CONNECTICUT HUMANE SOCIETY

Transcription

1 FINANCIAL STATEMENTS DECEMBER 31, 2015 AND 2014

2 CONTENTS Independent Auditors Report 1-2 Statements of Financial Position - December 31, 2015 and Statements of Activities for the Years Ended December 31, 2015 and Statement of Functional Expenses for the Year Ended December 31, Statement of Functional Expenses for the Year Ended December 31, Statements of Cash Flows for the Years Ended December 31, 2015 and Notes to Financial Statements 8-16

3 29 South Main Street P.O. Box West Hartford, CT Tel Fax blumshapiro.com Independent Auditors Report To the Board of Directors Connecticut Humane Society We have audited the accompanying financial statements of Connecticut Humane Society, which comprise the statements of financial position as of December 31, 2015 and 2014, and the related statements of activities, functional expenses 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 audits 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. Blum, Shapiro & Company, P.C. -1- An independent member of Baker Tilly International

4 Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Connecticut Humane Society 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. West Hartford, Connecticut June 10,

5 STATEMENTS OF FINANCIAL POSITION DECEMBER 31, 2015 AND ASSETS Cash and cash equivalents $ 338,226 $ 1,013,233 Contributions and other receivables 115, ,048 Investments 57,145,277 57,937,950 Dividends and interest receivable 191, ,226 Land, buildings and equipment, net 7,118,041 7,085,210 Other assets 138, ,372 Investments held in trust by others 14,377,111 15,380,455 Total Assets $ 79,423,632 $ 81,966,494 LIABILITIES AND NET ASSETS Liabilities Accounts payable and other liabilities $ 185,586 $ 241,314 Accrued payroll and benefits 187, ,952 Total liabilities 373, ,266 Net Assets Unrestricted: Designated - land, buildings and equipment 7,118,041 7,085,210 Designated - funds functioning as endowment 57,167,777 57,928,754 Undesignated 325,505 1,034,776 Total unrestricted 64,611,323 66,048,740 Temporarily restricted 62,050 25,033 Permanently restricted: Investments held in trust by others 14,377,111 15,380,455 Total net assets 79,050,484 81,454,228 Total Liabilities and Net Assets $ 79,423,632 $ 81,966,494 The accompanying notes are an integral part of the financial statements -3-

6 STATEMENTS OF ACTIVITIES FOR THE YEARS ENDED DECEMBER 31, 2015 AND Changes in Unrestricted Net Assets Operations: Revenues: Contributions, donations and support $ 2,152,873 $ 1,955,250 Legacies and bequests 1,348,763 1,501,830 Program revenue 2,060,588 2,010,758 Other income 34,788 17,507 Net assets released from restriction 2,400 25,480 Total unrestricted revenues 5,599,412 5,510,825 Expenses: Program services: Animal shelter services 4,720,212 3,933,505 Veterinary clinic services 1,399,763 1,507,268 Community & educational services 580, ,551 Total program services 6,700,548 5,892,324 Program support: Management and general 910, ,528 Fundraising 753, ,665 Total program support 1,664,257 1,474,193 Total expenses 8,364,805 7,366,517 Decrease in unrestricted net assets from operations (2,765,393) (1,855,692) Other changes in unrestricted net assets: Net realized and unrealized gains (losses) on investments (964,426) 3,427,308 Investment income 1,567,062 1,758,437 Income from investments held in trust by others 694, ,981 Gain on disposition of land, buildings and equipment 30,860 - Total other changes in unrestricted net assets 1,327,976 5,915,726 Increase (decrease) in unrestricted net assets (1,437,417) 4,060,034 Changes in Temporarily Restricted Net Assets Contributions 39,417 - Net assets released from restriction (2,400) (25,480) Increase (decrease) in temporarily restricted net assets 37,017 (25,480) Changes in Permanently Restricted Net Assets Change in value of investments held in trust by others (1,003,344) (235,197) Decrease in permanently restricted net assets (1,003,344) (235,197) Increase (Decrease) in Net Assets (2,403,744) 3,799,357 Net Assets - Beginning of Year 81,454,228 77,654,871 Net Assets - End of Year $ 79,050,484 $ 81,454,228 The accompanying notes are an integral part of the financial statements -4-

7 STATEMENT OF FUNCTIONAL EXPENSES FOR THE YEAR ENDED DECEMBER 31, 2015 Program Services Program Support Animal Veterinary Community & Total Shelter Clinic Educational Management Fundraising & Expense Services Services Services Total and General Development Total 2015 Salaries and related expenses $ 2,970,413 $ 827,517 $ 198,251 $ 3,996,181 $ 347,442 $ 368,259 $ 715,701 $ 4,711,882 Medical supplies and diagnostics 346, , , ,944 Printing and promotion 91,734 41,134 91, ,318 1, , , ,235 Animal care and transports 361,456 15,055 6, , ,193 Professional services 94, ,866 46, ,575 78,375 16,310 94, ,260 Facilities expenses 221,492 36,932 15, ,813 46,676 6,337 53, ,826 Investment fees , , ,593 Utilities 178,925 12,409 6, ,625 20,337 1,551 21, ,513 Advertising 42,393 4, , ,560-35,959 35, ,519 IT and communications 62,680 16,964 6,239 85,883 26,409 31,457 57, ,749 Insurance 43,530 7,385 1,715 52,630 25,305-25,305 77,935 Staff expense 42,972 4,878 4,342 52,192 12,864 9,837 22,701 74,893 Special events - - 8,769 8,769-45,978 45,978 54,747 Bank & transaction fees 16,885 13,483-30,368 12,632 11,260 23,892 54,260 Office supplies and postage 27,700 6,418 1,566 35,684 8,150 8,231 16,381 52,065 Miscellaneous 21,981 7,573 2,179 31,733 7,967 6,016 13,983 45,716 Dog training ,234 44, ,234 Total expenses before depreciation 4,522,698 1,346, ,501 6,422, , ,561 1,564,862 7,987,564 Depreciation 197,514 53,260 27, ,846 89,315 10,080 99, ,241 Total Functional Expenses $ 4,720,212 $ 1,399,763 $ 580,573 $ 6,700,548 $ 910,616 $ 753,641 $ 1,664,257 $ 8,364,805 The accompanying notes are an integral part of the financial statements -5-

8 STATEMENT OF FUNCTIONAL EXPENSES FOR THE YEAR ENDED DECEMBER 31, 2014 Program Services Program Support Animal Veterinary Community & Total Shelter Clinic Educational Management Fundraising & Expense Services Services Services Total and General Development Total 2014 Salaries and related expenses $ 2,524,457 $ 981,678 $ 152,101 $ 3,658,236 $ 315,637 $ 280,110 $ 595,747 $ 4,253,983 Medical supplies and diagnostics 302, , , ,904 Printing and promotion 86,227 35,816 81, ,668 3, , , ,254 Animal care and transports 199,142 12,581 1, , ,191 Professional services 70,193 75,408 19, ,126 67,763 7,690 75, ,579 Facilities expenses 210,201 30,700 14, ,674 46,774 6,316 53, ,764 Investment fees , , ,733 Utilities 182,494 13,796 6, ,284 24,240 1,725 25, ,249 Advertising 8, ,391 99,760-22,446 22, ,206 IT and communications 47,076 14,668 5,279 67,023 22,344 30,415 52, ,782 Insurance 39,306 7,359 1,359 48,024 20,063-20,063 68,087 Staff expense 38,816 7,687 2,718 49,221 12,113 9,377 21,490 70,711 Special events ,403 10,403-33,996 33,996 44,399 Bank & transaction fees 12,306 16,070-28,376 12,439 9,068 21,507 49,883 Office supplies and postage 23,532 7,325 1,334 32,191 9,490 5,894 15,384 47,575 Miscellaneous 15,014 7,613 2,590 25,217 5,442 3,872 9,314 34,531 Dog training ,670 35, ,670 Total expenses before depreciation 3,759,596 1,456, ,230 5,641, , ,821 1,373,533 7,015,501 Depreciation 173,909 51,126 25, ,356 90,816 9, , ,016 Total Functional Expenses $ 3,933,505 $ 1,507,268 $ 451,551 $ 5,892,324 $ 864,528 $ 609,665 $ 1,474,193 $ 7,366,517 The accompanying notes are an integral part of the financial statements -6-

9 STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2015 AND Cash Flows from Operating Activities Increase (decrease) in net assets $ (2,403,744) $ 3,799,357 Adjustments to reconcile increase (decrease) in net assets to net cash provided by (used in) operating activities: Depreciation 377, ,016 Gain on disposition of fixed assets (30,860) - Net realized and unrealized (gains) losses on investments 964,426 (3,427,308) Change in value of investments held in trust by others 1,003, ,197 (Increase) decrease in operating assets: Contributions and other receivables (12,290) 17,443 Dividends and interest receivable 37,120 (48,097) Other assets 79,839 (22,152) Increase (decrease) in operating liabilities: Accounts payable and other liabilities (55,728) 72,094 Accrued payroll and benefits (83,390) 29,170 Net cash provided by (used in) operating activities (124,042) 1,006,720 Cash Flows from Investing Activities Outlays for land, buildings and equipment (410,713) (110,495) Proceeds from disposition of land, building and equipment 31,501 - Purchases of investments (50,722,054) (19,048,533) Sales of investments 50,550,301 18,392,918 Net cash used in investing activities (550,965) (766,110) Net Increase (Decrease) in Cash (675,007) 240,610 Cash and Cash Equivalents - Beginning of Year 1,013, ,623 Cash and Cash Equivalents - End of Year $ 338,226 $ 1,013,233 The accompanying notes are an integral part of the financial statements -7-

10 NOTES TO FINANCIAL STATEMENTS NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES Nature of Business The Connecticut Humane Society (the Society) is one of Connecticut s oldest privately funded nonprofit organizations. The Society is the leading resource in the state for companion animal welfare, enriching the lives of families and communities through adoption services, medical care, education and prevention of cruelty. Founded in 1881 to promote humanity and kindness and to prevent cruelty to people and animals, for 84 years the Society was the only statewide organization offering protection to children, until a state agency was established. From that point forward, the Society devoted its efforts exclusively to animals. The Society operates three shelters where animals may be surrendered and adopted, and a reduced fee, full service animal hospital (Fox Memorial Clinic). Additional public services include vaccine clinics, spay/neuter clinics, humane education, dog obedience classes, a Pet Food Pantry, and assistance to law enforcement in cruelty investigations. The Society generates income from adoption and surrender fees, clinic fees, donations, program fees, trust income, income from funds functioning as endowment and grants. The Society also has an extensive volunteer program. Basis of Accounting and Presentation The financial statements of the Society have been prepared in accordance with accounting principles generally accepted in the United States of America. Accordingly, the accounts of the Society are reported in the following net asset categories: Unrestricted Net Assets Unrestricted net assets represent available resources other than donor-restricted contributions. These resources may be expended at the discretion of the Board of Directors. Undesignated net assets represent the portion of expendable funds that is available for support of operations. Designated net assets represent reserves or special designations established by the Board of Directors. The Board of Directors has established the following designations: funds functioning as endowment for the amounts accumulated as unrestricted endowment funds, and the Society s investment in land, buildings and equipment. Temporarily Restricted Net Assets Temporarily restricted net assets represent contributions that are restricted by the donor as to purpose or time of expenditure. Permanently Restricted Net Assets Permanently restricted net assets represent resources that have donor-imposed restrictions that require that the principal be maintained in perpetuity but permit the Society to expend the income earned thereon. These permanently restricted net assets include the Society s proportionate share of the principal amount of the irrevocable trusts with outside trustees for which the Society is an income beneficiary. -8-

11 NOTES TO FINANCIAL STATEMENTS Measure of Operations The statements of activities present revenue from operations separately from nonoperating activities. For purposes of the statement of activities, operations are defined as revenue and expenses from animal rescue, protection and adoption, community outreach, humane education, administration and fundraising. All other revenue and expenses (primarily investment results) are classified as nonoperating activities. The basis of presentation reflects the Society s management operating philosophy. Use of 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 certain reported amounts and disclosures in the financial statements. Actual results could differ from those estimates. Cash and Cash Equivalents Cash equivalents are defined as highly liquid investments with original maturities of 90 days or less. The Society maintained deposits in financial institutions that exceeded federal depository insurance limits. However, management believes that the Society s deposits are not subject to significant credit risk. Investment Valuation and Income Recognition Investments are reported at fair value. Fair value is the price that would be received to sell an asset in an orderly transaction between market participants at the measurement date. See Note 2 for a discussion of fair value measurements. Purchases and sales of securities are recorded on the trade date basis. Interest income is recorded on the accrual basis. Dividends are recorded on the ex-dividend date. Net realized and unrealized gains (losses) on investments includes the Society s gains and losses on investments bought and sold as well as held during the year. These amounts are reported in the statements of activities as increases or decreases in unrestricted, temporarily restricted or permanently restricted net assets as appropriate based on any donor stipulations or law. Land, Buildings and Equipment The Society capitalizes all fixed asset acquisitions over $1,000. Buildings and equipment are depreciated on a straight-line basis over their estimated useful lives, which are generally as follows: Buildings and improvements Equipment Furniture and fixtures years 3-5 years 10 years Expenditures for repairs and maintenance are charged to expense as incurred. -9-

12 NOTES TO FINANCIAL STATEMENTS Investments Held in Trust by Others The Society retains a beneficial interest in various trusts established by donors and held by unrelated trustees. Under this arrangement, the Society receives investment income from the trusts in perpetuity but does not have access to the principal. The beneficial interests are carried at the present value of estimated future receipts from the trusts, which is measured by the fair market value of the assets in the trust. Changes in the carrying amount of the beneficial interest are recognized as increases or decreases in permanently restricted net assets. Contributions Unconditional contributions are recognized when pledged or received, as applicable, and are considered to be available for unrestricted use unless specifically restricted by the donor. Contributions receivable expected to be collected in more than one year are discounted to their present value. The Society reports nongovernmental contributions and grants of cash and other assets as temporarily restricted support if they are received with donor stipulations that limit their use. When a donor restriction expires, that is, when a stipulated time restriction ends or purpose restriction is accomplished, temporarily restricted net assets are reclassified to unrestricted net assets and reported in the statement of activities as net assets released from restrictions. Contributions received whose restrictions are met in the same period are presented with unrestricted net assets. Conditional promises to give are recognized when the conditions on which they depend are substantially met. The Society reports gifts of property and equipment as unrestricted support unless explicit donor stipulations specify how the donated assets must be used. Gifts of long-lived assets with explicit restrictions on how the assets are to be used and gifts of cash or other assets that must be used to acquire property and equipment are reported as restricted support. Absent donor stipulations about how long those assets must be maintained, the Society reports expirations of donor restrictions when the assets are placed in service. Contributed services are recognized in the financial statements if they enhance nonfinancial assets or require specialized skills, are provided by individuals possessing those skills, and would typically need to be purchased if not provided by donation. General volunteer services do not meet these criteria for recognition. However, many volunteers have donated significant amounts of time, estimated at approximately 29,900 hours in 2015, in supporting the Society s mission. Functional Allocation of Expenses The costs of providing the various programs and other activities have been summarized on a functional basis in the statements of functional expenses. Accordingly, certain costs have been allocated among the programs and supporting services benefitted. Income Taxes The Society is exempt from federal and state corporate income taxes as a public charity under Section 501(c)(3) of the Internal Revenue Code. Reclassifications Certain amounts reported in prior periods have been reclassified in order to conform to the current year presentation. -10-

13 NOTES TO FINANCIAL STATEMENTS Subsequent Events In preparing these financial statements, management has evaluated subsequent events through June 10, 2016, which represents the date the financial statements were available to be issued. NOTE 2 - FAIR VALUE MEASUREMENTS Generally accepted accounting principles establish a 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 (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 Inputs to the valuation methodology are unadjusted quoted prices for identical assets in active markets that the Society has the ability to access. Level 2 Inputs to the valuation methodology include: Quoted prices for similar assets in active markets; Quoted prices for identical or similar assets in inactive markets; Inputs other than quoted prices that are observable for the asset; 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. Level 3 Inputs to the valuation methodology are unobservable and significant to the fair value measurement. The asset 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. When, as a practical expedient, an investment is measured at fair value on the basis of net asset value, its classification as Level 2 or 3 will be impacted by the ability to redeem the investment at net asset value at the measurement date. If there is uncertainty or the inability to redeem an investment at net asset value in the near term subsequent to the measurement date, the investment is categorized as Level 3. The following is a description of the valuation methodologies and strategies used for assets measured at fair value: Marketable Equity Securities Common stocks are valued at the closing price reported in the active market in which the individual securities are traded. Corporate Bonds Certain corporate bonds are valued at the closing price reported in the active market in which the individual securities are traded. Other corporate bonds are valued based on yields currently available on comparable securities of issuers with similar durations and credit ratings. -11-

14 NOTES TO FINANCIAL STATEMENTS Mutual Funds Mutual funds are valued at the quoted net asset value of shares held by the Society at year end. Money Markets Funds Money market funds are valued at the quoted net asset value of shares held by the Society at year end. This investment class is meant to provide safety when money managers are unable to find investments with appropriate returns consistent with their strategy. It tends to be very short term with a very low return. Real Estate Investment Trust Real estate investment trusts are valued at the closing price reported in the active market in which the individual securities are traded. This investment class makes commitments to private real estate investment opportunities with the goal of outperforming market indices over the long term. Investments Held in Trust by Others Fair value inputs used for investments held in trust by others are based on the estimated present value of the future payments to the Society, which is considered to be the fair value of the assets held in trust. There have been no changes in the methodologies used at December 31, 2015 and The methods described above may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, while the Society believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date. The following is a summary of the source of fair value measurements for assets that are measured at fair value as of December 31, 2015 and 2014: December 31, Fair Value Measurements Using Description 2015 Level 1 Level 2 Level 3 Marketable equity securities: U.S. large cap $ 31,300,563 $ 31,300,563 $ - $ - U.S. mid cap 1,280,360 1,280, International developed 346, , Corporate bonds: Investment grade taxable 18,066,334 7,421,201 10,645,133 - International developed bonds 855,408 37, ,275 - Global high yield taxable 77,695-77,695 - Investment grade tax exempt 51,594-51,594 - Mutual funds 168, , Money market funds 3,752,077 3,752, Real estate investment trust 1,246,404 1,246, Total investments 57,145,277 45,552,580 11,592,697 - Investments held in trust by others 14,377, ,377,111 Total $ 71,522,388 $ 45,552,580 $ 11,592,697 $ 14,377,

15 NOTES TO FINANCIAL STATEMENTS December 31, Fair Value Measurements Using Description 2014 Level 1 Level 2 Level 3 Marketable equity securities: U.S. large cap $ 32,082,848 $ 32,082,848 $ - $ - U.S. mid cap 396, , International developed 1,409,704 1,409, Corporate bonds: Investment grade taxable 18,386,666 6,093,311 12,293,355 - International developed bonds 1,167,612-1,167,612 - Investment grade tax exempt 73,288-73,288 - Mutual funds 237, , Money market funds 3,626,194 3,626, Real estate investment trust 558, , Total investments 57,937,950 44,403,695 13,534,255 - Investments held in trust by others 15,380, ,380,455 Total $ 73,318,405 $ 44,403,695 $ 13,534,255 $ 15,380,455 The following is a summary of the changes in the balances of assets measured at fair value on a recurring basis using significant unobservable inputs for the years ended December 31, 2015 and 2014: Investments Held in Trust By Others Balance - January 1, 2014 $ 15,615,652 Net realized and unrealized losses included in the change in net assets (235,197) Balance - December 31, ,380,455 Net realized and unrealized losses included in the change in net assets (1,003,344) Balance - December 31, 2015 $ 14,377,

16 NOTES TO FINANCIAL STATEMENTS NOTE 3 - LAND, BUILDINGS AND EQUIPMENT The following is a detailed list of property and equipment, cost, depreciation and accumulated depreciation for the years ended December 31, 2015 and 2014: Land $ 110,380 $ 110,380 Buildings and improvements 10,372,333 10,310,134 Equipment 1,816,208 1,672,716 Furniture and fixtures 230, ,922 Construction in progress 21,070 71,788 12,550,341 12,372,940 Less accumulated depreciation 5,432,300 5,287,730 Land, Buildings and Equipment, Net $ 7,118,041 $ 7,085,210 Depreciation expense for the years ended December 31, 2015 and 2014, was $377,241 and $351,016, respectively. NOTE 4 - ENDOWMENT The Society s endowment includes funds designated by the Board of Directors to function as endowments. As required by accounting principles generally accepted in the United States of America, 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 donorimposed restrictions. Interpretation of Relevant Law The Board of Directors of the Society has interpreted the Connecticut Uniform Prudent Management of Institutional Funds Act (CTPMIFA) as requiring the preservation of the fair value of the original gift as of the gift date of the donor-restricted endowment funds, absent explicit donor stipulations to the contrary. As a result of this interpretation, the Society classifies as permanently restricted net assets (a) the original value of gifts donated to the permanent endowment, (b) the original value of subsequent gifts to the permanent endowment, and (c) accumulations to the permanent endowment made in accordance with the direction of the applicable donor gift instrument at the time the accumulation is added to the fund. The remaining portion of the donor-restricted endowment fund that is not classified as permanently restricted net assets is classified as temporarily restricted net assets until those amounts are appropriated for expenditure by the Society in a manner consistent with the standard of prudence prescribed by CTPMIFA. In accordance with CTPMIFA, the Society considers the following factors in making a determination to appropriate or accumulate donor-restricted endowment funds: The duration and preservation of the various funds The purposes of the Society 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 Society The investment policies of the Society -14-

17 NOTES TO FINANCIAL STATEMENTS Endowment Net Assets Changes in endowment net assets for the years ended December 31, 2015 and 2014, are as follows: Unrestricted Endowment net assets - January 1, 2014 $ 53,778,461 Investment return: Investment income, net 1,756,399 Investment gains 3,394,671 Total investment return 5,151,070 Contributions 1,522,198 Appropriation of endowment assets for expenditure (2,289,242) Other changes: Management fees (233,733) Endowment net assets - December 31, ,928,754 Investment return: Investment income, net 1,555,196 Investment losses (965,423) Total investment return 589,773 Contributions 1,375,389 Appropriation of endowment assets for expenditure (2,492,546) Other changes: Management fees (233,593) Endowment Net Assets - December 31, 2015 $ 57,167,777 Return Objectives and Risk Parameters The Society 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. Endowment assets include board-designated funds. Under this policy, as approved by the Board of Directors, the endowment assets are invested in a manner that is intended to maintain the inflation-adjusted value of the current asset base while recognizing the objective of real growth in principal within reasonable and prudent levels of risk. -15-

18 NOTES TO FINANCIAL STATEMENTS Strategies Employed for Achieving Objectives To satisfy its long-term rate-of-return objectives, the Society 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 Society targets a diversified asset allocation that places a greater emphasis on equity-based investments to achieve its long-term return objectives within prudent risk constraints. Spending Policy and How the Investment Objectives Relate to Spending Policy The Society has a policy of appropriating for distribution an amount not to exceed 5.0% for the years ended December 31, 2015 and 2014, of its endowment fund s average fair value over the prior three calendar years. This is consistent with the Society s objective to maintain the purchasing power of the endowment assets held in perpetuity or for a specified term, as well as to provide additional real growth through new gifts and investment return. NOTE 5 - RETIREMENT PLAN The Society has established a 401(k) retirement plan that covers all eligible employees. Participants can elect to have their compensation reduced, and the Society matches up to 6% of the participants contributions based on years of service. Additionally, the plan provides for a discretionary employer contribution. For the years ended December 31, 2015 and 2014, the discretionary employer contribution was 5% of eligible compensation. The Society s expense for the years ended December 31, 2015 and 2014, was $183,945 and $157,186, respectively. The Society established a 403(b) plan in December 2013, whereby employees meeting certain requirements may participate in the plan. Participants can elect to have their compensation reduced, and the Society matches up to 6% of the participants contributions based on years of service. Additionally, the plan provides for a discretionary employer contribution. These matching contributions are subject to certain Internal Revenue Service limitations. For the years ended December 31, 2015 and 2014, the discretionary employer contribution was 5% of eligible compensation. The Society s matching contributions expense for the years ended December 31, 2015 and 2014, was $14,720 and $10,075, respectively. NOTE 6 - PERFORMANCE STOCK OPTION PLAN The Society has established a nonqualified Performance Stock Option Plan for the benefit of its employees. Total options granted to date allow a fifteen-year option to purchase shares of Vanguard 500 Index Fund. The plan is required to be funded at the time of purchase, and any assets set aside to fund future benefits remain subject to any claims of the Society s creditors. The market value of the fund as of December 31, 2015 and 2014, was $168,606 and $237,422, respectively, and is included in investments. NOTE 7 - RELATED PARTY TRANSACTIONS Certain board members and key employees are also owners or key employees of organizations providing animal care services to the Society totaling $68,252 and $55,436 as of December 31, 2015 and 2014, respectively. There were no amounts due to related parties as of December 31, 2015 and