FINANCIAL STATEMENTS WITH SUPPLEMENTAL SCHEDULE YEAR ENDED DECEMBER 31, 2012 AND INDEPENDENT AUDITOR S REPORT
FINANCIAL STATEMENTS WITH SUPPLEMENTAL SCHEDULE YEAR ENDED DECEMBER 31, 2012 TABLE OF CONTENTS Independent Auditor s Report 1-2 Page Financial Statements: Statement of Financial Position 3 Statement of Activities 4 Statement of Cash Flows 5 Notes to Financial Statements 6-16 Supplemental Schedule: Schedule 1 - Functional Expenses 17
BOLLUS LYNCH CERTIFIED PUBLIC ACCOUNTANTS & CONSULTANTS INDEPENDENT AUDITOR'S REPORT Board of Directors Worcester Natural History Society EcoTarium Worcester, MA Report on the Financial Statements We have audited the accompanying financial statements of the Worcester Natural History Society EcoTarium (the EcoTarium ) which comprise the statement of financial position as of December 31, 2012, and the related statements of activities and cash flows for the year 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. Auditor s Responsibility Our responsibility is to express an opinion on these 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 financial statements are free of 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 auditor s 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 auditor considers internal control relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the EcoTarium as of December 31, 2012, and the changes in its net assets and its cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America. Bollus Lynch, LLP independent member of the bdo seidman alliance 89 Shrewsbury Street Worcester, MA 01604 p - 508.755.7107 f - 508.755.3896 Bolluslynch.com
INDEPENDENT AUDITOR'S REPORT Report on Summarized Comparative Information We have previously audited the EcoTarium s financial statements, and we expressed an unmodified audit opinion on those audited financial statements in our report dated April 5, 2012. In our opinion, the summarized comparative information presented herein as of and for the year ended December 31, 2011 is consistent, in all material respects, with the audited financial statements from which it has been derived. Other Matter Our audit was conducted for the purpose of forming an opinion on the financial statements as a whole. The accompanying supplementary information is presented for purposes of additional analysis and is not a required part of the financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the financial statements. The information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated in all material respects in relation to the financial statements as a whole. Worcester, Massachusetts April 9, 2013 2
STATEMENT OF FINANCIAL POSITION DECEMBER 31, 2012 (With Summarized Financial Information for 2011) 2012 2011 Assets Current assets Cash and cash equivalents $ 320,151 $ 798,158 Cash held with trustee 35,618 32,037 Accounts receivable Program fees 7,344 8,738 Grants 23,068 12,102 Pledges receivable 254,616 494,177 Store inventory 30,783 28,790 Prepaid expenses 36,663 30,127 Total current assets 708,243 1,404,129 Long-term pledges receivable, net 86,505 412,886 Deferred expenses 11,018 16,527 Beneficial interest 898,809 853,754 Investments 11,598,850 10,908,233 Property, plant, and equipment, net 8,029,053 8,695,502 $ 21,332,478 $ 22,291,031 Liabilities and Net Assets Current liabilities Notes payable, bank $ 160,000 $ 1,046,997 Current maturities of long-term debt 277,208 257,985 Accounts payable, trade 236,800 144,055 Accrued and other liabilities 197,100 183,807 Deferred revenue 17,537 23,772 Total current liabilities 888,645 1,656,616 Long-term debt, less current maturities 288,562 565,770 Net assets Unrestricted 9,117,682 9,162,265 Temporarily restricted 1,514,842 1,428,688 Permanently restricted 9,522,747 9,477,692 Total net assets 20,155,271 20,068,645 $ 21,332,478 $ 22,291,031 See accompanying notes to financial statements. 3
STATEMENT OF ACTIVITIES YEAR ENDED DECEMBER 31, 2012 (With Summarized Financial Information for 2011) Temporarily Permanently Totals Unrestricted Restricted Restricted 2012 2011 Operating Support, revenue and other activities Admissions $ 517,714 $ - $ - $ 517,714 $ 463,688 Memberships 205,414 - - 205,414 160,509 Program fees 422,480 - - 422,480 363,609 Visitor services 180,325 - - 180,325 174,790 Store 174,528 - - 174,528 141,893 Contributions, gifts and grants 527,627 193,531-721,158 470,421 Investment return designated for operations 925,000 - - 925,000 950,000 Other 51,323 - - 51,323 210,002 Net assets released from restrictions 317,881 (317,881) - - - Total 3,322,292 (124,350) - 3,197,942 2,934,912 Expenditures Program services Exhibits 1,220,344 - - 1,220,344 1,000,446 Wildlife collections 476,528 - - 476,528 442,372 Educational services 570,923 - - 570,923 538,769 Membership activities 62,133 - - 62,133 50,328 Visitor services 499,288 - - 499,288 491,303 Special events 304,112 - - 304,112 363,105 Store 137,062 - - 137,062 135,889 Supporting services General and administrative 597,833 - - 597,833 620,630 Public relations 273,209 - - 273,209 219,549 Development 122,697 - - 122,697 90,827 Total 4,264,129 - - 4,264,129 3,953,218 Change in net assets from operating activity (941,837) (124,350) - (1,066,187) (1,018,306) Nonoperating Contributions, gifts and grants 7,550 400,619-408,169 1,547,766 Net investment return 1,233,519 301,177-1,534,696 (319,142) Investment return designated for operations (925,000) - - (925,000) (950,000) Change in fair value of beneficial interest - - 45,055 45,055 (45,823) Gain on disposition of property, plant, and equipment 89,893 - - 89,893 - Net assets released from restrictions 491,292 (491,292) - - - Change in net assets from nonoperating activity 897,254 210,504 45,055 1,152,813 232,801 Change in net assets (44,583) 86,154 45,055 86,626 (785,505) Net assets, beginning of year 9,162,265 1,428,688 9,477,692 20,068,645 20,854,150 Net assets, end of year $ 9,117,682 $ 1,514,842 $ 9,522,747 $ 20,155,271 $ 20,068,645 See accompanying notes to financial statements. 4
STATEMENT OF CASH FLOWS YEAR ENDED DECEMBER 31, 2012 (With Summarized Financial Information for 2011) 2012 2011 Cash flows from operating activities: Change in net assets $ 86,626 $ (785,505) Adjustments to reconcile change in net assets to net cash used in operating activities: Depreciation and amortization 879,444 843,838 Net investment (gains) losses (1,149,400) 818,997 Change in fair value of beneficial interest (45,055) 45,823 Gain on disposition of property, plant, and equipment (89,893) - Contributions restricted for long term investments - (1,000) Contributions restricted for investment in property, plant, and equipment (400,619) (1,547,766) (Increase) decrease in operating assets: Accounts receivable (9,572) 4,955 Pledges receivable (6,290) 14,665 Inventories (1,993) (4,482) Prepaid expenses (6,536) 5,149 Increase (decrease) in operating liabilities: Accounts payable, trade 45,745 (25,629) Accrued and other liabilities 13,293 838 Deferred revenue (6,235) (3,258) Total adjustments (777,111) 152,130 Net cash used in operating activities (690,485) (633,375) Cash flows from investing activities: Expenditures for property, plant, and equipment (180,486) (1,685,069) Proceeds from disposition of property, plant, and equipment 109,893 - Proceeds from sales and maturities of investments 8,769,457 6,887,421 Payments for purchases of investments (8,310,674) (6,436,525) Net cash provided by (used in) investing activities 388,190 (1,234,173) Cash flows from financing activities: (Increase) decrease in cash held with trustee (3,581) 1,959 Net (payments) borrowings from notes payable, bank (886,997) 971,997 Principal payments on long-term debt (257,985) (247,568) Contributions received for long term investments - 1,000 Contributions received for investment in property, plant, and equipment 972,851 1,880,205 Net cash provided by (used in) financing activities (175,712) 2,607,593 Net increase (decrease) in cash and cash equivalents (478,007) 740,045 Cash and cash equivalents, beginning of year 798,158 58,113 Cash and cash equivalents, end of year $ 320,151 $ 798,158 See accompanying notes to financial statements. 5
1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Organization The Worcester Natural History Society, which operates as the EcoTarium (the EcoTarium ), was founded in 1825 and incorporated as a not-for-profit organization in 1866. The EcoTarium is dedicated to promoting an understanding of natural history and earth sciences. Accounting estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses. Actual results could differ from those estimates. Subsequent events The EcoTarium has evaluated the financial statement impact of subsequent events occurring through April 9, 2013, the date that the financial statements were available to be issued. Method of accounting The financial statements of the EcoTarium have been prepared on the accrual method of accounting. Accordingly, assets are recorded when the EcoTarium obtains the rights of ownership or is entitled to claims for receipt and liabilities are recorded when the obligation is incurred. Financial statement presentation The EcoTarium presents information regarding its financial position and activities according to three classifications of net assets described as follows: Unrestricted - All resources over which the governing board has discretionary control. The governing board of the EcoTarium may elect to designate such resources for specific purposes. This designation may be removed at the board's discretion. Temporarily restricted - Resources accumulated through donations or grants for specific operating or capital purposes. Such resources will become unrestricted when the requirements of the donor or grantee have been satisfied through expenditure for the specified purpose or program or through the passage of time. Permanently restricted - Endowment resources accumulated through donations or grants that are subject to the restriction in perpetuity that the principal be invested. Investment income may be either an unrestricted or temporarily restricted resource when earned, determined according to the gift instruments and relevant state law. The financial statements include certain prior year summarized comparative information in total but not by net asset class. Such information does not include sufficient detail to constitute a presentation in conformity with accounting principles generally accepted in the United States of America. Accordingly, such information should be read in conjunction with the EcoTarium s financial statements for the year ended December 31, 2011 from which the summarized information was derived. 6
1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Cash and cash equivalents For purposes of the financial statements, the EcoTarium considers all highly liquid debt instruments purchased with a maturity date of three months or less to be cash equivalents. The EcoTarium maintains its cash in bank deposit accounts which, at times, may exceed federally insured limits. The EcoTarium has not experienced any losses in such accounts. The EcoTarium believes it is not exposed to any significant credit risk on cash and cash equivalents. Pledges receivable and grants receivable Pledges are recorded as receivables in the year the pledge is made. Pledges for support of current operations are recorded as unrestricted support. Pledges for support of future operations, plant asset acquisitions, and endowment are recorded as temporarily restricted or permanently restricted support. Unconditional promises to give that are expected to be collected within one year are recorded at their net realizable value. Unconditional promises to give that are expected to be collected in future years are recorded at the present value of estimated future cash flows. The discounts on those amounts are computed using a risk free interest rate applicable to the year in which the promise is received. Amortization of the discount is included in revenue of gifts and grants. Conditional promises to give are not included as support until such time as the conditions are substantially met. It is the EcoTarium s policy not to record revocable or irrevocable bequests given that the actual pledge amount is indeterminable until the time the estate has completed the probate process. Inventories Inventories, which consist principally of museum shop merchandise, are stated at the lower of cost or market. Cost is determined by the first-in, first-out (FIFO) method. Property, plant, and equipment Property, plant, and equipment are carried at cost or at fair value as of the date of gift. amortization are computed using the straight-line method. Depreciation and Impairment of long-lived assets and long-lived assets to be disposed of Long-lived assets and certain identifiable intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Deferred expenses Deferred expenses represent loan origination and issuance fees and are being amortized using the straight-line method over the life of the loan. Measure of operations In its statement of activities, the EcoTarium includes in its definition of operations all revenues and expenses that are an integral part of its programs and supporting activities. Investment return in excess of the amount appropriated for operations, and donor-restricted contributions for endowment and capital activities are recognized as non-operating activities. Additionally, unrestricted contributions designated by the Board for endowment purposes are recognized as non-operating activities, however the related cash received is included in operating cash flows. 7
1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Investments Investments in equity securities with readily determinable fair values and all debt securities are reported at fair value. Alternative investments which do not have readily determinable fair values are carried at estimated fair values using the net asset value per share of the investment as reported by the investment managers. The EcoTarium reviews and evaluates the net asset values reported by the investment managers and has determined that the net asset values are calculated in a manner consistent with the measurement principles of FASB ASC Topic 946 as of the balance sheet date. Those estimated fair values may differ significantly from the values that would have been used had a ready market for these securities existed. Gains or losses on investments are reported in the statement of activities as increases or decreases in unrestricted net assets unless their use is temporarily or permanently restricted by explicit donor stipulations or by law. Investment income is recorded in unrestricted net assets unless its use is temporarily or permanently restricted by explicit donor stipulations. Endowment funds The EcoTarium s endowment includes both donor-restricted endowment funds and funds designated by the Board to function as endowments. 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 or legal restrictions. Endowment funds include invested gifts. As required by generally accepted accounting principles, the EcoTarium 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 in permanently restricted net assets is classified as temporarily restricted net assets until those amounts are appropriated for expenditure by the EcoTarium in a manner consistent with the standard of prudence prescribed by state law. In accordance with the Uniform Prudent Management of Institutional Funds Act, the EcoTarium can consider 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; and the investment policies of the organization. The EcoTarium has adopted investment and spending policies for its Board-designated and other endowment assets that attempt to provide a predictable stream of funding for its programs while seeking to maintain the purchasing power of the endowment assets. Under this policy, as approved by the Board of Trustees, the endowment assets are invested in a manner that is intended to produce results that meet or exceed the price and yield results of the relevant equity and bond indexes while assuming a moderate level of investment risk. The EcoTarium targets its endowment funds, over time, to provide an average rate of return of approximately 8% annually. Actual returns in any given year may vary from this amount. To satisfy its long-term rate-of-return objectives, the EcoTarium 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 EcoTarium normally invests in institutional mutual funds that target a diversified asset mix that places a greater emphasis on equity-based investments to achieve its long-term return objectives within prudent risk constraints. 8
1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Endowment funds (continued) The EcoTarium has a policy of appropriating for distribution each year 5% of its endowment fund s average fair value over the prior twelve quarters through the end of the third quarter proceeding the year in which the distribution is planned. In establishing this policy, the EcoTarium considered the long-term expected return on its endowment. Accordingly, over the long term, the EcoTarium expects the current spending policy to allow its endowment to grow at an average of 3% annually. This is consistent with the EcoTarium s objective to maintain the purchasing power of its board-designated endowment. As allowed under its policy, during 2012 and 2011 the EcoTarium appropriated for distribution more than 5% of its endowment fund s average fair value. From time to time, the fair value of assets associated with individual donor-restricted endowment funds may fall below the level that the donor imposed restrictions require the EcoTarium to retain as a fund of perpetual duration. In accordance with generally accepted accounting principles, deficiencies of this nature are reported in unrestricted net assets. Such deficiencies amounted to $2,532 as of December 31, 2012. Beneficial interest The EcoTarium is named as the beneficiary of two trusts from which it receives distributions. Such distributions are recorded as unrestricted investment income when received. Although the assets of the underlying trusts are not owned or controlled by the EcoTarium, an asset representing the estimated present value of the expected future receipts has been recorded in permanently restricted assets. Net appreciation is treated as permanently restricted. Deferred revenue Deferred revenue consists of the unearned portion of exchange grants and contracts. Contributions, gifts, grants Contributions received are recorded as unrestricted, temporarily restricted, or permanently restricted support depending on the existence and nature of any donor restrictions. Contributions may include actual gifts or promises to give. Such contributions are considered to be available for unrestricted use unless specifically restricted by the donor or grantor. Contribution of assets other than cash are recorded at their fair value on the date of the gift. Restricted gifts or promises to give are reported as restricted support in the period received and are then reclassified to unrestricted net assets upon satisfaction of the donor restriction. Advertising and promotion Advertising and promotion costs with expected future benefits, such as brochures, are capitalized at cost and are amortized over their estimated useful life. All other costs associated with advertising and promoting the EcoTarium are expensed in the year incurred. Promotion and advertising expense was $126,181 and $123,415 in 2012 and 2011, respectively. Donated goods and services Donated goods are recorded at their fair value at the date of the donation. Donated services are recorded at fair value at the date of the donation if the services require special skills and would ordinarily be purchased by the EcoTarium. The financial statements include donated services of $129,823 and $73,423 in 2012 and 2011, respectively. The financial statements do not reflect amounts for the many services provided by volunteers since no objective basis is available to measure the value of these services. 9
1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Functional expenses The costs of providing the various programs and other activities of the EcoTarium have been summarized on a functional basis in the statement of activities. Accordingly, certain costs have been allocated to the program services and supporting services benefited. 2 - PLEDGES RECEIVABLE Payments of pledges are expected to be received as follows: 2013 $ 254,616 2014 90,850 2015 2,500 347,966 Less: Unamortized discount 6,845 $ 341,121 3 - INVESTMENTS Investments are included in the following classes of net assets: Donor-restricted endowment funds: 2012 2011 Unrestricted $ (2,532) $ (907,504) Temporarily restricted - - Permanently restricted 8,623,938 8,623,938 Board-designated endowment funds 2,977,444 3,191,799 Investment fair values as of December 31 are summarized as follows: $ 11,598,850 $ 10,908,233 2012 2011 Money market funds $ 18,381 $ 5,307 Mutual funds Fixed income 2,557,040 2,233,742 Asset allocation 3,054,327 2,201,454 Balanced 1,096,416 2,415,920 Equity 4,355,794 4,051,810 Corporate bond 48,513 - Corporate bonds 468,379 - Total investments $ 11,598,850 $ 10,908,233 10
3 - INVESTMENTS The following schedule summarizes the investment return and its classification in the statement of activities for the year ended December 31, 2012: Unrestricted Temporarily Restricted Permanently Restricted Interest and dividend income $ 90,489 $ 324,762 $ - $ 415,251 Net realized and unrealized gains 1,149,400 - - 1,149,400 Investment management fees (6,370) (23,585) - (29,955) Total return on investments 1,233,519 $ 301,177 $ - $ 1,534,696 Less: Investment return designated for current operations 925,000 Investment return less amounts designated for current operations $ 308,519 The following schedule summarizes the investment return and its classification in the statement of activities for the year ended December 31, 2011: Unrestricted Temporarily Restricted Permanently Restricted Interest and dividend income $ 155,690 $ 373,445 $ - $ 529,135 Net realized and unrealized losses (818,997) - - (818,997) Investment management fees (8,547) (20,733) - (29,280) Total return on investments (671,854) $ 352,712 $ - $ (319,142) Less: Investment return designated for current operations 950,000 Investment return less amounts designated for current operations $ (1,621,854) Total Total 4 - BENEFICIAL INTEREST The EcoTarium is the beneficiary of two trust funds with a combined estimated value of $898,809 and $853,754 as of December 31, 2012 and 2011, respectively. Changes in the fair value of these funds for the year then ended are segregated on the statement of activities and included in the change in permanently restricted net assets. Income distributed to the EcoTarium by the trusts is unrestricted and totaled $56,412 and $32,340 in 2012 and 2011, respectively. 11
5 - PROPERTY, PLANT, AND EQUIPMENT Property, plant, and equipment, together with estimated useful lives, consists of the following: Estimated Useful Lives 2012 2011 Land and improvements 10-20 years $ 3,602,981 $ 3,475,497 Building and equipment 3-40 years 15,054,753 15,045,032 Exhibits 3-5 years 6,344,572 6,328,941 Railroad 15 years 314,992 314,992 Motor vehicles 5 years 99,740 99,740 Construction in progress - 47,000-25,464,038 25,264,202 Less: Accumulated depreciation 17,434,985 16,568,700 $ 8,029,053 $ 8,695,502 Depreciation expense for property, plant, and equipment was $873,935 and $838,328 in 2012 and 2011, respectively. 6 - ENDOWMENT ASSETS Endowment assets include donor-restricted and Board-designated investments as well as beneficial interests in perpetual trusts. Changes in endowment assets for the year ended December 31, 2012 are as follows: Unrestricted Temporarily Restricted Permanently Restricted Endowment assets, beginning of year $ 2,284,295 $ - $ 9,477,692 $ 11,761,987 Investment return: Interest and dividend income 87,716 324,762-412,478 Net realized and unrealized gains 244,428 904,972-1,149,400 Investment management fees (6,370) (23,585) - (29,955) Investment return before reclassification 325,774 1,206,149-1,531,923 Replenishment of deficient funds 904,972 (904,972) - - Total investment return 1,230,746 301,177-1,531,923 Contributions 83,694 - - 83,694 Appropriation for expenditure (623,823) (301,177) - (925,000) Changes in fair value of beneficial interest - - 45,055 45,055 Endowment assets, end of year $ 2,974,912 $ - $ 9,522,747 $ 12,497,659 Total 12
7 - NOTES PAYABLE, BANK The EcoTarium has two working capital lines of credit totaling $1,500,000, secured by certain investments. Interest is charged at the bank s base rate. There was $160,000 and $1,046,997 outstanding as of December 31, 2012 and 2011, respectively. 8 - LONG-TERM NOTES PAYABLE Long-term notes payable consists of the following: 2012 2011 Bonds note payable, Massachusetts Health and Educational Facilities Authority (MHEFA) unsecured, due in varying annual principal installments through June 2014. Interest is due monthly at a variable rate (approximately 0.583% as of December 31, 2012.) $ 565,770 $ 823,755 Less: Current maturities 277,208 257,985 Maturities of long-term notes payable in subsequent years are as follows: 2013 $ 277,208 2014 288,562 $ 288,562 $ 565,770 $ 565,770 The bonds notes payable require, among other considerations, the maintenance of certain financial covenants. Included in the financial statements are proceeds from the bonds payable for capital projects totaling $35,618 and $32,037 as of December 31, 2012 and 2011, respectively. These proceeds are held in trust and are to be used for capital project-related expenditures and future debt service. 9 - RESTRICTED NET ASSETS Temporarily restricted net assets are available for the following purposes: 2012 2011 Capital projects $ 1,478,658 $ 1,401,838 Educational programs 21,184 26,850 Other 15,000 - $ 1,514,842 $ 1,428,688 13
9 - RESTRICTED NET ASSETS Net assets were released from donor restrictions by incurring expenses satisfying the restricted purpose or by occurrence of other events specified by donors as follows: 2012 2011 Investment return designated for current operations $ 301,177 $ 352,712 Capital projects 323,799 1,786,529 Educational programs 115,722 132,377 Other 68,475 63,586 Permanently restricted net assets are restricted to: $ 809,173 $ 2,335,204 2012 2011 Investment in perpetuity, the income and appreciation from which is expendable to support any activities of the EcoTarium. $ 9,522,747 $ 9,477,692 10 - FAIR VALUE MEASUREMENTS The EcoTarium follows the provisions of Financial Accounting Standards Board Accounting Standards Codification Topic 820, Fair Value Measurements and Disclosures (ASC Topic 820) which 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 ASC Topic 820 are described as follows: Level 1: Valuation is based on quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date. Level 2: Valuation is based on observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Level 3: Valuation is based on unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Level 3 assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation. The asset s or liability 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. Following is a description of the valuation methodologies used for assets measured at fair value. There have been no changes in the methodologies used at December 31, 2012 and 2011. Mutual funds (non-privately managed), money market funds, and corporate bonds: Valued at the closing price reported on the active market on which the individual securities are traded. 14
10 - FAIR VALUE MEASUREMENTS Mutual funds (privately managed): The EcoTarium, as a practical expedient, estimates the fair value of its alternative investments based on the net asset value (or its equivalent) as reported by the fund manager. The EcoTarium has evaluated the audited financial statements of its holdings as of the balance sheet date and believe that reported net asset value (or its equivalent) is calculated consistent with the guidance of ASC 820-10-35-59. Classification within the fair value hierarchy is based on the existence of restrictions on the EcoTarium s ability to access its holdings. Beneficial interest: Valued at the estimated present value of the expected future receipts. The preceding methods described may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, although the EcoTarium 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 EcoTarium s financial assets that are measured at fair value on a recurring basis were recorded using the fair value hierarchy at December 31, 2012 as follows: Investments Level 1 Level 2 Level 3 Total Money market funds $ 18,381 $ - $ - $ 18,381 Mutual funds Fixed income 2,557,040 - - 2,557,040 Asset allocation - 3,054,327-3,054,327 Balanced 1,096,416 - - 1,096,416 Equity 4,355,794 - - 4,355,794 Corporate bond 48,513 - - 48,513 Corporate bonds 468,379 - - 468,379 Total investments 8,544,523 3,054,327-11,598,850 Beneficial interest - - 898,809 898,809 Total financial assets $ 8,544,523 $ 3,054,327 $ 898,809 $ 12,497,659 The EcoTarium does not measure any liabilities at fair value on a recurring or non-recurring basis on the statements of financial position. The following is a reconciliation of level 3 assets: Balance at December 31, 2011 $ 853,754 Change in fair value of beneficial interest 45,055 Balance at December 31, 2012 $ 898,809 15
10 - FAIR VALUE MEASUREMENTS As disclosed in footnote 1 to the financial statements, the EcoTarium estimates the fair value of its investments in certain entities using the net asset value per share of the investment. Further information about these investments is presented below. Fair Value Unfunded Commitments Redemption Frequency Redemption Notice Period Mutual fund asset allocation (a) $ 3,054,327 $ - daily - (a) TIFF Multi-Asset Fund - This fund invests in common stocks, convertible bonds, subordinated convertible notes, corporate bonds, asset-backed securities, mortgage-backed securities, bank loans, US Treasury securities, exchange-traded funds and mutual funds, private investment funds, preferred stocks, purchased options, rights, warrants and short term investments. The fund also includes common stocks sold short, financial futures contracts and swap contracts. The fair value of the investments in this category has been estimated using the net asset value per share of the investments. 11 - STATEMENT OF CASH FLOWS Supplemental disclosures of cash flows information is as follows: 2012 2011 Cash paid during the year for: Interest $ 23,597 $ 39,356 12 - TAX EXEMPT STATUS The EcoTarium qualifies as a tax-exempt, nonprofit organization under Section 501(c)(3) of the Internal Revenue Code. Accordingly, no provision for federal income tax is required. Management annually reviews for uncertain tax positions along with any related interest and penalties, and believes that the EcoTarium has no uncertain tax positions that would have a material adverse effect, individually or in the aggregate upon the EcoTarium s statements of financial position, or the related statements of activities, or cash flows. The EcoTarium files income tax returns in the U.S. federal jurisdiction. The EcoTarium is no longer subject to U.S. federal income tax examinations by tax authorities for years before 2009. 13 - RECLASSIFICATIONS Certain amounts in the 2011 comparative totals have been reclassified to conform with the 2012 presentation. Such reclassifications had no effect on change in net assets as previously reported. 16
SUPPLEMENTAL SCHEDULE
17 Worcester Natural History Society Schedule 1 FUNCTIONAL EXPENSES YEAR ENDED DECEMBER 31, 2012 Program Services Supporting Services Totals Wildlife Education Membership Visitor Special Public Exhibits Collections Services Activities Services Events Store Administration Relations Development 2012 2011 Direct costs Salaries, wages and contractor compensation $ 189,247 $ 94,734 $ 225,550 $ 19,393 $ 249,285 $ 39,549 $ 27,747 $ 299,418 $ 99,767 $ 76,070 $ 1,320,760 $ 1,301,725 Fringe benefits 46,963 29,069 63,528 6,405 65,168 13,525 4,217 38,899 22,318 30,699 320,791 295,856 Outside services 10,470-3,304-404 18,536-8,544 4,696 654 46,608 65,087 Repairs and maintenance 3,407 1,341 8,283-17,434 - - 1,659 - - 32,124 38,115 Promotion and advertising 3,746-525 - (20) 769 20 527 120,514 100 126,181 123,415 Operating/office supplies 15,510-9,741 566 5,785 12,486 533 10,010 514 406 55,551 46,229 Contracts, fees, and permits - 7,241 5,150 704 495 1,114 732 8,797 764 704 25,701 38,677 Merchandise for resale - 170 - - - - 62,749 - - - 62,919 63,093 Exhibit buy/build/rent expense 58,192 - - - - - - - - - 58,192 34,625 Wildlife expense - 38,548 - - - - - - - - 38,548 44,918 Hospitality 161 46 10,710 53 2,415 5,728-6,546-3,678 29,337 38,081 Professional expense - - - - - - - 44,082 - - 44,082 22,004 Miscellaneous expense 14,201 5,457 11,204 3,584 23,100 21,172-49,194 8,555 2,137 138,604 122,329 Interest expense - - - - - - 6,493 15,318 - - 21,811 36,412 Donor-funded expenses 109,079 12,540 28,549 - - - - - - - 150,168 64,368 Donated goods and services - - - - - 129,823 - - - - 129,823 73,423 450,976 189,146 366,544 30,705 364,066 242,702 102,491 482,994 257,128 114,448 2,601,200 2,408,357 Allocable costs Buildings and grounds 122,807 60,491 38,636 1,814 16,020 12,091 5,290 21,159 3,627 1,814 283,749 328,448 Utilities 65,887 32,454 20,729 973 8,595 6,487 2,838 11,352 1,946 973 152,234 206,770 Repairs 129,271 63,674 40,670 1,909 16,864 12,727 5,568 22,273 3,818 1,909 298,683 120,654 Depreciation 427,889 119,181 96,946 26,385 90,676 27,790 19,862 56,004 5,996 3,206 873,935 838,328 General insurance 23,514 11,582 7,398 347 3,067 2,315 1,013 4,051 694 347 54,328 50,661 $ 1,220,344 $ 476,528 $ 570,923 $ 62,133 $ 499,288 $ 304,112 $ 137,062 $ 597,833 $ 273,209 $ 122,697 $ 4,264,129 $ 3,953,218 See accompanying independent auditor s report.