PIKES PEAK COMMUNITY FOUNDATION AND AFFILIATES

Transcription

1 PIKES PEAK COMMUNITY FOUNDATION AND AFFILIATES Consolidated Financial Statements For the Year Ended December 31, 2014 And Independent Auditors' Report

2 INDEPENDENT AUDITORS' REPORT To the Board of Directors Pikes Peak Community Foundation Colorado Springs, Colorado We have audited the accompanying consolidated financial statements of Pikes Peak Community Foundation and Affiliates, a non-profit organization, (collectively, the Foundation), which comprise the consolidated balance sheet as of December 31, 2014 and the related consolidated statements of activities and cash flows for the year then ended, and the related notes to the consolidated financial statements. Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these consolidated 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 consolidated financial statements based on our audit. We conducted our audit 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 consolidated financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditors' judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the consolidated 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 consolidated financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

3 Opinion In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Pikes Peak Community Foundation and Affiliates as of December 31, 2014, and the changes in their net assets and their cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America. Report on Summarized Comparative Information We have previously audited Pikes Peak Community Foundation and Affiliates' 2013 consolidated financial statements, and our report dated June 11, 2014 expressed an unmodified audit opinion on those audited financial statements. In our opinion, the summarized comparative information presented herein as of and for the year ended December 31, 2013 is consistent, in all material respects, with the audited financial statements from which it has been derived. Stockman Kast Ryan & Co., LLP June 10,

4 PIKES PEAK COMMUNITY FOUNDATION AND AFFILIATES CONSOLIDATED BALANCE SHEET DECEMBER 31, 2014 (with comparative totals for 2013) ASSETS Cash and cash equivalents $ 4,383,060 $ 4,906,624 Investments 31,334,859 29,547,327 Property and equipment, net 14,560,133 14,504,538 Land held for investment 4,323,000 Water rights 7,928,554 7,928,554 Prepaid expenses and other assets 27,971 TOTAL $ 62,557,577 $ 56,887,043 LIABILITIES AND NET ASSETS LIABILITIES Accounts payable and accrued expenses $ 104,497 $ 136,886 Deferred revenue 127, ,618 Liabilities associated with charitable remainder trusts 1,584, ,178 Amounts held for others 512, ,777 Total 2,328,481 1,182,459 NET ASSETS Unrestricted 60,121,287 55,591,607 Temporarily restricted 107, ,977 Total net assets 60,229,096 55,704,584 TOTAL $ 62,557,577 $ 56,887,043 See notes to financial statements

5 PIKES PEAK COMMUNITY FOUNDATION AND AFFILIATES CONSOLIDATED STATEMENT OF ACTIVITIES FOR THE YEAR ENDED DECEMBER 31, 2014 (with comparative totals for 2013) Unrestricted 2014 Operating Community Total Temporarily 2013 Funds Funds Unrestricted Restricted Total Total REVENUE Contributions $ 127,156 $ 9,871,507 $ 9,998,663 $ 9,998,663 $ 7,363,739 Investment income 470,142 1,220,808 1,690,950 1,690,950 3,614,884 Program income 334,564 1,079,234 1,413,798 1,413,798 1,217,942 Management fee, charged to others 6,627 6,627 6,627 5,773 Management fee, internal 323,077 (323,077) Contributions, internal 41,082 (41,082) Other revenue (expense) 159, ,310 $ (5,168) 154, ,003 Total 1,461,958 11,807,390 13,269,348 (5,168) 13,264,180 12,363,341 EXPENSES Program expenses: Grants 72,375 4,645,494 4,717,869 4,717,869 4,050,438 Non-grant program expenses 302, ,725 1,107,306 1,107,306 1,619,009 Total program expenses 374,956 5,450,219 5,825,175 5,825,175 5,669,447 Payroll and related 1,130,377 1,130,377 1,130,377 1,244,157 General and administrative 315, , , ,471 Investment fees 36, , , , ,428 Depreciation 87,470 87,470 87,470 77,383 Legal and professional 31,362 31,362 31,362 59,478 Rent and utilities 36,849 36,849 36,849 37,345 Total 2,012,974 5,644,400 7,657,374 7,657,374 7,714,709 Change in net assets before deconsolidation (551,016) 6,162,990 5,611,974 (5,168) 5,606,806 4,648,632 Deconsolidation of PPEF (1,082,294) (1,082,294) Change in net assets after deconsolidation $ (551,016) $ 6,162,990 4,529,680 (5,168) 4,524,512 4,648,632 NET ASSETS, Beginning of year 55,591, ,977 55,704,584 51,055,952 NET ASSETS, End of year $ 60,121,287 $ 107,809 $ 60,229,096 $ 55,704,584 See notes to financial statements

6 PIKES PEAK COMMUNITY FOUNDATION AND AFFILIATES CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 31, 2014 (with comparative totals for 2013) OPERATING ACTIVITIES Change in net assets $ 4,524,512 $ 4,648,632 Adjustments to reconcile change in net assets to net cash provided by (used in) operating activities Depreciation expense 87,470 77,383 Realized and unrealized investment gains (705,879) (2,645,716) Donation of land held for investment (4,323,000) Other 21,167 63,728 Changes in operating assets and liabilities: Prepaid expenses and other assets (27,971) Accounts payable and accrued expenses (32,389) 26,102 Deferred revenue 3,585 3,367 Net cash provided by (used in) operating activities (452,505) 2,173,496 INVESTING ACTIVITIES Purchases of investments (16,089,816) (14,803,140) Sales of investments 16,161,822 15,007,687 Purchases of property and equipment (143,065) (320,171) Net cash used in investing activities (71,059) (115,624) NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (523,564) 2,057,872 CASH AND CASH EQUIVALENTS, Beginning of year 4,906,624 2,848,752 CASH AND CASH EQUIVALENTS, End of year $ 4,383,060 $ 4,906,624 NON-CASH INVESTING ACTIVITY Donation of land held for investment $ 4,323,000 See notes to financial statements

7 PIKES PEAK COMMUNITY FOUNDATION AND AFFILIATES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Pikes Peak Community Foundation (PPCF) is a Colorado nonprofit corporation. The mission of PPCF is to enhance the quality of life in the Pikes Peak region, both now and for future generations, by building a community endowment, helping donors address community needs, and providing philanthropic leadership. Principles of Consolidation The consolidated financial statements include the accounts of PPCF, Pikes Peak Real Estate Foundation (PPREF), and Pikes Peak Educational Foundation (PPEF), (collectively, the Foundation). PPREF was organized to support PPCF and is consolidated since PPCF has both an economic interest in and control over the entity. PPEF was initially organized to support PPCF and is consolidated through June 30, 2014 since PPCF had both an economic interest and control over the entity through that date. See further information in Note 7. All significant intercompany accounts and transactions have been eliminated in consolidation. Basis of Presentation The accompanying financial statements include certain prior-year summarized comparative information in total. Such information does not include sufficient detail to constitute a presentation in conformity with generally accepted accounting principles. Accordingly, such information should be read in conjunction with the Foundation's financial statements for the year ended December 31, 2013, from which the summarized information was derived. The Foundation reports information regarding its financial position and activities according to three classes of net assets: unrestricted net assets, which represents the expendable resources that are available for operations at management's discretion; temporarily restricted net assets, which represents resources restricted by donors as to purpose or by the passage of time; and permanently restricted net assets, which represents resources whose use by the Foundation is limited by donor-imposed stipulations that neither expire by passage of time nor can be fulfilled or otherwise removed by actions of the Foundation. The Foundation presently has no permanently restricted net assets. Cash and Cash Equivalents For purposes of the statement of cash flows, the Foundation considers cash, amounts due from banks and highly liquid investments purchased with original maturities of three months or less to be cash and cash equivalents. Donated Services The Foundation recognizes donated services that create or enhance nonfinancial assets or that require specialized skills, are provided by persons possessing those skills and would typically need to be purchased if not provided by donation. Investments Investments are carried at fair value. Fair values for money market accounts, mutual funds, exchange traded funds, real estate investment trusts and common and preferred stocks are determined principally through quoted market prices. Fair values for government obligations and corporate bonds are determined principally through pricing services. Certificates of deposit are valued at cost which approximates fair value. Fair values for private equity securities are determined through the Foundation's proportionate share of the estimated value of the private company. Realized and - 6 -

8 unrealized gains and losses are reflected in the consolidated statement of activities. Earnings on restricted investments are reported as an increase in unrestricted net assets if the restriction expires in the reporting period in which the earnings are recognized. All other earnings on donor restricted investments are recognized as an increase in temporarily restricted net assets according to the nature of the restrictions on the original gift. When a donor restriction is met, temporarily restricted net assets are reclassified to unrestricted net assets and reported in the statement of activities as net assets released from restrictions. Property and Equipment All acquisitions of property and equipment in excess of $5,000 and all expenditures for repairs, maintenance, renewals, and betterments that materially prolong the useful lives of assets in excess of $50,000 are capitalized. Property and equipment, which consist of land, buildings and furniture and fixtures, are recorded at cost or, if donated, at the fair value at the date of donation. Depreciation is provided on a straight-line basis over the estimated useful lives of the assets of three to five years for furnishings and equipment and 40 years for buildings. Water Rights Water rights totaled $7,928,554 as of December 31, 2014 and Water rights of $6,003,554 were valued based on the present value of estimated future cash receipts from the sale of water, using a 5% discount rate. Water taps of $1,925,000 were recorded at appraised value. The water rights and taps are assessed for impairment annually. Amounts Held for Others Various non-profit organizations have transferred funds to the Foundation and specified that the funds be transferred back to each organization upon request. The Foundation has no variance power over the funds. The funds are recorded within investments and amounts held for others in the accompanying consolidated balance sheet. Operating Funds Operating funds consist of Venetucci Farm, Aspen Valley Ranch, Pikes Peak Urban Gardens, PPCF discretionary grant making and other PPCF operations including the management fee charged to all community funds. Concentrations of Credit Risk Certain financial instruments potentially subject the Foundation to concentrations of credit risk. These financial instruments consist primarily of cash and investments. Use of Estimates Preparation of the Foundation's financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates. Tax Status The Foundation is a nonprofit corporation which is exempt from income tax under Section 501(c)(3) of the Internal Revenue Code. In addition, the Foundation qualifies for the Charitable Contribution deduction. The Foundation believes that it does not have any uncertain tax positions that are material to the financial statements. Tax years that remain subject to examination include 2011 through the current period. Subsequent Events The Foundation has evaluated subsequent events for recognition or disclosure through the date of the Independent Auditors' Report, which is the date the financial statements were available for issuance

9 2. INVESTMENTS AND FAIR VALUE MEASUREMENTS The Foundation is required to use 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 are described below: Level 1: Unadjusted quoted prices in active markets for identical assets or liabilities that the Foundation has the ability to access. Level 2: Prices determined using significant other observable inputs. 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; Inputs that are derived principally from or corroborated by observable market data by correlation or other means. If the asset or liability has a specified (contractual) term, the Level 2 input must be observable for substantially the full term of the asset or liability. Level 3: Prices determined using significant unobservable inputs. The investment's fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs. The following tables set forth by level, within the fair value hierarchy, the Foundation's financial instruments at fair value as of December 31: Quoted Significant Prices in Active Other Significant Markets for Observable Unobservable Identical Assets Inputs Inputs Fair Value (Level 1) (Level 2) (Level 3) 2014: ASSETS Common stock: Domestic $ 9,610,538 $ 9,610,538 International 2,975,375 2,975,375 Preferred stock: International 4,625 4,625 Money market accounts 1,656,717 1,656,717 Exchange traded funds: Domestic equity 1,071,971 1,071,971 International equity 222, ,656 Domestic fixed income 151, ,303 International fixed income 627, ,937 Real estate and alternative 40,964 40,

10 Quoted Significant Prices in Active Other Significant Markets for Observable Unobservable Identical Assets Inputs Inputs Fair Value (Level 1) (Level 2) (Level 3) 2014 (continued): Mutual funds: Domestic equity 2,513,004 2,513,004 International equity 1,586,895 1,586,895 Domestic fixed income 3,021,544 3,021,544 International fixed income 421, ,832 Hedge funds 389, ,415 Real estate and alternative 153, ,392 Real Estate Investment Trusts 317, ,682 Fixed income: Corporate bonds 3,082,382 $ 3,082,382 Government obligations 1,882,945 1,882,945 Certificates of deposit 1,349,124 1,349,124 Private equity securities 254,558 $ 254,558 Total $ 31,334,859 $ 24,765,850 $ 6,314,451 $ 254,558 LIABILITIES Charitable remainder trust $ 413,887 $ $ $ 413, : ASSETS Common stock: Domestic $ 7,739,547 $ 7,739,547 International 3,385,946 3,385,946 Preferred stock: International 7,944 7,944 Money market accounts 1,831,955 1,831,955 Exchange traded funds: Domestic equity 648, ,196 International equity 228, ,711 Domestic fixed income 120, ,404 International fixed income 661, ,361 Real estate and alternative 73,698 73,698 Mutual funds: Domestic equity 3,017,572 3,017,572 International equity 1,478,477 1,478,477 Domestic fixed income 2,743,059 2,743,059 International fixed income 409, ,995 Hedge funds 361, ,681 Real estate and alternative 158, ,062 Real Estate Investment Trusts 509, ,

11 Quoted Significant Prices in Active Other Significant Markets for Observable Unobservable Identical Assets Inputs Inputs Fair Value (Level 1) (Level 2) (Level 3) 2013 (continued): Fixed income: Corporate bonds 2,595,665 $ 2,595,665 Government obligations 2,681,849 2,681,849 Certificates of deposit 639, ,038 Private equity securities 254,558 $ 254,558 Total $ 29,547,327 $ 23,376,217 $ 5,916,552 $ 254,558 LIABILITIES Charitable remainder trust $ 433,730 $ $ $ 433,730 Assets and liabilities measured on a recurring basis using significant unobservable inputs are as follows: Private Equity Securities: Balance, January 1, 2013 $ 254,558 Change in value Balance, December 31, ,558 Change in value Balance, December 31, 2014 $ 254,558 Charitable Remainder Trust: Balance, January 1, 2013 $ 407,891 Change in value 60,921 Distributions (35,082) Balance, December 31, ,730 Change in value 21,167 Distributions (41,010) Balance, December 31, 2014 $ 413,887 The following table shows quantitative information about significant unobservable inputs related to Level 3 fair value measurements used as of December 31, 2014: Valuation Unobservable Investment Technique Input Range Liabilities associated Discounted cash Expected life of lead with charitable remainder flows beneficiaries 22 years remainder trust Return on assets 8 % Discount rate 8 %

12 Investment income consists of the following for the years ended December 31: Realized and unrealized gains on investments $ 705,879 $ 2,645,716 Interest and dividends 985, ,168 Total $ 1,690,950 $ 3,614, PROPERTY AND EQUIPMENT Property and equipment consist of the following at December 31: Land $ 11,744,000 $ 11,744,000 Buildings 3,292,370 3,172,643 Furniture and equipment 437, ,514 Art and sculptures 39,500 39,500 Construction in process 16,139 Livestock 7,500 7,500 Total 15,536,803 15,484,157 Less accumulated depreciation 976, ,619 Property and equipment, net $ 14,560,133 $ 14,504, LAND HELD FOR INVESTMENT During the year ended December 31, 2014, the Foundation received a donation of 131 acres of land which had an appraised value of $4,323,000 at the time of the donation. The land is expected to be sold or donated to another non-profit organization. PPCF has agreed to hold the land for a minimum of two years before selling it, unless the property can be sold at or above the appraised value. 5. CHARITABLE TRUST SPLIT-INTEREST AGREEMENTS The Foundation administers a charitable remainder trust. A charitable remainder trust provides for the payment of distributions to the grantor or other designated beneficiaries over the trust's term (the designated beneficiary's lifetime). At the end of the trust's term, the remaining assets are available for the Foundation's use. Assets held in the charitable remainder trust totaled $521,696 and $546,707 at December 31, 2014 and 2013, respectively, and are reported at fair value within investments in the accompanying financial statements. On an annual basis, the Foundation revalues the liability to make distributions to the designated beneficiaries based on actuarial assumptions. The present value of the estimated future payments is $413,887 and $433,730 at December 31, 2014 and 2013, respectively. The Foundation also serves as trustee for two charitable remainder trusts. The assets, which total $1,170,538 and $163,448 at December 31, 2014 and 2013, respectively are included within investments in the accompanying financial statements. The beneficiaries of these trusts are third-party organizations; therefore, a corresponding liability is recorded

13 6. TEMPORARILY RESTRICTED NET ASSETS Temporarily restricted net assets consist of the net assets of the split interest agreement and are available for distribution in future periods. 7. PIKES PEAK EDUCATIONAL FOUNDATION Effective July 1, 2014, with the consent of the Foundation, the PPEF board of directors amended their articles of incorporation and, as a result, PPEF no longer exists to support the Foundation and the Foundation board of directors no longer appoints members of the PPEF board of directors. Therefore, the accounts of PPEF are not included in the accompanying consolidated financial statements subsequent to June 30, The balance sheet and statement of activities of PPEF which are included in the accompanying consolidated financial statements consisted of the following for the years ended December 31, 2014 and 2013: Assets $ $ 929,422 Liabilities 2,154 Revenues 252, ,130 Expenses 147, ,244 As of June 30, 2014, the Foundation's financial statements included PPEF assets of $1,082,294 and a reduction of unrestricted net assets was recorded to reflect the deconsolidation of PPEF