides the public with access to the outdoors for recreation, education and interpretation of cultural, natural and scenic resources. This is accomplished through the operation of the Whiterock Guest Services, which is designed to accommodate all visitors by offering various overnight accommodations and a variety of services ranging from guided tours, nature walks, fishing, boating, and bird watching, along with recreational equipment rentals. Whiterock Guest Services operates as a fee for service program; however, many activities are available at no charge. Significant accounting policies: The Organization prepares its financial statements in accordance with generally accepted accounting principles (GAAP) promulgated in the United States of America. The significant accounting and reporting policies used by the Organization are described as follows: Basis of accounting: The Organization s policy is to prepare its financial statements on the accrual basis of accounting

9 Note 1. Nature of Activities and Significant Accounting Policies (Continued) Significant accounting policies: (Continued) Financial statement presentation: Financial statement presentation follows the recommendations of the Financial Accounting Standards Board Accounting Standards Codification (FASB ASC). Under FASB ASC, the Organization is required to report information regarding its financial position and activities according to three classes of net assets that are based upon the existence or absence of restrictions on use or time that are placed by its donors. Accordingly, net assets of the Organization and changes therein are classified and reported as one of these three classes. Unrestricted net assets Unrestricted net assets are resources available to support operations. The only limits on the use of unrestricted net assets are the broad limits resulting by the nature of the Organization, the environment in which it operates, the purposes specified in its corporate documents and its application for tax-exempt status, and any limits resulting from contractual agreements with creditors and others that are entered into in the course of its operations. Contributions are considered to be available for unrestricted use unless specifically restricted by the donor. Temporarily restricted net assets Temporarily restricted net assets are resources that are restricted by a donor for a particular purpose or for a future period. The Organization s unspent contributions are classified in this class if the donor limited their use, as are the un-appropriated appreciation of its donor-restricted endowment funds. When a donor s restriction is satisfied, either by using the resources in the manner specified by the donor or by the passage of time, the expiration of the restriction is reported in the financial statements by reclassifying the net assets from temporarily restricted to unrestricted net assets. If a restriction is fulfilled in the same time period in which the contribution is received, the Organization reports the support as unrestricted. Permanently restricted net assets Permanently restricted net assets are resources whose use by the Organization is limited by donor-imposed restrictions that neither expire by being used in accordance with a donor s restriction nor by the passage of time. Cash and cash equivalents: Cash consists of cash on hand and deposits held in checking accounts and money market funds held in brokerage accounts. The Organization considers all unrestricted short-term investments with an original maturity of three months or less to be cash equivalents unless the investments are held for meeting restrictions of a capital or endowment nature. Accounts receivable: The Organization carries its accounts receivable at cost and does not maintain an allowance for doubtful accounts, as uncollectible accounts are typically immaterial. There is no formal policy dealing with accounts receivable past 90 days old. Generally, interest is charged on accounts receivable over 30 days past due at a rate of one and one-half percent per month

10 Note 1. Nature of Activities and Significant Accounting Policies (Continued) Significant Accounting Policies: (Continued) Contributions receivable: Contributions are recognized when the donor makes a promise to give to the Organization that is unconditional. Contributions receivable are stated at their net realizable value. FASB ASC requires that contributed revenue be measured at fair value. Contributions receivable at December 31, 2016 amounting to $6,000 are expected to be collected in The Organization is a beneficiary under several donors wills. Contributions from bequests are recognized as contributions receivable when the probate court declares the will valid, the Organization has received notification of the bequest and the Organization has an irrevocable right to the bequest. Grants receivables and refundable advances: The Organization recognizes grants receivables when conditions and requirements for the grants and contracts, involving job progress and claims for reimbursements, are satisfied. Claims for reimbursements not received by year end are reported as receivables. Refundable advances represent grant funding received but not expended as of the end of the year or the grant has not been recognized as revenue because the conditions of the grant have not been met. Inventories: Inventories typically consist of grain, hay and supplies. Grain and hay inventories are valued at market price as of the end of the year. Supplies inventory consists of gift shop supplies valued at cost determined on a first-in, first-out basis by the Organization s personnel. Prepaid expenses: Prepaid expenses represent costs that have been paid in advance of receiving the benefits of the payment. Occasionally, the Organization will prepay farm seed and other farm expenses. These prepayments are classified as prepaid custom farming expenses. Cash restricted for long-term purposes: Cash restricted for long-term purposes has been segregated by the Organization and is not available for current operating purposes. The cash at December 31, 2016 will be used for campground improvements, land restoration, directory signage and various projects

11 Note 1. Nature of Activities and Significant Accounting Policies (Continued) Significant Accounting Policies: (Continued) Property and equipment: Purchased property and equipment are capitalized at cost. Donations of property and equipment are recorded as contributions at their estimated fair value on the date of receipt. Donated property and equipment are recorded as unrestricted support unless the donor has restricted the donated asset to a specific purpose. For the year ended December 31, 2016 there was no restricted contributions of property and equipment. The Organization has adopted a capitalization policy for property and equipment. In general, purchased property and equipment with a cost exceeding $500 and expected useful life of over one year and computer software with a cost exceeding $1,500 are capitalized. Repairs and maintenance that do not significantly increase the useful life of the asset are expensed as incurred. Depreciation of property and equipment is computed using the straight-line method over the estimated useful lives of the assets as follows: Investments: Years Land 20 Buildings and building improvements 7 to 40 Equipment, vehicles and office furniture 2 to 20 Investments are reported at their fair values, as determined by quoted market prices, in the statements of financial position. Investment income and gains and losses on investments restricted by a donor are reported as increases or decreases in unrestricted net assets if the restrictions are met (either by passage of time or by use) in the reporting period in which the income and gains and losses are recognized. Unrealized gains and losses are included in the change in net assets. Restricted and unrestricted revenues and support: Revenue is recognized when earned and support is recognized when contributions are made, which may be when cash is received, unconditional promises are made, or ownership of other assets is transferred to the Organization. Contributions received are recorded as unrestricted, temporarily restricted, or permanently restricted support depending on the existence or nature of any donor restrictions. All contributions are considered to be available for unrestricted use unless specifically restricted by the donor. Amounts received that are designated for future periods or restricted by the donor for specific purposes are reported as temporarily restricted or permanently restricted support. If the restriction expires in the reporting period in which the support is recognized, the contribution is reported as an increase in unrestricted net assets

12 Note 1. Nature of Activities and Significant Accounting Policies (Continued) Significant Accounting Policies: (Continued) Split-interest gifts: A split-interest gift is one in which a donor makes an initial gift to a trust or directly to the organization, in which the organization has a beneficial interest, but the donor retains a portion of the benefits of the assets or names a third party as the recipient of a portion of the benefits. To date, the Organization has received life interest in real estate, for which the accounting policy is as follows: A life interest in real estate is an arrangement between a donor and the organization in which the donor contributes real estate (such as a residence or farm) to the organization and the donor or third party recipient, retains the right to use the real estate until his or her death. The assets received are recorded at fair value, and a use obligation for the donor s life interest is recorded based on the fair value rent for similar property, actuarial life expectancy of the donor, as well as whether the donor is responsible for the executory costs. Contribution revenue is recognized as the difference between the two amounts and is classified according to donor restrictions. In subsequent periods, annual use of the residence by the donor reduces the use obligation. Adjustments to the use obligation to reflect accretion of discount and changes in the life expectancy of the beneficiary are recognized in the statement of activities under the caption change in value of residence subject to life interest. The carrying value of the residence subject to a life interest was $456,000 as of December 31, The donor is responsible for executory cost of the residence such as property taxes, utilities, etc. There are no other donor impose restrictions other than the residence cannot be sold until the death of the beneficiary. In-kind contributions: In-kind contributions of property and equipment are recorded as income and increases in property and equipment at their estimated fair value. In-kind contributions received in 2016 and their fair values were for farm equipment and two trail easements with a combined total of $20,502. In-kind contributions of publicly-traded securities are recorded as income and increases in assets at their estimated fair value. Donated securities that are immediately converted to cash or cash equivalents and are not restricted by donors for long-term purposes are recorded as cash inflows from operations within the statement of cash flows. In-kind contributions of supplies and materials used in the Organization s programs are recorded as income and expense at their estimated fair value and amounted to $1,647 for the year ended December 31, FASB ASC states that for donated services to be recognized in the financial statements, the services must either (a) create or enhance a nonfinancial asset or (b) be specialized skills, provided by entities or persons possessing those skills that would be purchased if not donated. Donated services meeting those criteria are recorded as income and expense at their estimated fair value. For the year ended December 31, 2016, $6,800 for auditing fees was recorded as management and general expense and $1,505 for other labor and services. The Organization also receives donated services from a variety of volunteers assisting with their program services and supporting activities. These amounts have not been recognized in the accompanying statements of activities because the criteria for recognition of such volunteer efforts have not been satisfied

13 Note 1. Nature of Activities and Significant Accounting Policies (Continued) Significant Accounting Policies: (Continued) Functional allocation of expenses and expense recognition: The costs of providing the Organization s various programs and activities have been summarized on a functional basis in the statements of activities and statements of functional expenses. Expenses that can be identified with a specific program are charged directly to that program. Costs common to multiple functions have been allocated among the various program and supporting services benefited. Included in management and general expenses are those costs that are not directly identifiable with any specific program, but which provide for the overall support and direction of the Organization. Fundraising costs are expensed as incurred, even though they may result in future contributions. The cost of advertising is charged to expense as incurred. Total advertising and marketing expenses amounted to $11,375 for the year ended December 31, Use of estimates: The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates. Refer to Note 17 regarding use of certain estimates. Income taxes: Note 2. Restatement The Organization is a not-for-profit organization that is exempt from income taxes under Section 501(c)(3) of the Internal Revenue Code. The Organization is also a public charity under the IRC Sections 509(a) and 170(b)(l)(A)(vi). This allows for donations to the Organization to be deductible as charitable contributions. The Organization is a Type 1 supporting organization under section 509(a)(3) and as such, is operated, supervised, or controlled by one or more publicly supported organizations. The Organization has filed for and received income tax exemptions in the various jurisdictions where it is required to do so. The Organization files a Form 990 tax return in the U.S. federal jurisdiction. Certain errors resulting in an understatement of a residence subject to life interest and use of life interest of beneficiary of residence were discovered. Accordingly, an adjustment of $456,000 was made to record the residence subject to life interest and an adjustment for $94,646 to record the beneficiary use interest of residence as of the beginning of the year. The net effect to 2015 was to increase temporarily restricted net assets and the change in net assets by $361,354. The Organization had $188,718 of receivables that were reported as temporarily restricted net assets as of December 31, 2015 even though there were no donor imposed restrictions or time restrictions. These receivables were reclassified from temporarily restricted to unrestricted net assets. There was no effect of the restatement on the change in net assets for

14 Note 3. Grant Programs, Grants Receivable, Excess Grant Reimbursements, Refundable Advances During the year ended December, 31, 2016, the Organization entered into or continued various federal, state, and private grant agreements that have or will provide funding to build and refurbish 22 miles of existing backcountry trails on its managed land trust; for renovating the Organization s visitor center; and to further the Organization s programs relating to land preservation, land restoration, conservation, sustainable agriculture, education and recreation. Amounts recognized as grant revenues on the statements of activities were mostly from reimbursable grants. Grant expenditures incurred and reimbursed or receivable for these grants for the year ended December 31, 2016 amounted to $230,761. Grants receivable are recognized when conditions and requirements for the grants, involving job progress and claims for reimbursements, are satisfied. Grants receivable representing requested claims for expense reimbursements at December 31, 2016 were $12,346 from federal grants. In 2014 the Organization requested excess state funds amounting to $39,004 on a reimbursement request. This amount was recovered by the state in Refundable advances represent funding received but not expended as of the end of the year. During the year ended December 31, 2016, the Organization received non-governmental grants for which $1,587 was reported as a refundable advance as the grant proceeds were not expended during the year. Note 4. USDA/NRCS and USDA/FSA CRP Receivable The United States Department of Agriculture/Natural Resources Conservation Service (USDA/NRCS) administers a number of programs that promote land conservation planning and provide assistance with conservation practices that result in productive lands and healthy ecosystems. The Organization has entered into cost-share reimbursement contracts through the Environmental Quality Incentives Program (EQIP) that will provide financial assistance to implement conservation practices. EQIP pays a portion of the project costs as designed in the conservation plan, which are reimbursed as each specific program component is completed. These programs were finalized in The United States Department of Agriculture/Farm Service Agency (USDA/FSA) administers the Conservation Reserve Program (CRP), which is a voluntary program available to agricultural producers to help them use environmentally sensitive land for conservation benefits. Producers enrolled in CRP plant long-term, resource-conserving covers to improve the quality of water, control soil erosion, and develop wildlife habitat. In return, FSA provides participants with rental payments and cost-share assistance. The rental contracts typically range from ten to fifteen years. As of December 31, 2016, the Organization has approximately 205 acres entered in CRP rental contracts with expiration dates ranging from September 30, 2017 to September 30, The USDA/NRCS and USDA/FSA CRP receivables represent reimbursement requests made for completed project components not received by the end of the year and are due within one year

15 Note 5. Investments The Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 820, Fair Value Measurements and Disclosures, provides the framework for measuring fair value. That framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy under the Topic are described below: Level 1 Fair Value Measurements Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in an active market. This level includes equity mutual funds based on the closing price reported in the active market where the securities are traded. Level 2 Fair Value Measurements Inputs to the valuation methodology include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in inactive markets, inputs other than quoted prices that are observable for the asset or liability, and inputs that are derived principally from or corroborated by observable market data. Level 3 Fair Value Measurements Inputs to the valuation methodology are unobservable and significant to the fair value measurement. The financial instrument s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Long-term investments held by the Organization consist of equity mutual funds and accrued income on investments. Investments are reported at their fair values measured on a recurring basis in the statements of financial position as of the end of the year and are valued at market as determined by quoted prices using Level 1 inputs. The Organization did not hold any Level 2 or Level 3 investments at December 31, In order to minimize investment expenses, the Organization has co-mingled board designated and permanently restricted funds into one long-term investment account. On the following schedules, cost represents the original amounts of board designated and permanently restricted funds, with accumulated net investment earnings recorded as temporarily restricted. The fair value of the investments has been allocated based on the original cost of the investments

16 Note 5. Investments (Continued Following is a summary of long-term investments as of December 31, Fair Unrealized Value Appreciation (Level 1) Cost (Depreciation) Equity mutual funds $ 1,530,262 $ 1,417,260 $ 113,002 Total unrestricted $ 1,530,262 $ 1,417,260 $ 113,002 Note 6. Endowment The Organization s endowment consists of donor-restricted endowment funds and is included in long- term investments in the statements of financial position. Donor-restricted endowments are permanent endowments or funds that provide a perpetual source of support for the Organization s activities. In addition, the Board of Directors has set aside resources to function as endowments which are referred to as board-designated endowment funds. As required by generally accepted accounting principles, net assets associated with endowment funds are classified and reported based on the existence or absence of donor-imposed restrictions. The State of Iowa enacted the Uniform Prudent Management of Institutional Funds Act (UPMIFA) effective April 11, UPMIFA establishes law for the management and investment of donor- restricted endowment funds. The Board of Directors of the Organization has interpreted UPMIFA as requiring the preservation of the fair value of the original gift as of the date of the gift of the donor-restricted permanent endowment funds unless there are explicit donor stipulations to the contrary. As a result of this interpretation, the Organization classifies the original value of gifts to donor-restricted permanent endowments as permanently restricted net assets. The remaining net income of a donor-restricted permanent endowment fund is classified as temporarily restricted net assets until those amounts are appropriated for expenditure by the Organization, unless the cumulative un-appropriated net income is negative, in which case it is reported as unrestricted net assets. In accordance with UPMIFA, the Organization considers the following factors in making a determination to appropriate or accumulate donor-restricted endowment funds. The duration and preservation of the fund The purposes of the Organization and the donor-restricted endowment fund General economic conditions The possible effect of inflation and deflation The expected total return from income and the appreciation of investments Other resources of the Organization The investment policies of the Organization

17 Note 6. Endowment (Continued) Investment Return Objectives, Risk Parameters and Strategies. The Organization has adopted investment and spending policies, approved by the Board of Directors, for endowment assets that attempt to provide a predictable stream of funding to programs supported by its endowment funds while also maintaining the purchasing power of those endowment assets over the longterm. Accordingly, the investment process seeks to achieve an after-cost total real rate of return, including investment income as well as capital appreciation, which exceeds the annual distribution with acceptable levels of risk. Endowment assets are invested in a well-diversified asset mix, including but not limited to mutual funds and various fixed income investments, intended to result in a consistent inflation-protected rate of return that has sufficient liquidity to make an annual distribution of 5 percent, while growing the funds if possible. Therefore, the Organization expects its endowment assets, over time, to produce an annual return that meets or exceeds that of the benchmark. Actual returns in any given year may vary from this amount. Investment risk is measured in terms of the total endowment fund; investment assets and allocation between asset classes and strategies are managed to not expose the fund to unacceptable levels of risk. Spending Policy. The Organization has a policy of appropriating for distribution each year 5 percent of the average fair market values of the total assets of the funds as of the last day of the prior twelve calendar quarters. In establishing this policy, the Organization considered the longterm expected return on its investment assets, the nature and duration of the individual endowment funds, and the possible effects of inflation. The Organization expects the current spending policy to allow its endowment funds to grow at a conservative rate annually. This is consistent with the Organization s objective to maintain the purchasing power of the endowment assets as well as to provide additional real growth through new gifts and investment return. During the year ended December 31, 2016, $79,068 was appropriated as available for expenditure and classified as unrestricted net assets. This amount was withdrawn from the earnings on the endowment funds to be used in current operations. The net asset composition of endowment funds as of December 31, 2016 is as follows: Temporarily Permanently Endowment Funds Unrestricted Restricted Restricted Total Donor-restricted $ - $ - $ 1,202,000 $ 1,202,000 Board-designated 228, ,000 Undesignated - 147, ,991 Total endowment funds $ 228,000 $ 147,991 $ 1,202,000 $ 1,577,991 From time to time, the fair value of assets associated with individual donor-restricted endowment funds and Board designated endowment funds may fall below the value of the initial donor gift amounts and designated funds (underwater). When underwater endowment funds exist, they are classified as a reduction of unrestricted net assets. There were no underwater endowment funds as of December 31,

18 Note 6. Endowment (Continued) Changes in endowment net assets for the year ended December 31, 2016 is as follows: Temporarily Permanently Unrestricted Restricted Restricted Total Endowment net assets - December 31, 2015, as restated $ 228,000 $ 121,535 $ 1,202,000 $ 1,551,535 Contributions Interest and dividends 8,906 17,873-26,779 Net realized gain - 41,947-41,947 Net Unrealized Gain - 45,704-45,704 Management fees (8,906) - - (8,906) Appropriated for expenditure - (79,068) - (79,068) Endowment net assets - December 31, 2016 $ 228,000 $ 147,991 $ 1,202,000 $ 1,577,991 Note 7. Property and Equipment Property and equipment at December 31, 2016 consists of the following: Land $ 12,805,399 Trails 2,470,561 Other land improvements 126,631 Buildings and buildings improvements 1,448,421 Farm, field, CRP and pasture equipment 234,061 Recreational equipment and vehicles 317,873 Office furniture and equipment 64,448 Livestock - farm animals 800 Easements 2 $ 17,468,196 Less: accumulated depreciation (1,293,345) Net property and equipment $ 16,174,851 Total in-kind contributions of property and equipment for the year ended December 31, 2016 amounted to $20,

19 Note 8. Line of Credit During the year ended December 31, 2016, the Organization entered into a line of credit agreement with Carroll County State Bank for $470,000 effective June 17, 2016 and maturity date of June 17, This agreement replaced a $470,000 line of credit from the bank effective June 17, 2015 with a maturity date of June 17, The interest rate is 3.75 percent and is collateralized by a real estate mortgage on the West Betts property, Sections 11, 12 and 14, Orange Township, Guthrie County, Iowa and an all-inclusive security agreement. Repayment terms specify one payment of all outstanding principal plus all accrued unpaid interest at maturity. At December 31, 2016 the amount of principal outstanding under the line of credit was $117,432. Note 9. Mortgage and Notes Payable Mortgage and notes payable consisted of the following as of December 31, 2016: Carroll County State Bank mortgage; payable in annual installments of $13,639, including interest at 3.1 percent through April 3, 2016; subsequently renewed with an interest rate at 3.5 percent with a maturity date of April 3, 2019; secured by an agriculture security agreement and mortgage for up to $600,000 on West Betts property. $ 68,106 Iowa Savings Bank note; payable in annual installments of $2,495, including interest at 3.0 percent through November 15, 2020; secured by an agriculture security agreement. 9,273 Iowa Savings Bank note; payable in monthly installments of $865; interest rate at 3.75 percent; maturity date of June 1, 2019; secured by a disc mower, lawn mower and trailer with a net book value of $27,160 23,906 Total mortgage and notes payable $ 101,285 Maturities of the mortgage and notes payable for the years succeeding December 31, 2015 are as follows: December 31, 2017 $ 23, , , $ 2, ,

20 Note 10. Net Assets Net assets as of December 31, 2016 consist of the following and are available for the purposes indicated. Unrestricted net assets: Designated by the board for endowment $ 228,000 Undesignated 15,996,114 Total unrestricted net assets $ 16,224,114 Temporarily restricted net assets: Cash restricted for: Campground improvements $ 7,191 Land restoration 2,674 Equipment 800 Farm repairs 80,000 Seeding 12,240 Other 7,750 Time restriction - residence subject to life interest 365,791 Time restriction - contribution receivable 6,000 Un-appropriated endowment fund earnings 147,991 Total temporarily restricted net assets $ 630,437 Permanently restricted net assets Restricted for endowment $ 1,202,000 Total permanently restricted net assets $ 1,202,000 Board designated net assets: Total net assets $ 18,056,551 At its discretion, the Board of Directors may designate funds for specific purposes. The Board designated funds for Endowment in January 2006 amounting to $200,000 and in January 2012 amounting to $28,

21 Note 10. Designation of Net Assets (Continued) Permanently restricted net assets: Permanently restricted net assets consist of endowment fund assets to be held indefinitely. The income from these assets is to be used for land restoration and conservation purposes. The donor for the initial endowment of $1,200,000 has specified that an extraordinary majority of the Board of Directors (71.04%) can remove any or all of these funds from endowment if, in their opinion, it is urgently needed to provide long-term benefit to the Organization. Except for this contingency, the maximum amount of endowment fund income available for consumption on an annual basis from this initial endowment shall be equal to the distribution amount which is discussed in Note 5. The amount determined under this formula shall be available to support the operating and capital budgets of the Organization. Note 11. Leases Rental Income The Organization leases several lodging, pasture and farm properties on a month-to-month or an annual (calendar year) basis. Related parties rented various cottages and farm properties during the 2016 year. All other properties were leased to unrelated tenants. For the year ended December 31, 2016, these leases included approximately 1,055 acres of crop and CRP ground, 507 acres of pasture, 1,897 acres for seasonal hunting leases and various facility leases. For the year ended December 31, 2016, related parties leased a combined total of approximately 240 acres of farmland and CRP ground from the Organization under various leases with termination dates ranging from 2016 to Rental income from pasture, cropland, farm buildings and farm lodging is included in farm revenues in the statements of activities and amounted to $149,829 for the year ended December 31, Rental income from the various cottages, lodges and country homes, including rental income from seasonal hunting leases, is included in guest services revenues and special events and tours in the statements of activities and amounted to $56,587 for the year ended December 31, Future minimum rental income for the farm leases noted previously as of December 31, 2016, is as follows: Year Amount 2017 $ 82, , , , ,597 Thereafter 187,807 Total Minimum rental income $ 570,

22 Note 12. Leases- CRP Rental Contracts The Organization has entered into Conservation Reserve Program (CRP) rental contracts with the United States Department of Agriculture/Farm Service Agency. Total acres entered in the CRP were approximately 205 as of December 31, 2016 with rent ranging from $81 to $308 per acre. The contract expiration dates range from September 30, 2017 to September 30, Rental income from CRP rental contracts is included in farm revenues in the statements of activities and amounted to $39,810 for the year ended December 31, Future minimum rental income for the CRP rental contracts as of December 31, 2016, is as follows: Year Amount 2017 $ 40, , , , ,203 Thereafter 75,636 Total Minimum rental income $ 206,484 Note 13. Leases - Equipment Rental and Office Space Expense The Organization rents certain equipment and office space on a month-to-month basis. There are no written lease agreements for the equipment leases. Lease expense incurred in 2016 was $5,937 and is reported under equipment rental and office space expense in the statement of functional expenses. Note 14. Concentrations of Credit Risk Cash and investments: The Organization maintains its cash balances at a financial institution located in Coon Rapids, Iowa. The Federal Deposit Insurance Corporation insures accounts at the institution up to $250,000. Occasionally, the Organization s cash balances exceed the insured amount. There were no uninsured cash balances at December 31, The Organization s long-term investments are invested in various types of marketable and debt securities. Investment securities are exposed to several risks, such as interest rates, credit and overall market volatility risks. Due to the significance of the investments to the Organization s financial position and the level of risk associated with certain investment securities, it is at least reasonably possible that changes in the values of investment securities could occur in the near term and that such changes could materially affect the amounts reported in the Organization s financial statements

23 Note 14. Concentrations of Credit Risk (Continued) Accounts receivable: Concentrations of credit risk with respect to accounts receivable are limited due to the large number of customers comprising the Organization s customer base and their dispersion across geographic areas. Note 15. Commitments and Contingencies The Organization has entered into several contracts relating to the design and construction of recreational trails. The total amount of the contracts entered into including revisions amounted to $848,851. Amounts incurred and paid on the contracts in 2016 were $124,434. Prior to 2016, the Organization paid $648,046 on these contracts leaving a balance of approximately $76,000, which will be recognized as a liability and paid as the work is satisfactorily completed. As noted in Note 9, the Organization entered into a mortgage for up to $600,000 with Carroll County State Bank in 2013 and renewed in 2016 to finance the purchase of land and buildings and for payments of farming operating expenses and reimbursable trail expenses. The Organization did not borrow any additional funds against the mortgage in The operation of the Organization is dependent upon the grants received from federal, state, local and private agencies and organizations, as well as contributions from various businesses and individuals. A significant reduction in the level of this support would have a material effect on the Organization s programs and activities. The Organization receives support that may be subject to audit or review by grantor agencies. Management believes that the Organization has complied with all aspects of grant and contract provisions and disallowed costs, if any, would be immaterial to its financial position. Note 16. Related Party Transactions The following transactions occurred during the year ended December 31, 2016 between the Organization and board members, staff, related individuals, entities and affiliated organizations. Revenues Expenses Revenues Cash contributions $ 52,392 In-kind contribution including stocks 28,311 Farm revenues - rent and other 34,559 Farm revenues - other 62,453 Expenses Outside services 2,310 Insurance 2,621 $ 177,715 $ 4,

24 Note 16. Related Party Transactions (Continued) The Organization occasionally uses equipment and a shop building that is owned by some board members and/or affiliated organizations. In addition, one board member owns facilities which are used extensively by the Organization in its outdoor recreation/education program. The amount of these donated in-kind services has not been recognized in the accompanying statements of activities as the value is indeterminable. Related party transactions - supported organizations: Receivables from the Organization and the Iowa Department of Natural Resources, the Leopold Center for Sustainable Agriculture, and the Iowa Natural Heritage Foundation (the supported organizations ) are as follows: Grants receivable $ 12,346 The following transactions occurred during the year ended December 31, 2016 between the Organization and the supported organizations: Revenues Revenues Grant revenues $ 80,649 Deer tag auction - offset to revenues by payment of 50 % of total amount received $ (5,104) 75,545 Note 17. Significant Estimate Beneficiary use of life interest of residence liability is based on the life expectancy of the donor or third party recipient and fair value of rent of a comparable residence in the area. Because of the uncertainties surrounding estimated life expectancy and comparable rent for the residence, it is reasonably possible the estimates may change significantly in the near term. Note 18. Subsequent Events Management has evaluated subsequent events through July 17, 2017, the date which the financial statements were available to be issued