Financial Statements and Independent Auditors' Report June 30, 2009 and 2008
Table of Contents Page Independent Auditors' Report...1 Financial Statements Statements of Financial Position...3 Statements of Activities...4 Statement of Functional Expenses for the Year Ended June 30, 2009...5 Statement of Functional Expenses for the Year Ended June 30, 2008...6 Statements of Cash Flows...7 Notes to Financial Statements...8 Supplemental Schedule Schedule of Wyoming Revenue and Expense Activities...20
INDEPENDENT AUDITORS' REPORT To the Board of Directors Food Bank of the Rockies, Inc. Denver, Colorado We have audited the accompanying statements of financial position of Food Bank of the Rockies, Inc. (the "Organization") (a Colorado non-profit corporation) as of June 30, 2009, and the related statements of activities and cash flows for the year then ended. These financial statements are the responsibility of the Organization's management. Our responsibility is to express an opinion on these financial statements based on our audit. The financial statements of Food Bank of the Rockies, Inc. as of June 30, 2008 were audited by other auditors whose report dated October 28, 2008 expressed an unqualified opinion on those statements. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Governmental Auditing Standards, issued by the Comptroller General of the United States. 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 includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Food Bank of the Rockies, Inc. as of June 30, 2009, and the results of its activities and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America. In accordance with Government Auditing Standards, we have also issued our report dated September 23, 2009 on our consideration of the Organization's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit.
To the Board of Directors Food Bank of the Rockies, Inc. Page Two Our audit was performed for the purpose of forming an opinion on the basic financial statements of the Organization taken as a whole. The accompanying schedule of expenditures of federal awards is presented for purposes of additional analysis as required by the U.S. Office of Management and Budget Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations, and is not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated, in all material respects, in relation to the basic financial statements taken as a whole. Our audit was made for the purpose of forming an opinion on the basic financial statements taken as a whole. The information included in the accompanying schedule is presented only for supplementary analysis purposes and is not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole. September 23, 2009 Denver, Colorado Ehrhardt Keefe Steiner & Hottman PC
Statements of Financial Position Assets June 30, 2009 2008 Current assets Cash and cash equivalents $ 1,443,905 $ 148,710 Receivables Agency support fees, net of allowance $7,500 (2009) and $0 (2008) 186,327 186,227 Pledges receivable 316,397 175,366 Contracts receivable 282,493 236,914 Total receivables 785,217 598,507 Investments 736,794 615,247 Food inventory 2,492,836 1,620,589 Commodities inventory 1,135,525 603,798 Prepaid expenses 124,715 96,611 Total current assets 6,718,992 3,683,462 Long-term assets Pledges receivable - 132,107 Beneficial interest in assets held by the Denver Foundation 299,576 340,310 Property and equipment, net 7,048,435 7,062,625 Other assets 18,711 - Total assets $ 14,085,714 $ 11,218,504 Liabilities and Net Assets Current liabilities Accounts payable $ 164,115 $ 170,993 Accrued liabilities 339,110 322,420 Deferred revenue 48,000 96,000 Current portion of note payable - 71,847 Current portion of capital lease 60,675 53,136 Total current liabilities 611,900 714,396 Long-term liabilities Long-term debt, net of current portion - 1,972,420 Capital lease obligations, net of current portion 66,809 127,484 Total liabilities 678,709 2,814,300 Commitments and contingencies Net assets Unrestricted 8,967,041 5,355,434 Temporarily restricted 4,140,388 2,708,460 Permanently restricted 299,576 340,310 Total net assets 13,407,005 8,404,204 Total liabilities and net assets $ 14,085,714 $ 11,218,504 See notes to financial statements. - 3 -
Statements of Activities For the Years Ended June 30, 2009 June 30, 2008 Temporarily Permanently Temporarily Permanently Unrestricted Restricted Restricted Total Unrestricted Restricted Restricted Total Revenues, gains and other support Agency support fees $ 1,203,406 $ - $ - $ 1,203,406 $ 1,130,265 $ - $ - $ 1,130,265 Purchased food 1,625,158 - - 1,625,158 948,154 - - 948,154 Contributions and grants 4,465,018 2,336,319 10,936 6,812,273 2,687,038 1,654,003 9,184 4,350,225 Government contracts 1,563,884 - - 1,563,884 1,288,279 - - 1,288,279 Special events 396,852 - - 396,852 408,829 - - 408,829 Promotions 527,149 - - 527,149 478,803 - - 478,803 Interest and miscellaneous 240,800 - - 240,800 181,713 - - 181,713 Change in beneficial interest - - (51,670) (51,670) - - (17,404) (17,404) Food contributions - 25,559,292-25,559,292-23,827,746-23,827,746 Commodities contributions - 4,638,081-4,638,081-2,769,088-2,769,088 Donated rent, materials, and services 203,201 - - 203,201 206,199 93,776-299,975 Net assets released from restrictions Food distributions 28,896,697 (28,896,697) - - 27,857,138 (27,857,138) - - Satisfaction of other restrictions 2,205,067 (2,205,067) - - 3,352,801 (3,352,801) - - Total revenues, gains and other support 41,327,232 1,431,928 (40,734) 42,718,426 38,539,219 (2,865,326) (8,220) 35,665,673 Expenses and losses Program services Main branch food distribution 21,131,223 - - 21,131,223 23,690,519 - - 23,690,519 Nutrition Network 1,174,729 - - 1,174,729 1,124,225 - - 1,124,225 Denver's Table Food Rescue 3,243,436 - - 3,243,436 337,563 - - 337,563 TEFAP 1,600,646 - - 1,600,646 948,767 - - 948,767 CSFP 3,004,102 - - 3,004,102 3,030,266 - - 3,030,266 Wyoming 3,051,486 - - 3,051,486 2,419,807 - - 2,419,807 Grand Junction 2,721,837 - - 2,721,837 2,143,915 - - 2,143,915 Total program services 35,927,459 - - 35,927,459 33,695,062 - - 33,695,062 Support services Administration and general 539,213 - - 539,213 491,549 - - 491,549 Fundraising 1,248,953 - - 1,248,953 1,101,684 - - 1,101,684 Total support services 1,788,166 - - 1,788,166 1,593,233 - - 1,593,233 Total expenses and losses 37,715,625 - - 37,715,625 35,288,295 - - 35,288,295 Change in net assets 3,611,607 1,431,928 (40,734) 5,002,801 3,250,924 (2,865,326) (8,220) 377,378 Net assets at beginning of year 5,355,434 2,708,460 340,310 8,404,204 2,104,510 5,573,786 348,530 8,026,826 Net assets at end of year $ 8,967,041 $ 4,140,388 $ 299,576 $ 13,407,005 $ 5,355,434 $ 2,708,460 $ 340,310 $ 8,404,204 See notes to financial statements. - 4 -
Statement of Functional Expenses For the Year Ended June 30, 2009 Main Branch Food Distribution Nutrition Network Program Services Denver's Table Food Rescue TEFAP CSFP Wyoming Grand Junction Support Services Administration and General Fundraising Total Salary and fringes $ 940,729 $ 368,789 $ 240,796 $ 179,605 $ 484,719 $ 270,328 $ 212,680 $ 436,186 $ 387,532 $ 3,521,364 Contributed food distributed 18,036,385 126,269 2,880,498 - - 1,690,639 2,056,552 - - 24,790,343 Commodities food distributed - - - 1,334,380 2,271,110 500,864 - - - 4,106,354 Purchased food distributed 1,130,163 1,895 166 - - 295,694 269,373 - - 1,697,291 Distribution costs 374,299 12,873 63,010 4,968 19,552 115,754 75,750-32 666,238 Occupancy 118,930 10,690 7,035 29,369 32,576 29,008 26,581 12,539 3,652 270,380 Professional and contract services 120,486 119,627 6,135 6,572 21,670 18,593 6,287 17,739 51,718 368,827 Cost of prepared meals and snacks - 492,031 - - - - - - - 492,031 Special events expense - - - - - 1,615 - - 159,384 160,999 Direct mail - - - - - - - - 545,020 545,020 Other operating 240,289 24,016 33,437 21,033 118,858 75,118 39,249 51,120 95,435 698,555 Depreciation 169,942 18,539 12,359 24,719 55,617 53,873 35,365 21,629 6,180 398,223 Total $ 21,131,223 $ 1,174,729 $ 3,243,436 $ 1,600,646 $ 3,004,102 $ 3,051,486 $ 2,721,837 $ 539,213 $ 1,248,953 $ 37,715,625 See notes to financial statements. - 5 -
Statement of Functional Expenses For the Year Ended June 30, 2008 Main Branch Food Distribution Nutrition Network Program Services Denver's Table Food Rescue TEFAP CSFP Wyoming Grand Junction Support Services Administration and General Fundraising Total Salary and fringes $ 928,760 $ 337,589 $ 191,044 $ 151,934 $ 469,253 $ 196,277 $ 170,175 $ 389,436 $ 320,807 $ 3,155,275 Contributed food distributed 20,989,036 270,694 - - - 1,530,284 1,699,825 - - 24,489,839 Commodities food distributed - - - 739,873 2,301,192 326,233 - - - 3,367,298 Purchased food distributed 731,181-680 393-113,584 111,853 - - 957,691 Distribution costs 362,844 12,018 65,927-29,879 105,538 61,351 - - 637,557 Occupancy 153,216 10,258 4,301 7,985 32,773 23,822 25,754 8,624 2,868 269,601 Professional and contract services 100,904 102,007 9,942 11,284 42,298 19,440 9,819 29,180 23,029 347,903 Cost of prepared meals and snacks - 341,715 - - - - - - - 341,715 Special events expense - - - - - 694 - - 123,168 123,862 Direct mail - - - - - - - - 529,757 529,757 Other operating 290,623 29,851 25,482 27,251 114,684 60,399 31,649 54,262 98,706 732,907 Depreciation 133,955 20,093 40,187 10,047 40,187 43,536 33,489 10,047 3,349 334,890 Total $ 23,690,519 $ 1,124,225 $ 337,563 $ 948,767 $ 3,030,266 $ 2,419,807 $ 2,143,915 $ 491,549 $ 1,101,684 $ 35,288,295 See notes to financial statements. - 6 -
Statements of Cash Flows For the Years Ended June 30, 2009 2008 Cash flows from operating activities Change in net assets $ 5,002,801 $ 377,378 Adjustments to reconcile change in net assets to net cash provided by operating activities Depreciation expense 398,223 334,888 Provision for bad debt 7,500 - Change in value of beneficial interest in assets held by the Denver Foundation 51,670 17,404 Realized loss (gain) on sale of investments (1,794) 18,294 Non-cash donation relating to property and equipment - (86,554) Contributed food distributed 28,896,697 27,857,138 Contributed food (30,197,373) (26,596,834) Endowment contributions (10,936) (9,184) Changes in assets and liabilities Receivables (62,103) (169,747) Purchased inventory (103,298) (105,669) Prepaid expenses and other assets (46,815) (6,825) Accounts payable and accrued liabilities 9,812 10,231 Deferred revenues (48,000) 15,755 Net cash provided by operating activities 3,896,384 1,656,275 Cash flows from investing activities Proceeds from sale of investments - 850,000 Property and equipment purchases (384,033) (2,112,191) Net purchase of investments (119,753) - Net cash used in investing activities (503,786) (1,262,191) Cash flows from financing activities Net change in line of credit - (60,000) Payments on capital leases (53,136) (33,481) Principal payments on long-term debt (2,044,267) (630,512) Endowment contributions 10,936 9,184 Transfers to the Denver Foundation (10,936) (9,184) Net cash used in financing activities (2,097,403) (723,993) Net increase (decrease) in cash and cash equivalents 1,295,195 (329,909) Cash and cash equivalents at beginning of year 148,710 478,619 Cash and cash equivalents at end of year $ 1,443,905 $ 148,710 Supplemental disclosure of cash flow information: Cash paid for interest was $109,875 and $168,607 for the years ended June 30, 2009 and 2008, respectively. Supplemental disclosure of non-cash activity: Equipment purchased under capital lease obligations for the year ended June 30, 2008 totaled $131,201. A building purchased under a note payable for the year ended June 30, 2008 totaled $2,453,000. See notes to financial statements. - 7 -
Notes to Financial Statements Note 1 - Organization and Summary of Significant Accounting Policies Organization The Food Bank of the Rockies, Inc. (the "Organization") is a Colorado non-profit corporation, organized to solicit, collect and distribute food to those in need of assistance through nonprofit member agencies. The Organization is a member of Feeding America. Its service area includes Northern Colorado and Wyoming. The Organization contracts with the state of Colorado for administration of two United States Department of Agriculture ("USDA") programs for the City and County of Denver and Northern Colorado called The Emergency Food Assistance Program ("TEFAP") and The Commodity Supplemental Food Program ("CSFP"). CSFP is for the City and County of Denver only. The Organization contracts with the state of Wyoming for administration of TEFAP for the state of Wyoming. TEFAP provides for the distribution of nutritious food to low income residents, upon self declaration of need. The Organization distributes TEFAP commodities to nearly 40 member agencies throughout Metro-Denver and to nearly 40 member agencies throughout Wyoming. CSFP works to improve the health of low-income pregnant and breast-feeding mothers, postpartum mothers up to one year, infants, children to age six and seniors over 60 years of age by supplementing their diets with nutritious USDA commodity foods. Those eligible must meet income guidelines established by the state of Colorado (which is 130% of the Federal Poverty Income Guidelines for seniors and 185% of the Federal Poverty Income Guidelines for mothers), establish local residency requirements and be able to provide identification issued by a state or federal agency. The Organization serves approximately 9,000 CSFP recipients monthly at six sites in Metro Denver and at several senior housing locations in Metro Denver. The Nutrition Network consists of several programs to feed hungry children, and seniors including: Kids Cafe, After School Snacks for Tutoring, Totes of Hope, and Kids Menu. Kids Cafe serves meals to children at risk of hunger at locations offering recreation, tutoring, and mentoring programs. After School Snacks for Tutoring supplies snacks to programs providing after school tutoring to lowincome students. Kids Menu purchases child-friendly foods and essential items (e.g., diapers) that are made available to all agencies serving children and families. Totes of Hope Children is designed to meet the needs of hungry children at times when other resources are not available, such as weekends and school vacations. Children at Totes of Hope program sites discretely receive a backpack filled with food each Friday to take home for the weekend. Totes of Hope Seniors provides a tote filled with nutritious food to over 380 individuals every other week to low income seniors. - 8 -
Notes to Financial Statements Note 1 - Organization and Summary of Significant Accounting Policies (continued) Basis of Presentation Financial statement presentation follows the recommendations of the Financial Accounting Standards Board ("FASB") which requires the Organization to report information regarding its financial position and activities according to three classes of net assets: unrestricted net assets, temporarily restricted net assets, and permanently restricted net assets. Unrestricted amounts are those currently available at the discretion of the Board of Directors for use in the Organization's operations and those resources invested in property and equipment. Temporarily restricted amounts are monies restricted by donors specifically for certain time periods, purposes or programs. Permanently restricted amounts are assets that must be maintained permanently by the Organization as required by the donor; but the Organization is permitted to use or expend part or all of any income derived from those assets. Cash and Cash Equivalents The Organization considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents, unless held for reinvestment as part of the investment portfolio or otherwise encumbered. Agency Support Fees Receivable Balances represent amounts billed for food provided to agencies that have not yet been collected. The Organization provides an allowance for doubtful accounts, which is based upon a review of outstanding receivables, historical collection information, and existing economic conditions. Delinquent receivables are written off based on the specific circumstances of the agencies. Pledges Receivable Pledges receivable which are expected to be collected within one year are recorded at their net realizable value and those that are expected to be collected in future years are recorded at the present value of estimated future cash flows. Amounts expected to be collected in more than one year have not been discounted to net present value because the effect on the financial statements would not be material. As of June 30, 2009 and 2008, the Organization expects that all promises to give will be fully collectible, accordingly, there is no allowance for uncollectible pledges receivable. Investments The Organization reports investments in equity securities with readily determinable fair values and all investments in debt securities at their fair values with unrealized gains and losses included in the statement of activities. Investments consist of certificates of deposit and are recorded at cost, which approximates fair value. - 9 -
Notes to Financial Statements Note 1 - Organization and Summary of Significant Accounting Policies (continued) Fair Value The Organization adopted Statement of Financial Accounting Standards ("SFAS") No. 157, Fair Value Measurements, for financial assets and liabilities and any other assets and liabilities carried at fair value. This pronouncement defines fair value, establishes a framework for measuring fair value, and expands disclosure about fair value measurements. On November 14, 2007, FASB agreed to a oneyear deferral for the implementation of SFAS No. 157 for other nonfinancial assets and liabilities. The Organization's adoption of SFAS No. 157 did not have a material effect on the financial statements and management does not anticipate the deferral to significantly impact the Organization's financial statements for financial assets and liabilities and any other assets and liabilities carried at fair value. Inventory Donated food inventory is valued at an average of the national wholesale prices as determined by Feeding America or at the cost of products purchased as determined by the first-in, first-out method. Donated commodities inventory received by the U.S. Department of Agriculture is valued based on prices provided by the U.S. Department of Agriculture. Purchased food is at lower of cost or market (first-in, first-out method). Property and Equipment Property and equipment having a unit cost of $1,500 or more are capitalized at cost, if purchased, and at fair market value, if contributed. Depreciation of property and equipment is computed on the straight-line method based upon the estimated useful lives of the assets, which range from 1 to 30 years. Long-Lived Assets The Organization reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recovered. The Organization looks primarily to the undiscounted future cash flows in its assessment of whether or not long-lived assets have been impaired. As of June 30, 2009, no impairment has been recognized. Endowments In 2008, the FASB issued Staff Position No. 117-1, Endowments of Not-for-Profit Organizations: Net Asset Classification of Funds Subject to an Enacted Version of the Uniform Prudent Management of Institutional Funds Act, and Enhanced Disclosure for all Endowment Funds ("FSP 117-1") to provide guidance on the net asset classification of and additional disclosures pertaining to endowment funds for organizations subject to the Uniform Prudent Management of Institutional Funds Act of 2006 ("UPMIFA"). The state of Colorado passed legislation containing a version of UPMIFA in 2008 and FSP 117-1 was effective for the Organization on January 1, 2008. Note 2 provides additional information regarding the Organization's endowments and related issues. - 10 -
Notes to Financial Statements Note 1 - Organization and Summary of Significant Accounting Policies (continued) Contributions Contributions are recorded as unrestricted, temporarily restricted or permanently restricted support depending on the existence and/or nature of any donor restrictions. Contributions are recognized when cash or ownership of donated assets is unconditionally promised to the Organization. Amounts of temporarily restricted contributions are subsequently released to unrestricted net assets when expenses have been incurred in satisfaction of those restrictions. Donated Services During the years ended June 30, 2009 and 2008, volunteers from the community donated approximately 73,000 and 64,000 hours, respectively, which was valued based on industry standards, at approximately $1,480,000 and $1,250,000, respectively, to assist the Organization in achieving the goals of its programs; however, no value for these services have been recorded as specialized skills were not required. Donated Food and Commodities The Organization receives donated food and commodities from local area merchants, the U.S. Department of Agriculture and Feeding America. During the years ended June 30, 2009 and 2008, the Organization received and distributed approximately 17 and 16 million pounds, respectively, of donated usable food. As of June 30, 2009 and 2008, donated food inventory consisted of approximately 1,355,500 pounds at an average value of $1.58 and approximately 921,500 pounds at an average value of $1.49, respectively. The inventory value is determined by Feeding America. During the years ended June 30, 2009 and 2008, the Organization received approximately nine and six million pounds, respectively, of commodities and distributed approximately eight and six million pounds of commodities, respectively. The Organization purchases high protein foods to supplement contributed food. As of June 30, 2009 and 2008, purchased food inventory was $350,909 and $247,611, respectively. Agency Support Fee Revenue Agencies support the Organization with a maximum fee of $0.18 per pound on selected categories of products to partially offset the handling and redistribution costs incurred by the Organization. Fees during 2009 and 2008, were based on the type of product distributed. The average support fee per pound was approximately $0.077 and $0.075 for the years ended June 30, 2009 and 2008, respectively, with approximately 15,653,000 and 16,226,000 pounds distributed for the years ended June 30, 2009 and 2008, respectively. - 11 -
Notes to Financial Statements Note 1 - Organization and Summary of Significant Accounting Policies (continued) Functional Expenses Expenses incurred directly for a program service are charged to such service. Accordingly, certain costs are allocated among the program and supporting services benefited based on the time expended, space utilized or by another rational basis. Income Taxes The Organization is exempt from Federal income taxes under Section 501(c)(3) of the Internal Revenue Code (the "Code"). The Organization is not a private foundation within the meaning of Section 509(a) of the Code. Use of Estimates The preparation of 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 revenue, expenses, gains, losses, and other changes in net assets during the reporting period. Actual results could differ from those estimates. Subsequent Events The Organization has evaluated all subsequent events through September 23, 2009, which is the date the financial statements were issued. Note 2 - Beneficial Interest in Assets Held by The Denver Foundation In 2001, the Organization entered into an agreement with The Denver Foundation (the "Foundation") to establish a permanent endowment fund, known as the Food Bank of the Rockies Endowment (the "Fund"), to be held by the Foundation. The Fund is held and invested by the Foundation for the benefit of the Organization. The Organization is eligible to receive annual distributions of five percent of the market value of the endowment. Excess earnings, if any, are reinvested in the Fund. Once the fund has reached a minimum balance of one million dollars, the Organization may make distributions or loans from the principal of the Fund upon approval by the boards of the Organization and the Foundation. Such distributions and loans may be made to meet an emergency need or for the purpose of funding a purchase of land or capital building project. - 12 -
Notes to Financial Statements Note 2 - Beneficial Interest in Assets Held by The Denver Foundation (continued) The Organization established and formed a separate non-profit entity exempt from taxation under section 501(c)(3) of the Code for the sole purpose of holding, operating and managing the Fund consistent with the purpose of maintaining a continuing endowment for the Organization. The Organization may, following a majority vote of the then acting Board of Directors of the Organization, request the transfer of the funds held by the Foundation to the new separate non-profit. For the year ended June 30, 2009, there was no activity in the entity. As of June 30, 2009 and 2008, the fair value of the assets of the Fund were $299,576 and $340,310, respectively. Distributions from the Fund are available to the Organization for its unrestricted use. During the fiscal year 2009 and 2008, income from the Fund was reinvested. Note 3 - Endowment The Organization's endowment consists of an individual fund. As required by Generally Accepted Accounting Principles ("GAAP"), net assets associated with the endowment funds are classified based on the existence or absence of donor-imposed restrictions. Interpretation of Relevant Law The Board of Directors of the Organization has interpreted the Colorado UPMIFA 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 Organization classifies as permanently restricted net assets (a) the original value of initial 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 Organization in a manner consistent with the standard of prudence prescribed by UPMIFA. In accordance with UPMIFA, the Organization considers the following factors in making a determination to appropriate or accumulate donor-restricted endowment funds: (1) The duration and preservation of the fund (2) The purposes of the Organization and the donor-restricted endowment fund (3) General economic conditions (4) The possible effect of inflation and deflation (5) The expected total return from income and the appreciation of investments (6) Other resources of the Organization (7) The investment policies of the Organization - 13 -
Notes to Financial Statements Note 3 - Endowment (continued) Return Objectives, Risk Parameters and Strategies Employed for Achieving Objectives As described in Note 2, the Organization's endowment is held by the Foundation. The terms of the Organization's agreement with the Foundation provides the Foundation full discretion over the investment of the endowment fund but it must exercise its judgment and care under the prevailing circumstances that persons of prudence, discretion and intelligence exercise in the management of the property of another, considering the probable income and safety of capital. Spending Policy and How the Investment Objectives Relate to Spending Policy The Organization is eligible to receive annual distributions of 5% of the market value of the endowment. Excess earnings are reinvested in the endowment. For the years ending June 30, 2009 and 2008 distributions available to the Organization were reinvested in the endowment. The endowment fund was comprised of permanently donor restricted amounts totaling $299,576 and $340,310 as of June 30, 2009 and 2008, respectively. Changes in permanently restricted endowment net assets for the fiscal years ended June 30, 2009 and 2008 were as follows: June 30, 2009 2008 Endowment net assets, beginning of year $ 340,310 $ 348,530 Net depreciation (realized and unrealized) (51,670) (17,404) Contributions 10,936 9,184 Endowment net assets, end of year $ 299,576 $ 340,310 Note 4 - Property and Equipment The Organization's commercial real estate and equipment are comprised of the following: June 30, 2009 2008 Building $ 4,061,293 $ 4,061,293 Commercial real estate 1,219,911 1,219,911 Leasehold improvements 1,620,999 1,520,808 Furniture and equipment 816,481 721,885 Vehicles 1,145,296 956,049 8,863,980 8,479,946 Less accumulated deprecation (1,815,545) (1,417,321) Total $ 7,048,435 $ 7,062,625-14 -
Notes to Financial Statements Note 5 - Line-of-Credit The Organization has a $750,000 line-of-credit with a bank which is collateralized by commercial real estate. Interest accrues at a fixed rate of 6% and matures on October 10, 2010. There was no outstanding balance due on the line at June 30, 2009 and 2008. Note 6 - Long-Term Debt Long-term debt consists of the following: June 30, 2009 2008 Note payable to a bank paid in full during 2009 $ - $ 204,267 Note payable to a bank paid in full during 2009-1,840,000-2,044,267 Less current portion - (71,847) Long-term portion of note payable $ - $ 1,972,420 Note 7 - Capital Leases The Organization has acquired assets under the provisions of long-term leases. For financial reporting purposes, minimum lease payments relating to the assets have been capitalized in property and equipment. Under these various leases, monthly payments range from $126 to $1,985 and the weighted average interest rate is 7.06%. All leases are collateralized by the related assets. The leases expire between September 2009 and May 2012. Amortization of the leased property is included in depreciation and amortization expense. The assets under capital lease have cost and accumulated amortization as follows: June 30, 2009 2008 Equipment $ 195,353 $ 195,353 Less accumulated amortization (141,269) (108,670) Capital leased assets, net of accumulated amortization $ 54,084 $ 86,683-15 -
Notes to Financial Statements Note 7 - Capital Leases (continued) Maturities of capital lease obligations are as follows: Year Ending June 30, 2010 $ 60,675 2011 52,090 2012 26,114 Total minimum lease payments 138,879 Amount representing interest (11,395) Present value of net minimum lease payments 127,484 Less current portion (60,675) Long-term capital lease obligation $ 66,809 Note 8 - Temporarily Restricted Net Assets The temporarily restricted net assets represent the net proceeds of donations, which have been restricted by the donors to be used only for the following purposes: June 30, 2009 2008 Food for distribution $ 3,277,447 $ 1,976,771 Capital campaign 454,925 349,032 Other restrictions 408,016 382,657 $ 4,140,388 $ 2,708,460 For additional information on the permanently restricted net asset, refer to Notes 2 and 3. Note 9 - Fair Value Measurements Effective January 1, 2008, the Organization adopted SFAS No. 157, Fair Value Measurements. SFAS No. 157 clarifies that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. SFAS No. 157 also requires disclosure about how fair value is determined for assets and liabilities and establishes a hierarchy for which these assets and liabilities must be grouped, based on significant levels of inputs as follows: Level 1: Level 2: Quoted prices in active markets that are accessible at the measurement date for assets or liabilities. Observable prices that are based on inputs not quoted in active markets, but corroborated by market data. - 16 -
Notes to Financial Statements Note 9 - Fair Value Measurements (continued) Level 3: Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions. The determination of where assets and liabilities fall within this hierarchy is based upon the lowest level of input that is significant to the fair value measure. These classifications (Level 1, 2, and 3) are intended to reflect the observability of inputs used in the valuation of investments and are not necessarily an indication of risk or liquidity. Within the fair value hierarchy, the Organization's financial assets measured on a recurring basis at fair value as of June 30, 2009 consist of $736,794 in certificates of deposit classified in Level 1, and $299,576 in the beneficial interest in assets held by the Denver Foundation classified in Level 3. The following is a reconciliation of the beginning and ending balances for assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the period ended June 30, 2009: Beginning balance $ 340,310 Total gains or losses (realized/unrealized) Included in earnings (51,670) Purchases, issuances and settlements, net 10,936 Ending balance $ 299,576 Note 10 - Contingencies Government Contracts The Organization receives certain revenues from contracts with various governmental agencies. The disbursement of funds received under these contracts generally requires compliance with the terms and conditions specified in the contracts and is subject to audit by the contracting agencies. The amount of charges to these contracts that may be disallowed, if any, by such audits cannot be presently determined. However, management believes that the effect of any such audits would not have a significant impact on the financial statements, and accordingly, no provision has been made in the financial statements for any liability that may result. Note 11 - Related Party Transaction During the year ended June 30, 2008, the Organization had a related party building lease requiring annual payments of approximately $33,000, consisting of the related party's direct costs related to ownership of the building. The Organization purchased the building during July 2007 for $4,067,121 of cash and long-term debt of $2,453,000. As discussed in Note 5, the Organization has a line-of-credit at a financial institution where the executive vice-president of the financial institution is a board member of the Organization. - 17 -
Notes to Financial Statements Note 12 - Retirement Plan The Organization has a retirement plan under the Code Section 403(b). Employees who work at least 1,000 hours per year are eligible to participate, at which time the Organization will contribute three percent of the employee's earnings. The Organization contributed $65,417 and $59,045 to the plan in fiscal year 2009 and 2008, respectively. Note 13 - Direct Mailing For the years ended June 30, 2009 and 2008, direct mail produced the following results: June 30, 2009 2008 Direct mail contributions $ 2,183,817 $ 1,795,901 Direct mail expense (545,020) (529,757) Net direct mail contributions $ 1,638,797 $ 1,266,144-18 -
SUPPLEMENTAL SCHEDULE
Schedule of Wyoming Revenue and Expense Activities June 30, 2009 2008 Agency support fee $ 131,334 $ 122,507 Purchased food 303,320 124,573 Food contributions 1,690,639 1,530,284 Commodities contributions 500,864 326,233 Contributions 214,688 187,994 Government contract 109,133 84,993 Other income 36,324 28,947 Total revenue 2,986,302 2,405,531 Salaries and fringes 270,328 196,277 Contributed food distributed 1,690,639 1,530,284 Commodities food distributed 500,864 326,233 Purchased food distributed 295,694 113,584 Distribution cost 115,754 105,538 Other expenses 178,207 147,891 Total expenses 3,051,486 2,419,807 Excess of expenses over revenue $ (65,184) $ (14,276) - 20 -