Financial Statements Years Ended March 31, 2016 and 2015
Financial Statements Years Ended March 31, 2016 and 2015 Table of Contents Page Independent Auditors Report 1 Financial Statements Statements of Financial Position 3 Statement of Activities 4 Statement of Functional Expenses 6 Statements of Cash Flows 7 Notes to Financial Statements 8
To the Board of Directors United Way of Greater Knoxville, Inc. and Its Operating Divisions Knoxville, Tennessee Independent Auditors Report We have audited the accompanying financial statements of United Way of Greater Knoxville, Inc. and Its Operating Divisions (collectively, the Organization ), which comprise the statement of financial position as of March 31, 2016, and the related statements of activities, functional expenses, 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. Auditors 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 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 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 Organization 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 Organization 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 United Way of Greater Knoxville, Inc. and Its Operating Divisions as of March 31, 2016, 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.
Report on Summarized Comparative Information We have previously audited the Organization s March 31, 2015 financial statements, and we expressed an unmodified audit opinion on those audited financial statements in our report dated May 28, 2015. In our opinion, the summarized comparative information presented herein as of and for the year ended March 31, 2015, is consistent, in all material respects, with the audited financial statements from which it has been derived. Knoxville, Tennessee August 25, 2016
Statements of Financial Position March 31, 2016 and 2015 ASSETS Current Assets Cash and cash equivalents $ 9,878,369 $ 10,275,278 Restricted cash 139,484 202,160 Cash held for Volunteer Knoxville - 56,017 Certificates of deposit 3,294,504 3,295,894 Pledges receivable (net of allowance for uncollectible pledges of $2,596,314 and $2,731,114 for 2016 and 2015, respectively) 7,251,368 6,492,789 Prepaid items and other current assets 104,446 70,403 Receivable from related parties 96,049 68,259 Total current assets 20,764,220 20,460,800 Property and equipment, net 2,698,008 2,753,997 Beneficial interest in assets held by others - endowment 5,822,245 5,853,918 Total assets $ 29,284,473 $ 29,068,715 LIABILITIES AND NET ASSETS Current Liabilities Grants payable $ 7,193,669 $ 7,233,430 Amounts designated by donors to specific organizations 3,098,051 2,612,766 Accounts payable and accrued expenses 99,151 92,144 Amounts due to Volunteer Knoxville - 56,017 Total current liabilities 10,390,871 9,994,357 Net Assets Unrestricted Board designated 8,426,211 9,574,066 Undesignated 8,309,815 7,277,062 Temporarily restricted 139,484 202,160 Permanently restricted 2,018,092 2,021,070 Total net assets 18,893,602 19,074,358 Total liabilities and net assets $ 29,284,473 $ 29,068,715 See notes to financial statements. 3
Statement of Activities Year Ended March 31, 2016 (with summarized financial information for the year ended March 31, 2015) Unrestricted Temporarily Restricted 2016 Permanently Restricted Total 2015 Total Campaign revenue, support and other Campaign revenue Campaign results $ 13,656,900 $ - $ - $ 13,656,900 $ 13,102,791 Less amounts designated by donors to specific organizations (3,649,179) - - (3,649,179) (3,498,699) Less provision for uncollectible pledges receivable (788,857) - - (788,857) (798,425) Net campaign revenue 9,218,864 - - 9,218,864 8,805,667 Support and other Donated in-kind services 395,010 - - 395,010 112,648 Other contributions 118,910 - - 118,910 45,700 Rental income 94,241 - - 94,241 94,916 Grant income 91,616 - - 91,616 6,061 Management fee income 64,820 - - 64,820 63,270 Interest income 21,489 - - 21,489 16,530 Miscellaneous income 2,224 - - 2,224 3,960 Program service fees 860 - - 860 2,349 Change in beneficial interest in assets held by others (145,207) - (2,978) (148,185) 221,160 Other net assets released from restrictions 17,368 (17,368) - - - Contributions - Volunteer Knoxville - - - - 105,850 Total support and other 661,331 (17,368) (2,978) 640,985 672,444 Total net campaign revenue, support and other 9,880,195 (17,368) (2,978) 9,859,849 9,478,111 Grants and designations Grants and designations 11,026,016 - - 11,026,016 11,352,044 Less amounts designated by donors to specific organizations (3,649,179) - - (3,649,179) (3,498,699) Volunteer Knoxville - - - - 105,850 Net grants and designations 7,376,837 - - 7,376,837 7,959,195 Functional expenses Program services 335,242 - - 335,242 360,906 Support services 2,328,526 - - 2,328,526 1,928,430 Total functional expenses 2,663,768 - - 2,663,768 2,289,336 See notes to financial statements. 4
Statement of Activities (Continued) Year Ended March 31, 2016 (with sumamrized financial information for the year ended March 31, 2015) Unrestricted Temporarily Restricted Permanently Restricted Total 2015 Total Total grants and functional expenses 10,040,605 - - 10,040,605 10,248,531 Change in net assets (160,410) (17,368) (2,978) (180,756) (770,420) Net assets at the beginning of the year 16,896,436 156,852 2,021,070 19,074,358 19,844,778 Net assets at the end of the year $ 16,736,026 $ 139,484 $ 2,018,092 $ 18,893,602 $ 19,074,358 2016 See notes to financial statements. 5
Statement of Functional Expenses Year Ended March 31, 2016 (with summarized financial information for the year ended March 31, 2015) PROGRAM SERVICES Health Education Income Community Impact Total Program Services Resource Development SUPPORT SERVICES Management and General Total Support Services 2016 Total Program and Support Services 2015 Total Program and Support Services Personnel expenses Salaries and related expenses $ 1,206 $ 10,904 $ 11,715 $ 212,857 $ 236,682 $ 688,446 $ 390,855 $ 1,079,301 $ 1,315,983 $ 1,328,447 Non-personnel expenses Professional & contract fees - 6 8,246 93 8,345 219,967 60,626 280,593 288,938 246,904 Telephone 8 91 136 2,530 2,765 7,891 5,400 13,291 16,056 15,417 Postage and shipping - - - 282 282 9,298 7,071 16,369 16,651 16,649 Building occupancy 24 246 355 6,794 7,419 21,613 17,219 38,832 46,251 54,006 Rental & maintenance of equipment 56 458 659 18,927 20,100 40,365 26,670 67,035 87,135 91,270 Donated services - - - - - 395,010-395,010 395,010 112,648 Supplies, printing and publications 3 32 135 7,292 7,462 87,829 (9,198) 78,631 86,093 62,018 Travel and transportation 2 154 43 2,962 3,161 16,949 4,794 21,743 24,904 31,468 Meetings 68 1,015 79 1,892 3,054 111,622 7,809 119,431 122,485 95,092 Membership dues and permits - 5 155 408 568 3,655 20,554 24,209 24,777 21,302 Insurance 11 102 148 3,510 3,771 9,791 5,948 15,739 19,510 14,846 Depreciation 46 427 619 15,473 16,565 37,483 25,143 62,626 79,191 82,982 Total non-personnel expenses 218 2,536 10,575 60,163 73,492 961,473 172,036 1,133,509 1,207,001 844,602 Total expenses before UWW dues 1,424 13,440 22,290 273,020 310,174 1,649,919 562,891 2,212,810 2,522,984 2,173,049 United Way Worldwide dues 128 1,155 1,241 22,544 25,068 74,321 41,395 115,716 140,784 116,287 Total functional expenses $ 1,552 $ 14,595 $ 23,531 $ 295,564 $ 335,242 $ 1,724,240 $ 604,286 $ 2,328,526 $ 2,663,768 $ 2,289,336 See notes to financial statements. 6
Statements of Cash Flows Years Ended March 31, 2016 and 2015 Cash Flows From Operating Activities Change in net assets $ (180,756) $ (770,420) Adjustments to reconcile change in net assets to net cash from operating activities Depreciation 79,191 82,982 Unrealized loss (gain) on endowment 385,505 (281,833) Realized (gain) loss on endowment (187,060) 107,577 Decrease in allowance for uncollectible pledges, net (134,800) (23,227) Net earnings from endowment fund (166,772) (48,800) (Increase) decrease in assets: Pledges receivable (623,779) (103,311) Prepaid items and other current assets (34,043) (23,035) Receivable from related parties (27,790) 1,123 Increase (decrease) in liabilities: Accounts payable (49,010) 18,076 Grants payable (39,761) 36,355 Amounts designated by donors for specific organizations 485,285 932,897 Net cash from operating activities (493,790) (71,616) Cash Flows From Investing Activities Decrease in restricted cash 62,676 215,275 Investments in certificates of deposit, net 1,390 (507,434) Acquisition of property and equipment (23,202) (51,721) Amounts received for Volunteer Knoxville - 105,850 Amounts disbursed to Volunteer Knoxville - (49,833) Net cash from investing activities 40,864 (287,863) Net change in cash and cash equivalents (452,926) (359,479) Cash and cash equivalents at the beginning of the year 10,331,295 10,690,774 Cash and cash equivalents at the end of the year $ 9,878,369 $ 10,331,295 Cash and cash equivalents consists of: Unrestricted $ 9,878,369 $ 10,275,278 Cash held for Volunteer Knoxville - 56,017 Total cash and cash equivalents $ 9,878,369 $ 10,331,295 See notes to financial statements. 7
Notes to Financial Statements Years Ended March 31, 2016 and 2015 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Nature of Activities - The United Way of Greater Knoxville, Inc. and Its Operating Divisions, the United Ways of Union, Jefferson, and Grainger Counties (collectively, the Organization ), is a non-profit organization which provides supporting services and other assistance to public and private agencies and community organizations to meet the human service needs of the general public of Greater Knoxville, Union County, Jefferson County, and Grainger County, Tennessee. Combined Financial Statements - The financial statements include United Way of Greater Knoxville, Inc. and Its Operating Divisions: the United Ways of Union, Jefferson, and Grainger Counties. All interdivisional transactions have been eliminated. Basis of Accounting - The financial statements of the Organization have been prepared on the accrual basis of accounting. Basis of Presentation - The Organization is required 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. 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 generally accepted accounting principles ( GAAP ). Accordingly, such information should be read in conjunction with the Organization s financial statements for the year ended March 31, 2015, from which the summarized information was derived. Cash and Cash Equivalents - For purposes of the Statements of Cash Flows, the Organization considers all highly liquid investments with an initial maturity of three months or less to be cash equivalents. Restricted Cash - Restricted cash consists of funds held by the Organization in its capacity as the Principal Combined Fund Organization ( PCFO ) for the Smoky Mountain Region Combined Federal Campaign ( CFC ). Cash held for Volunteer Knoxville consists of funds held by the Organization for the purpose of funding operating and program expenses related to Volunteer Knoxville, a local entity that supports non-profit organizations. Revenue Recognition - The Organization records pledges and contributions received as unrestricted, temporarily restricted, or permanently restricted support depending on the existence and nature of any donor restrictions. Pledges receivable are recognized when the donors makes a promise to give to the Organization, that is in substance, unconditional. All other donor-restricted pledges are reported as increases in temporarily or permanently restricted net assets depending on the nature of the restriction. When a restriction expires (i.e. when a stipulated time restriction ends or purpose restriction is accomplished), temporarily restricted net assets are classified to unrestricted net assets and reported in the statement of activities as net assets released from restrictions. Allowance for Uncollectible Pledges - The Organization uses the allowance method to determine uncollectible, unconditional pledges receivable. The allowance is based on prior experience and management s analysis of specific pledges made. Periodically, management reviews pledges receivable and adjusts the allowance based on current circumstances and charges off uncollectible receivables when all attempts to collect have failed. Functional Expense Allocation - The costs of providing various programs and other activities have been summarized on a functional basis in the Statements of Activities and in the Statements of Functional Expenses. Accordingly, certain costs have been allocated among the programs and supporting services benefited. 8
Notes to Financial Statements - (Continued) NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (Continued) Property and Equipment - Purchased property and equipment are stated at cost. Donations of property and equipment are recorded as support at their estimated fair value. Such donations are reported as unrestricted support unless the donor has restricted the donated asset to a specific purpose or time of use. Assets donated with explicit restrictions regarding their use and contributions of cash that must be used to acquire property and equipment are reported as restricted support. Absent donor stipulations regarding how long those donated assets must be maintained, the Organization reports expirations of donor restrictions when the donated or acquired assets are placed in service as instructed by the donor. The Organization reclassifies temporarily restricted net assets to unrestricted net assets at that time. The Organization capitalizes property and equipment with an original cost of at least $750. Depreciation is computed on the straight-line method over the estimated useful lives of the assets and is considered a cost of operations. Donated In-Kind Advertising Services - The value of donated in-kind advertising services has been recorded as inkind revenue and expensed in the amounts of $395,010 and $112,648 for 2016 and 2015, respectively, and is included in the Statements of Activities. Of these amounts, $218,620 and $0 is for advertising services donated by United Way Worldwide for 2016 and 2015, respectively. Throughout the year, many individuals volunteer their time and perform a variety of tasks that assist the Organization with specific assistance programs, campaign solicitations, and various committee assignments. No value has been assigned to this volunteer time. Income Tax Status - The Organization is a not-for-profit organization exempt from federal income taxes under Internal Revenue Code (IRC) 501(c)(3). Accordingly, no provision for federal income taxes has been made. Management is not aware of any uncertain tax positions as of March 31, 2016. The Organization s Forms 990, Return of Organization Exempt from Income Tax, for the years ending 2014, 2015, and 2016 are subject to examination by the IRS, generally for three years after they were filed. The Organization is not aware of any unrelated business income that would trigger a taxable event for the tax years still open for examination. 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, the disclosure of contingent assets and liabilities at the date of the financial statements, and reported amounts of revenues and expenses during the reporting period. Accordingly, actual results could vary from those estimates. Concentration of Credit Risk - Financial instruments that potentially subject the Organization to concentrations of credit risk consist principally of temporary cash investments and promises to give receivable. The Organization places its temporary cash investments with financial institutions and limits the amount of credit exposure to any one financial institution. Concentrations of credit risk with respect to pledges receivable are limited due to the large number of contributors comprising the Organization s contributor base and their dispersion across different industries and geographic areas. Insurance coverage is limited to $250,000 per depositor at each financial institution, and the Organization s cash balances may exceed federally insured limits. For the years ended March 31, 2016 and 2015, three donor groups made up 32% and 31% of contributions, respectively. Reclassifications - Certain reclassifications have been made to the 2015 balances in order to conform to the 2016 presentation with no effect on the previously reported net assets or change in net assets. 9
Notes to Financial Statements - (Continued) NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (Continued) Date of Management s Review - Management has evaluated events and transactions occurring subsequent to the statement of financial position date for items that should potentially be recognized or disclosed in these financial statements. The evaluation was conducted through the date of the report, which is the date these financial statements were available to be issued. NOTE 2 - AMOUNTS DONATED BY DONORS FOR SPECIFIC ORGANIZATIONS The Organization has included $3,649,179 and $3,498,699 of amounts designated by donors for specific organizations as a portion of total campaign results on the Statements of Activities for the fiscal years ended March 31, 2016 and 2015, respectively. These amounts include funds pledged to the Organization but designated by the donor to other organizations. The Organization does not retain variance power related to these designations. They are treated as agency transactions rather than contributions and are reflected as liabilities of the Organization. The Statements of Activities show a reduction of campaign results for these pledges and also a reduction of allocation expense for the pledges. Included in the total designations of $3,649,179 for fiscal year 2016 are pass through donations totaling $2,814,924 designated to organizations under the condition that funds would not be subject to management fees and other administrative allocations. For fiscal year 2015, the Organization did not assess fees and other administrative allocations on donations specifically designated and, as a result, the Organization accepted pass through donations totaling $3,498,699. As of March 31, 2016, $1,372,607 has been collected and disbursed. From the amount recorded as a liability of $2,902,011 on the balance sheet, $1,442,317 has been recorded in pledge receivables with an offsetting payable in the designated by donors to specific organizations line item on the face of the financials. NOTE 3 - PROPERTY AND EQUIPMENT The following table summarizes the estimated useful lives, cost of purchased land, building and equipment and the fair value of the donated land: 2016 Estimated Useful Life Unrestricted Permanently Restricted Total 2015 Total Land N/A $ 51,050 $ 1,839,520 $ 1,890,570 $ 1,890,570 Building 18-32 years 1,389,465-1,389,465 1,389,465 Equipment and furniture 5-15 years 582,424-582,424 609,318 2,022,939 1,839,520 3,862,459 3,889,353 Accumulated depreciation (1,164,451) - (1,164,451) (1,135,356) Property and equipment, net $ 858,488 $ 1,839,520 $ 2,698,008 $ 2,753,997 NOTE 4 - PENSION PLAN The Organization has a defined contribution pension plan covering substantially all employees. Plan benefits are cliff vested after three years. The monthly employer contribution on behalf of a participant is 8.8% of the participant s compensation. The contribution will not exceed the maximum amount allowed by the Internal Revenue Service regulations. The amount contributed by the Organization to the defined contribution plan amounted to $84,173 and $83,823 for the fiscal years ended March 31, 2016 and 2015, respectively. 10
Notes to Financial Statements - (Continued) NOTE 5 - LAND LEASES AND RELATED RENTAL INCOME The Organization owns, by deed of gift, the following properties (permanently restricted) and related operating leases: Recorded Rental Recorded Rental Value Income Value Income Northgate Shopping Center-Land (Tract I) $ 478,800 $ 58,000 $ 478,800 $ 58,000 Northgate Shopping Center-Land (Tract II) 110,720 11,400 110,720 11,400 Papermill Red Roof Inn - Land 1,250,000 24,616 1,250,000 24,616 Other miscellaneous rents - 225-900 $ 1,839,520 $ 94,241 $ 1,839,520 $ 94,916 These land leases are classified as non-cancelable operating leases with remaining terms ranging from 28 to 60 years. Future minimum rental receipts under the non-cancelable operating leases with remaining terms in excess of one year as of March 31, 2016 are as follows: Year ending March 31, 2017 $ 99,854 2018 101,018 2019 101,018 2020 101,018 2021 101,018 Thereafter 2,708,590 $ 3,212,516 NOTE 6 - RESTRICTED NET ASSETS Temporarily restricted net assets are available for the following purposes or time periods as of March 31, 2016 and 2015: Unallocated net assets from the Monday Foundation to be released based on the recommendation of the Monday Trustees $ 139,484 $ 156,852 Temporarily restricted net assets of the Combined Federal Campaign - 45,308 $ 139,484 $ 202,160 11
Notes to Financial Statements - (Continued) NOTE 6 - RESTRICTED NET ASSETS - (Continued) Permanently restricted net assets consist of an endowment to be held indefinitely, the rental and investment income is expendable as determined by the Monday Trustee committee in accordance with the deed of gift: Land $ 1,839,520 $ 1,839,520 Funding of the Organization s operating expenses 178,572 181,550 NOTE 7 - RELATED PARTIES $ 2,018,092 $ 2,021,070 United Way of Greater Knoxville, Inc. served as the PCFO for the CFC. The Organization recorded $0 and $15,289 of program service fees for this service during the years ended March 31, 2016 and 2015, respectively. NOTE 8 - CHANGE IN BENEFICIAL INTEREST IN ASSETS HELD BY OTHERS The change in beneficial interest in assets held by others is summarized as follows: Dividends $ 66,390 $ 61,934 Realized gain 187,060 281,833 Unrealized loss (385,505) (107,577) Administrative fees (17,246) (15,248) Other 1,116 - Earnings on beneficial interest in assets held by others, net (148,185) 220,942 Self funded contributions 116,512 2,114 Change in beneficial interest in assets held by others $ (31,673) $ 223,056 NOTE 9 - NET ASSETS RELEASED FROM RESTRICTIONS As discussed in Note 1, when a purpose restriction is accomplished, temporarily restricted assets are reclassified to unrestricted net assets and reported in the Statement of Activities as Net assets released from restrictions. During the years ended March 31, 2016 and 2015, temporarily restricted funds of $94,241 and $144,749 were received in by the Organization and subsequently spent prior to year end. Accordingly, these funds are reflected as changes in unrestricted net assets in the accompanying Statement of Activities. During fiscal year 2015, the Monday Foundation approved a $200,000 grant to assist a local non-profit foundation for the purchase of real estate to be used in the daily operations of the organization. NOTE 10 - BOARD DESIGNATED UNRESTRICTED NET ASSETS The Board Designated Unrestricted Net Assets Fund consists of $8,426,211 and $9,574,066 at March 31, 2016 and 2015, respectively, set aside by the Organization s Board of Directors in the Endowment Fund, Operating Stabilization Reserve (the Reserve ) and Organization Operating Reserves. 12
Notes to Financial Statements - (Continued) NOTE 10 - BOARD DESIGNATED UNRESTRICTED NET ASSETS - (Continued) The Reserve was established by the Organization s Board of Directors on March 31, 2006. The Reserve had balances of $2,391,543 and $2,379,463 at March 31, 2016 and 2015, respectively. The Reserve assists in maintaining financial stability for the Organization and can be temporarily used to cover unanticipated expenses or pledge collection losses. The recommended balance of the Reserve is determined annually by the Operations Committee based upon a calculation that takes into consideration financial directives of the Organization s Board of Directors. The Endowment Fund is a Board designated vehicle used to accumulate funds over time with a long-term goal of funding the Organization s operating expenses from the earnings of the fund. The Fund is managed by the East Tennessee Foundation. Funds may only be removed from the Endowment Fund with two consecutive majority votes of the Board of Directors and approval by the East Tennessee Foundation Board of Directors. The activity in the fund for the years ended March 31, 2016 and 2015 is as follows: Balance at the beginning of the year $ 5,853,918 $ 5,630,862 Net investment return (see Note 7) (31,673) 223,056 Balance at the end of the year $ 5,822,245 $ 5,853,918 The balance of the Board Designated Unrestricted Net Assets at March 31, 2016 is as follows: Board designated unrestricted net assets: United Way of Greater Operating Stabilization Reserve Endowment Fund Other Reserves Total 2015 Total Knoxville $ 2,391,543 $ 5,822,245 $ 95,346 $ 8,309,134 $ 9,456,989 United Way of Union County - - 23,568 23,568 23,568 United Way of Jefferson County - - 63,429 63,429 63,429 United Way of Grainger County - - 30,080 30,080 30,080 2016 $ 2,391,543 $ 5,822,245 $ 212,423 $ 8,426,211 $ 9,574,066 NOTE 11 - FAIR VALUE OF FINANCIAL INSTRUMENTS The Organization values investments using the guidance in Financial Accounting Standards Board Codification 820-10- 50-5, which provides a hierarchy by which to measure fair value. Level 1 inputs are based value upon quoted prices for identical assets or liabilities in active markets. Level 2 inputs are based value upon quoted prices for similar assets or liabilities in active markets or other market-based information, and Level 3 inputs are based on modeling. As of March 31, 2016, the Organization s long-term comingled investment pool consisted of 82.5% in Level 1, primarily mutual funds and 17.5% in Level 3, consisting of absolute return pool and private equity, resources and real estate. 13
Notes to Financial Statements - (Continued) NOTE 11 - FAIR VALUE OF FINANCIAL INSTRUMENTS - (Continued) Investments as of March 31, 2016 are as follows: Fair Carrying Cost Value Value Unrestricted $ - $ 5,704,670 $ 5,704,670 Permanently restricted - 117,575 117,575 East Tennessee Foundation Endowment $ - $ 5,822,245 $ 5,822,245 Investments as of March 31, 2015 are as follows: Fair Carrying Cost Value Value Unrestricted $ - $ 5,733,365 $ 5,733,365 Permanently restricted - 120,553 120,553 East Tennessee Foundation Endowment $ - $ 5,853,918 $ 5,853,918 The following schedule summarizes the Endowment investment return and activities for the years ended March 31, 2016 and 2015: Balance at the beginning of the year $ 5,853,918 $ 5,630,862 Dividends and contributions 182,902 64,048 Realized gain 187,060 281,833 Unrealized loss (385,505) (107,577) Administrative fees (17,246) (15,248) Other 1,116 - Balance at the end of the year $ 5,822,245 $ 5,853,918 The following is the aggregate carrying amounts by major types as of March 31, 2016: Level 1 Level 3 Multi asset mutual fund $ 3,516,636 $ - Equity mutual funds 832,581 - Fixed income mutual funds 454,135 - Absolute return pool - 611,336 Private equity funds - 262,001 Private real estate & natural resource funds - 145,556 Total $ 4,803,352 $ 1,018,893 14
Notes to Financial Statements - (Continued) NOTE 11 - FAIR VALUE OF FINANCIAL INSTRUMENTS - (Continued) The following is the aggregate carrying amounts by major types as of March 31, 2015: Level 1 Level 3 Multi asset mutual fund $ 3,603,291 $ - Equity mutual funds 912,177 - Fixed income mutual funds 340,513 - Absolute return pool - 562,764 Private equity funds - 260,115 Private real estate & natural resource funds - 175,058 Total $ 4,855,981 $ 997,937 East Tennessee Foundation does not provide adequate information to separate the aggregate amounts that they report to the Organization for income, gains, expenses, and losses into amounts associated with Level 1 and Level 3. Consequently, the net change in Level 3 investments for the year is unable to be disclosed. Endowment Agreement The Organization entered into an agreement with the East Tennessee Foundation (the Foundation) to establish an endowment fund. The endowment fund is the property of the Foundation, and the Foundation has ultimate authority and control of all property of the fund, and the income derived thereof, for the charitable purposes of the Foundation. The net income, or an amount equal to the annual spending rate (a percentage of fair value), is to be distributed to the Organization each year. Upon 75% vote of approval of the Board of Directors of the Organization, and with the approval of the Foundation, which approval shall not be unreasonably withheld, the fund or some portion thereof may be distributed. The Board of Directors of the Foundation has the power to modify any restriction or condition on the distribution of funds for any specified charitable purposes or to a specified organization if, in the sole judgment of the Board, such restriction or condition becomes, in effect, unnecessary, undesirable, impractical, incapable of fulfillment, or inconsistent with the charitable needs of the community served. At March 31, 2016, $5,704,670 of contributions, accumulated earnings and unrealized gains of endowment fund assets were available to be spent. This amount is presented in unrestricted net assets. The amount of $117,575, of endowment fund assets represents donor contributions and is reported in permanently restricted net assets based on the donors restrictions on the amounts they contributed. 15