CHIEF SEATTLE COUNCIL BOY SCOUTS OF AMERICA Consolidated Financial Statements
Table of Contents Independent Auditor s Report 1 2 Consolidated Financial Statements: Consolidated Statements of Financial Position 3 Consolidated Statements of Activities and Changes in Net Assets 4 5 Consolidated Statements of Cash Flows 6 Consolidated Statement of Functional Expenses 2014 7 Consolidated Statement of Functional Expenses 2013 8 9 24 Page
Independent Auditor s Report Board of Directors Chief Seattle Council, Boy Scouts of America Seattle, Washington We have audited the accompanying consolidated financial statements of Chief Seattle Council, Boy Scouts of America and the Chief Seattle Council Scoutreach Foundation (the Council), which comprise the consolidated statements of financial position as of December 31, 2014 and 2013, and the related statements consolidated of activities and changes in net assets, cash flows and functional expenses for the years then ended, and the related notes to the consolidated financial statements. Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these 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 audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free from material misstatement. T: 425-454-4919 T: 800-504-8747 F: 425-454-4620 10900 NE 4th St Suite 1700 Bellevue WA 98004 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. clarknuber.com
Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Council as of December 31, 2014 and 2013, and the changes in its net assets and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America. Emphasis of Matter As discussed in Note 18 to the financial statements, management recorded an adjustment to correct a timing difference error for the recognition of corporate matching gifts in the financial statements for the year ended December 31, 2013. Our opinion is not modified with respect to that matter. Report on Supplementary Information Our audit was conducted for the purpose of forming an opinion on the financial statements as a whole. The fund level information in the statements of financial position, statements of activities, and cash flows are presented for purposes of additional analysis and are not a required part of the basic 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. Certified Public Accountants May 12, 2015 2
Consolidated Statements of Financial Position December 31, 2014 and 2013 Operating Fund 2013 (As Restated, 2014 Note 18) Assets Current Assets: Cash and cash equivalents $ 1,169,312 $ 925,797 Short term investments (Note 5) 0 379,999 Accounts, grants and pledges receivable, net of allowance for doubtful accounts of $4,844 and $10,548 for 2014 and 2013, respectively (Note 3) 225,234 296,753 Prepaid expenses 42,624 98,292 Deferred activity expenses 20,296 7,000 Due (to) from other funds 68,271 (61,297) Merchandise inventories 136,286 143,140 Total Current Assets 1,662,023 1,789,684 Long term investments (Note 5) 0 144,368 Long term accounts, grants and pledges receivable (Note 3) 1,000 14,000 Interfund promissory note (Note 8) 0 (254,086) Contributed land held for sale (Note 15) Cash designated or restricted for improvement of long term assets (Note 4) Receivables designated or restricted for improvement of long term assets net of allowance for doubtful accounts of $21,733 and $24,166 for 2014 and 2013, respectively (Note 4) Investments designated or restricted for improvement of long term assets (Note 4) Land, buildings, equipment, and construction in progress, net (Note 6) Beneficial interests in trusts (Note 7) Other noncurrent assets Total Assets $ 1,663,023 $ 1,693,966 Liabilities and Net Assets Current Liabilities: Accounts payable and accrued liabilities $ 209,695 $ 241,930 Custodial funds held for others 477,452 444,621 Deferred income 221,175 206,891 Total Current Liabilities 908,322 893,442 Total Liabilities 908,322 893,442 Net Assets: Unrestricted 394,788 384,755 Temporarily restricted (Note 11) 359,913 415,769 Permanently restricted (Note 12) Total Net Assets 754,701 800,524 Total Liabilities and Net Assets $ 1,663,023 $ 1,693,966 See accompanying notes.
Capital Fund Endowment Fund 2013 (As Restated, 2014 2013 2014 2013 2014 Note 18) Total $ $ $ 16,464 $ 31,465 $ 1,185,776 $ 957,262 379,999 0 0 225,234 296,753 42,624 98,292 20,296 7,000 (68,271) (6,141) 0 67,438 136,286 143,140 (68,271) (6,141) 16,464 98,903 1,610,216 1,882,446 18,704,883 18,081,432 18,704,883 18,225,800 1,000 14,000 254,086 3,673 33,673 3,673 33,673 3,438,653 4,815,003 3,438,653 4,815,003 521,593 2,578,814 521,593 2,578,814 15,104,755 10,738,353 15,104,755 10,738,353 492,054 504,276 492,054 504,276 78,378 77,000 78,378 77,000 $ 18,996,730 $ 18,126,029 $ 19,295,452 $ 19,049,370 $ 39,955,205 $ 38,869,365 $ $ $ 1,059 $ $ 210,754 $ 241,930 477,452 444,621 221,175 206,891 1,059 909,381 893,442 1,059 909,381 893,442 15,073,715 10,825,025 11,586,191 11,415,517 27,054,694 22,625,297 3,923,015 7,301,004 2,208,231 2,148,649 6,491,159 9,865,422 5,499,971 5,485,204 5,499,971 5,485,204 18,996,730 18,126,029 19,294,393 19,049,370 39,045,824 37,975,923 $ 18,996,730 $ 18,126,029 $ 19,295,452 $ 19,049,370 $ 39,955,205 $ 38,869,365 3
Consolidated Statements of Activities and Changes in Net Assets Changes in Unrestricted Net Assets 2013 (As Restated, 2014 Note 18) Operating Capital Endowment Fund Fund Fund Total Total Total support 1,845,591 4,433 1,850,024 2,066,921 Support, Revenues and Reclassifications: Support Friends of Scouting contributions $ 1,391,240 $ $ $ 1,391,240 $ 1,535,070 United Way 281,066 281,066 264,167 Special events, net of expenses of $162,436 and $160,305 for 2014 and 2013, respectively 90,188 90,188 133,665 Other contributions 83,097 4,433 87,530 134,019 Revenues Sales of product to the public: Gross sales 1,474,189 1,474,189 1,493,231 Less cost of goods sold (397,819) (397,819) (391,358) Less commissions paid to scout units (518,858) (518,858) (534,842) Net sales of product to the public 557,512 557,512 567,031 Camp fees 1,962,842 8,400 1,971,242 1,928,526 Scouting activities 171,786 171,786 878,738 Investment income (Note 5) 382,153 55,454 1,856 439,463 441,360 Trading Post and BSA stores (Note 9) 101,142 101,142 107,177 Realized and unrealized gains on investments (Note 5) 235,833 19,766 173,328 428,927 1,476,283 Miscellaneous 3,064 (303) 2,761 34,483 Total revenues 3,414,332 83,317 175,184 3,672,833 5,433,598 Net assets released from restrictions Expiration of time restrictions 291,070 291,070 195,914 Satisfaction of use restrictions 124,700 5,086,762 5,211,462 1,938,856 Total assets released from restrictions 415,770 5,086,762 5,502,532 2,134,770 Total Support, Revenues and Reclassifications 5,675,693 5,174,512 175,184 11,025,389 9,635,289 Expenses: Program services 4,383,728 908,684 5,292,412 6,090,827 Supporting services Management and general 778,546 29,373 807,919 674,104 Fundraising 384,379 22,765 4,510 411,654 540,958 Total supporting services 1,162,925 52,138 4,510 1,219,573 1,215,062 Charter and national service fee 84,007 84,007 80,614 Total Expenses 5,630,660 960,822 4,510 6,595,992 7,386,503 Change in Unrestricted Net Assets $ 45,033 $ 4,213,690 $ 170,674 $ 4,429,397 $ 2,248,786 See accompanying notes. 4
Consolidated Statements of Activities and Changes in Net Assets (Continued) 2013 (As Restated, 2014 Note 18) Operating Capital Endowment Fund Fund Fund Total Total Change in Unrestricted Net Assets $ 45,033 $ 4,213,690 $ 170,674 $ 4,429,397 $ 2,248,786 Changes in Temporarily Restricted Net Assets: Friends of Scouting contributions 112,122 112,122 256,644 United Way 17,000 17,000 34,425 Other contributions 230,792 1,708,633 1,939,425 3,862,024 Realized and unrealized gains on investments and interest (Note 5) 140 59,582 59,722 543,128 Net assets released from restrictions (415,770) (5,086,762) (5,502,532) (2,134,770) Change in Temporarily Restricted Net Assets (55,856) (3,377,989) 59,582 (3,374,263) 2,561,451 Changes in Permanently Restricted Net Assets: Contributions 25,928 25,928 443,065 Gain (loss) on contributed land held for sale (Note 15) 1,060 1,060 (81,201) Change in value of beneficial interests in trusts (Notes 5 and 7) (12,221) (12,221) 20,512 Change in Permanently Restricted Net Assets 14,767 14,767 382,376 Change in Net Assets (10,823) 835,701 245,023 1,069,901 5,192,613 Net Assets, Beginning of Year: Unrestricted 384,755 10,825,025 11,415,517 22,625,297 20,376,511 Temporarily restricted 415,769 7,301,004 2,148,649 9,865,422 7,303,971 Permanently restricted 5,485,204 5,485,204 5,102,828 Total Net Assets, Beginning of Year 800,524 18,126,029 19,049,370 37,975,923 32,783,310 Transfers (Note 17) (35,000) 35,000 Net Assets, End of Year: Unrestricted 394,788 15,073,715 11,586,191 27,054,694 22,625,297 Temporarily restricted 359,913 3,923,015 2,208,231 6,491,159 9,865,422 Permanently restricted 5,499,971 5,499,971 5,485,204 Total Net Assets, End of Year $ 754,701 $ 18,996,730 $ 19,294,393 $ 39,045,824 $ 37,975,923 See accompanying notes. 5
Consolidated Statements of Cash Flows 2013 (As Restated, 2014 Note 18) Operating Capital Endowment Fund Fund Fund Total Total Cash Flows From Operating Activities: Change in net assets $ (10,823) $ 835,701 $ 245,023 $ 1,069,901 $ 5,192,613 Adjustments to reconcile change in net assets to net cash provided (used) by operating activities Depreciation 909,655 909,655 706,775 Decrease (increase) in accounts, grants and pledges receivable 86,881 2,059,654 2,146,535 (2,423,920) Increase (decrease) in allowance for doubtful accounts (2,362) (2,433) (4,795) 21,804 Decrease (increase) in prepaid expenses 55,668 55,668 (33,507) (Increase) decrease in deferred activity expenses (13,296) (13,296) 238,534 (Increase) decrease in merchandise inventories 6,854 6,854 (41,264) (Decrease) increase in accounts payable and accrued liabilities (32,235) 1,059 (31,176) (139,736) Increase in custodial funds held for others 32,831 32,831 59,397 (Decrease) increase in deferred income 14,284 14,284 (197,936) (Increase) decrease in cash surrender value of life endowments (1,378) (1,378) 1,358 Change in value of beneficial interests in trusts 12,222 12,222 (20,511) Change in value of land held for sale 30,000 30,000 81,201 Contributions restricted for long term assets or endowments 189,310 (25,928) 163,382 (2,180,389) Interest and dividends retained by long term investments (401,443) (401,443) (440,858) Loss on disposal of fixed assets 301 301 14,073 Noncash contribution of assets (2,000) (2,000) (4,100) Net realized and unrealized losses (gains) on long term investments (1,593,008) (1,593,008) (2,807,642) Net Cash Provided (Used) by Operating Activities 137,802 3,990,188 (1,733,453) 2,394,537 (1,974,108) Cash Flows From Investing Activities: Purchases of buildings and equipment (5,274,358) (5,274,358) (1,799,628) Proceeds from sale of assets 0 6,000 Purchases of investments (9,612,224) (9,612,224) (11,689,942) Interest retained by long term investments designated 0 0 for capital asset acquisitions (140) (140) (42,511) Proceeds from sales and maturities of investments restricted for improvement of long term assets 0 4,783,552 Cash received restricted for improvement of long term assets 0 (4,400,094) Proceeds from sales and maturities of investments 524,367 10,983,224 11,507,591 12,840,930 Net Cash Provided (Used) by Investing Activities 524,367 (5,274,498) 1,371,000 (3,379,131) (301,693) Cash Flows From Financing Activities: Contributions received restricted for capital asset acquisitions 1,187,040 1,187,040 1,737,324 Contributions received restricted for endowment 25,928 25,928 443,065 Interest received from long term investments designated for capital asset acquisitions 140 140 42,511 Transfers (35,000) 35,000 0 Advances on interfund loan (62,130) 62,130 Payments received (made) on interfund loan (321,524) 321,524 Net Cash Provided (Used) by Financing Activities (418,654) 1,284,310 347,452 1,213,108 2,222,900 Net Change in Cash and Cash Equivalents 243,515 0 (15,001) 228,514 (52,901) Cash and cash equivalents, beginning of year 925,797 31,465 957,262 1,010,163 Cash and Cash Equivalents, End of Year $ 1,169,312 $ $ 16,464 $ 1,185,776 $ 957,262 Supplemental Disclosures of Cash Flow Information: Fixed asset acquisitions in accounts payable $ $ $ $ $ 1,112 See accompanying notes. 6
Consolidated Statement of Functional Expenses For the Year Ended December 31, 2014 Supporting Services Program Management Services and General Fundraising Total 2014 Total Employee Compensation: Salaries and wages $ 2,042,152 $ 358,689 $ 175,977 $ 534,666 $ 2,576,818 Employee benefits 362,029 71,559 34,649 106,208 468,237 Payroll taxes 192,340 28,324 13,714 42,038 234,378 Total Employee Compensation 2,596,521 458,572 224,340 682,912 3,279,433 Bank fees 282 66,529 6,196 72,725 73,007 Conferences, conventions and meetings 50,470 6,968 3,374 10,342 60,812 Depreciation 868,930 27,439 13,286 40,725 909,655 Insurance 155,664 12,614 6,108 18,722 174,386 Interest 8,834 8,834 Membership and advancement 51,107 51,107 Occupancy 345,422 22,431 12,620 35,051 380,473 Other 40,002 24,007 5,617 29,624 69,626 Postage and shipping 25,398 4,207 8,404 12,611 38,009 Printing and publications 12,500 1,744 31,066 32,810 45,310 Professional fees 2,145 124,997 10,316 135,313 137,458 Public relations 5,770 5,770 Recognition awards 117,898 2,042 57,153 59,195 177,093 Rental and maintenance of equipment 79,820 11,147 5,398 16,545 96,365 Scoutreach dues 12,632 12,632 Specific assistance to individuals 38,803 38,803 Supplies 661,040 8,030 8,055 16,085 677,125 Telephone 47,297 7,000 3,461 10,461 57,758 Travel 171,877 30,192 16,260 46,452 218,329 Total Functional Expenses $ 5,292,412 $ 807,919 $ 411,654 $ 1,219,573 $ 6,511,985 See accompanying notes. 7
Consolidated Statement of Functional Expenses For the Year Ended December 31, 2013 Supporting Services Program Management Services and General Fundraising Total 2013 Total Employee Compensation: Salaries and wages $ 2,072,171 $ 326,442 $ 230,010 $ 556,452 $ 2,628,623 Employee benefits 393,216 69,786 48,733 118,519 511,735 Payroll taxes 199,460 26,476 18,489 44,965 244,425 Total Employee Compensation 2,664,847 422,704 297,232 719,936 3,384,783 Bank fees 683 65,700 2,662 68,362 69,045 Conferences, conventions and meetings 231,667 6,629 4,629 11,258 242,925 Depreciation 669,426 21,992 15,357 37,349 706,775 Insurance 139,605 10,385 7,252 17,637 157,242 Interest 23,147 23,147 Membership and advancement 78,839 78,839 Occupancy 304,867 12,873 9,539 22,412 327,279 Other 26,737 2,174 1,476 3,650 30,387 Postage and shipping 11,748 1,621 8,460 10,081 21,829 Printing and publications 15,049 981 17,024 18,005 33,054 Professional fees 4,368 76,763 74,296 151,059 155,427 Public relations 4,727 939 655 1,594 6,321 Recognition awards 120,577 4,574 59,390 63,964 184,541 Rental and maintenance of equipment 78,613 10,488 7,324 17,812 96,425 Scoutreach dues 70,409 70,409 Specific assistance to individuals 210,909 210,909 Supplies 714,545 5,395 12,191 17,586 732,131 Telephone 43,281 4,891 3,415 8,306 51,587 Travel 676,783 25,995 20,056 46,051 722,834 Total Functional Expenses $ 6,090,827 $ 674,104 $ 540,958 $ 1,215,062 $ 7,305,889 See accompanying notes. 8
Note 1 Summary of Significant Accounting Policies Purpose of Organization The Chief Seattle Council, Boy Scouts of America (the Council) is chartered by the National Council of Boy Scouts of America (the National Council). The Council is a not for profit organization within the State of Washington s counties of King, Jefferson, Clallam, North Mason, and Kitsap. The Council has four camping facilities: Camp Parsons in Jefferson County, Camp Sheppard in Pierce County, and Camps Pigott and Brinkley in Snohomish County. The Council is devoted to preparing young people to make ethical and moral choices over their lifetimes by instilling in them the values of the Scout Oath and Law. Teaching leadership, participating citizenship, character development and self reliance are the objectives of Scouting. The Council s programs are classified as follows: Tiger Cubs A family oriented program for first grade boys and an adult partner (usually a parent). Together they search, discover and share. Tiger Cubs is the first year of the Cub Scout program. Cub Scouts A family and community centered program for boys 8 to 10 years of age. Cub Scouts learn citizenship, compassion, and courage through service projects, ceremonies, games, and other activities promoting character development and physical fitness. Boy Scouts A leadership development program for boys 11 to 18 years of age. With the Scout Oath and Scout Law as guides, and the support of parents and community and religious organizations, these youth develop an awareness and appreciation of their role in the community and become good citizens. The program teaches leadership and character development through different methods, such as, advancement, camping and training. Varsity Scouting A program for young men 14 to 17 years of age. Varsity Scouting provides options for those who are looking for rugged high adventure or challenging sporting activities and still want to be a part of a Scouting program that offers the advancement opportunities and values of the Boy Scouts of America. There are five fields of emphasis: advancement, high adventure, personal development, service and special programs and events. Venturing A program for young men and women 14 (or 13 with completion of the eighth grade) through 20 years of age. Venturing provides experiences to develop youth to become mature, responsible, caring adults. Each program is specific to the youth participating. There are robotic groups, high adventure groups, computer groups, and sea ship groups. The one thing that is consistent with Venturing is that the youth run the program. Learning for Life/Exploring A co educational mix of worksite and classroom based programs that offer career education through role models and hands on experiences by bringing young men and women, up to age 20, and organizations in the community together. This program gives youth an opportunity to explore careers or fields of interest. 9
Note 1 Continued These programs served: 2014 2013 (Unaudited) (Unaudited) Youth members 17,524 24,404 Registered adult volunteers 6,835 7,200 Pack, troops, and posts 898 983 The Council s website address is: SeattleBSA.org. The Chief Seattle Council Scoutreach Foundation (the Foundation) was established as a 501(c)(3) organization in 2004 to operate exclusively to support the Chief Seattle Council, Boy Scouts of America and its tax exempt mission, purposes, goals and objectives. The Foundation solicited donations for the benefit of the Council. All such donations in 2013 were given by donors directly to the Council. The Foundation was dissolved by operation of law effective October 21, 2013. Fund Accounting To ensure observance of limitations and restrictions placed on the use of available resources, the accounts of the Council are maintained in accordance with the principles of fund accounting. Under such principles, resources for various purposes are classified for accounting and reporting purposes into funds that are in accordance with specified activities or objectives. Principles of Consolidation The consolidated financial statements include the accounts of the Council and Foundation. All intercompany transactions have been eliminated. Basis of Presentation The Council prepares the consolidated financial statements in accordance with the Financial Accounting Standards Board (FASB) standards for not for profit organizations (ASC 958 205 and subsections). Accordingly, the Council 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. Net assets of the Council and changes therein are classified and reported as follows: Unrestricted Net Assets Net assets that are not subject to externally imposed restrictions. Amounts designated by the Board of the Council are included in this classification. Temporarily Restricted Net Assets Net assets subject to externally imposed restrictions that will be met by actions of the Council and/or the passage of time. Permanently Restricted Net Assets Permanently restricted net assets must be maintained by the Council in perpetuity, the income of which is expendable. Permanently restricted net assets increase when the Council receives contributions for which donor imposed restrictions exist, which limit the Council s use of an asset for its economic benefits and neither expire with the passage of time nor can be removed by the Council meeting certain requirements. 10
Note 1 Continued Revenues are reported as increases in unrestricted net assets unless use of the related assets is limited by restrictions imposed by donors. When donor restrictions expire, temporarily restricted net assets are reclassified to unrestricted net assets and are reported in the consolidated statements of activities and changes in net assets as assets released from restriction. If a restriction is fulfilled in the same time period in which the contribution is received, the contribution is reported as unrestricted. Expenses are reported as decreases in unrestricted net assets. Gains and losses on investments and other assets or liabilities are reported as increases or decreases in unrestricted net assets unless their use is restricted by explicit donor restriction or by law. The Council reports gifts of land, buildings, and equipment as unrestricted support unless explicit donor stipulations specify how the donated assets must be used. Gifts of long lived assets with explicit restrictions that specify how the assets are to be used and gifts of cash or other assets that must be used to acquire long lived assets are reported as restricted support. Absent explicit donor stipulations about how those long lived assets must be maintained, the Council reports expirations of donor restrictions when the donated or acquired long lived assets are placed in service. Fair Value of Financial Instruments The FASB Fair Value Measurement standard clarifies the definition of fair value for financial reporting, establishes a framework for measuring fair value, and requires additional disclosure about the use of fair value measurements in an effort to make the measurement of fair value more consistent and comparable. The Council has adopted this standard for its financial assets and liabilities measured on a recurring and nonrecurring basis (ASC 820 10). Fair Value Measurement defines fair value as the amount that would be received from the sale of an asset or paid for the transfer of a liability in an orderly transaction between market participants, i.e., an exit price. Financial instruments not reflected at fair value on a recurring basis include cash, short term investments, receivables, accounts payable, and accrued liabilities. The carrying amount of these financial instruments approximates fair value. Cash and Cash Equivalents Cash and cash equivalents consist of deposits with financial institutions, which at times exceed federally insured limits. Short Term Investments Short term investments consist of investments directed by the Council that have an original maturity of less than 90 days. Investments Investments in securities with quoted market values are carried at fair value using Level 1 inputs. Accordingly, unrealized gains or losses due to fluctuations in the fair value are reflected in the consolidated statements of activities and changes in net assets. The Council pools the investments of each of the funds to obtain investment flexibility with a primary goal of providing safety of principal with maximum current income to assist in the operations of the Council s activities. In addition, a secondary goal is capital appreciation to offset the effects of inflation. Realized gains and losses are determined based on the specific identification method. Interfund Loans Interfund loans result from the Operating Fund making advances of cash to the Capital Fund to provide funds for camp maintenance expenditures and purchases of fixed assets and from the Endowment Fund to the Operating Fund to extinguish a bank note (See Note 8). 11
Note 1 Continued Merchandise Inventories Inventories consist of items for sale through the camp stores of the Council. They are stated at the lower of cost (first in, first out basis) or market. Land, Buildings, and Equipment Land, buildings, and equipment are recorded at cost, if purchased, or at fair value, if donated, if the value exceeds the Council s capitalization threshold of $1,000. Depreciation is computed using the straightline method based upon estimated useful lives of ten to forty years for buildings and three to ten years for equipment. Contributed Land Contributed land, whether held for resale or development, is recorded at the lesser of fair value at the date of the gift or the property s current fair value. Donated Materials and Services Donated materials and services which meet the criteria for recognition are reflected as other contributions and expenses in the accompanying consolidated statements of activities and changes in net assets to the extent fair value is objectively determinable. The value of materials and services donated in 2014 and 2013 were nominal. Some members of the Council have donated significant amounts of time to the Council to further the Council s programs and objectives. No amounts have been included in the consolidated financial statements for donated member volunteer services since they did not meet the criteria for recognition. Income Taxes The Council and the Foundation are exempt from federal income taxes under Section 501(c)(3) of the Internal Revenue Code as charitable organizations whereby only unrelated business income, as defined by Section 509(a)(1) of the Code, is subject to federal income tax. The Council and the Foundation have no unrelated business income. Accordingly, no provision for income taxes has been recorded. Statement of Functional Expenses The costs of providing the various programs and other activities have been summarized on a functional basis in the consolidated statements of activities and changes in net assets and functional expenses. Accordingly, certain costs have been allocated among the programs and supporting services based on the benefits derived. Administrative expenses are allocated between programs and supporting services based on personnel time studies performed periodically throughout the year, in accordance with the guidelines provided by the National Council. Direct costs are assigned to the respective programs as they are incurred. Use of Estimates The preparation of financial statements requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates. Significant estimates include collectability of pledges and accounts receivable, discounts on multiyear pledges, the value of contributed noncash assets, including land held for sale, functional allocation of expenses, and useful lives of fixed assets. Subsequent Events The Council has evaluated subsequent events through May 12, 2015, the date on which the financial statements were available to be issued. 12
Note 2 Capital and Endowment Campaign During 2007, the Council s Board approved a campaign to raise $12 million for capital improvements and $8 million for the endowment fund. As of December 31, 2014, the Council has received donations in excess of $13.1 million for the capital improvement campaign. Since the beginning of the campaign, construction projects totaling $7.6 million, funded by this campaign, were placed in service as of December 31, 2014, and the Camp Parsons Dining Hall project was in progress at year end. The Council entered into a construction contract with a general contractor for the Camp Parsons Dining Hall project that has a total value of approximately $6 million of which there was approximately $3.9 million in commitments remaining as of December 31, 2014. Note 3 Accounts, Grants and Pledges Receivable Operating Fund The Operating Fund had accounts, grants and pledges receivable of $225,234 and $296,753 (as restated) due within one year, and $1,000 and $14,000 due in more than one year at December 31, 2014 and 2013, respectively. The amounts due beyond one year have not been discounted as the amount was determined to be immaterial. Accounts, grants and pledges receivable are stated at unpaid balances, less an allowance for doubtful accounts. It is the Council s policy to write off uncollectible receivables when management determines the receivable will not be collected. Note 4 Assets Designated or Restricted for Improvement of Long Term Assets Capital Fund The Capital Fund had accounts, grants and pledges receivable of $35,933 and $110,380 due in more than one year at December 31, 2014 and 2013, respectively. The amounts due beyond one year have not been discounted as the amount was determined to be immaterial. Note 5 Investments The following schedule summarizes the cost and market values of investments by fund: December 31, 2014 December 31, 2013 Cost Market Value Cost Market Value Operating fund $ $ $ 524,367 $ 524,367 Endowment fund 16,563,716 18,704,883 15,548,406 18,081,432 $ 16,563,716 $ 18,704,883 $ 16,072,773 $ 18,605,799 13
Note 5 Continued Investments (including short term investments) were comprised of the following: December 31, 2014 December 31, 2013 Cost Market Value Cost Market Value Money market funds $ 814,155 $ 814,155 $ 1,847,324 $ 1,847,324 Debt securities 3,361,219 3,376,802 3,978,967 3,933,730 Equity securities 12,388,342 14,513,926 10,246,482 12,824,745 $ 16,563,716 $ 18,704,883 $ 16,072,773 $ 18,605,799 Valuation Techniques The Council uses a three level valuation hierarchy. Financial assets and liabilities valued using Level 1 inputs are based on unadjusted quoted market prices within active markets. Financial assets and liabilities valued using Level 2 inputs are based primarily on quoted prices for similar assets or liabilities in active or inactive markets. Financial assets and liabilities using Level 3 inputs are valued using management s assumptions about the assumptions market participants would utilize in pricing the asset or liability. The Council did not hold any Level 3 assets at December 31, 2014 and 2013. Valuation techniques utilized to determine fair value are consistently applied. 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, 2014 and 2013. Level 1 Money Market Funds Includes money market funds valued at cost plus accrued interest, which approximates fair value. Marketable Equity Securities Valued at the closing price reported on the active market on which the securities are traded. Level 2 Debt Securities Securities listed on a securities exchange or traded on the National Association of Securities Dealers National Market System ( NASDAQ ) are valued at their closing price or at the most recently quoted bid price if there is not a closing price. Debt securities and over the counter stocks not listed on the NASDAQ are valued at prices that reflect a broker/dealer supplied valuation or are obtained from independent pricing services. If the available prices are deemed unreliable, the valuation is based on fundamental valuation methods, which may include the analysis of the effect of any restrictions on the resale of the security, industry analysis and trends, significant changes in the issuer s financial position, and any other event that could have a significant effect on the value of the security. 14
Note 5 Continued Fair Values Measured on a Recurring Basis Fair values of assets measured on a recurring basis at December 31, 2014 and 2013 were as follows: Fair Value Measurements at December 31, 2014 Level 1 Level 2 Level 3 Total Money market funds $ 814,155 $ $ $ 814,155 Debt securities Investment grade taxable 2,613,663 2,613,663 International developed bonds 262,967 262,967 Global high yield taxable 500,172 500,172 Marketable securities Equities: US large cap 5,163,281 5,163,281 US mid cap 1,857,529 1,857,529 US small cap 1,005,092 1,005,092 International developed 1,954,534 1,954,534 Emerging markets 1,946,644 1,946,644 Public REITs 1,365,773 1,365,773 Commodities mutual funds 647,542 647,542 Hedge funds 566,028 566,028 Other equity 7,503 7,503 Total at December 31, 2014 $ 15,328,081 $ 3,376,802 $ $ 18,704,883 Fair Value Measurements at December 31, 2013 Level 1 Level 2 Level 3 Total Money market funds $ 1,847,324 $ $ $ 1,847,324 Debt securities Investment grade taxable 2,616,492 2,616,492 International developed bonds 282,949 282,949 Fixed income 336,477 336,477 Global high yield taxable 697,812 697,812 Marketable securities Equities: US large cap 6,119,107 6,119,107 US mid cap 1,186,937 1,186,937 US small cap 725,914 725,914 International developed 2,146,329 2,146,329 Emerging markets 1,117,207 1,117,207 Commodities mutual funds 341,305 341,305 Public REITs 1,187,946 1,187,946 Total at December 31, 2013 $ 14,672,069 $ 3,933,730 $ $ 18,605,799 15
Note 5 Continued The following schedule summarizes the activity in each fund for 2014: Beginning Distributions Investment Ending Balance Contributions and Other Return Balance Operating fund $ 524,367 $ $ (524,484) $ 117 $ Endowment fund 18,081,432 390,581 (674,947) 907,817 18,704,883 $ 18,605,799 $ 390,581 $ (1,199,431) $ 907,934 $ 18,704,883 The following schedule summarizes the activity in each fund for 2013: Beginning Distributions Investment Ending Balance Contributions and Other Return Balance Operating fund $ 751,064 $ 1,030,000 $ (1,256,981) $ 284 $ 524,367 Capital fund 4,741,041 (4,783,552) 42,511 Endowment fund 15,799,734 456,028 (568,822) 2,394,492 18,081,432 $ 21,291,839 $ 1,486,028 $ (6,609,355) $ 2,437,287 $ 18,605,799 The following schedule summarizes the investment return and classification in the consolidated statements of activities and changes in net assets: 2014 2013 Dividends and interest on long term investments $ 463,047 $ 371,807 Net realized and unrealized gains 544,727 2,108,659 Return on long term investments 1,007,774 2,480,466 Dividends and interest on short term investments and cash accounts 2,012 692 Net realized and unrealized gains on short term investments 805 42,511 Investment fees (97,681) (86,382) Total return on investments 912,910 2,437,287 Gain (loss) on land held for sale 1,060 (81,201) Return on perpetual trusts held by others (Note 7) 2,981 43,996 $ 916,951 $ 2,400,082 16
Note 6 Land, Buildings, Equipment, and Construction in Progress Land, buildings, equipment, and construction in progress were as follows for December 31: 2014 2013 Buildings and improvements $ 19,263,447 $ 14,125,188 Equipment 1,085,498 1,018,285 Less accumulated depreciation (9,284,845) (8,389,963) 11,064,100 6,753,510 Construction in progress 2,117,701 2,061,889 Land 1,922,954 1,922,954 $ 15,104,755 $ 10,738,353 Note 7 Perpetual Trusts The Council is named as a 15% beneficiary of a trust held for the benefit of local nonprofit agencies, and a sole beneficiary of a trust held for its benefit. The trusts, which are held in perpetuity, are administered by financial institutions and provide for at least annual earnings distributions to the Council. The earnings are available for general operating purposes. The Council s interests in the trust agreements are included in permanently restricted net assets. The Council s interests in gains and losses in the trust value are recognized in the consolidated statements of activities and changes in net assets as permanently restricted activities. Fair values of the Council s share of investment securities held by the trusts measured on a recurring basis at December 31, 2014 and 2013, were $492,054 and $504,276, respectively. A reconciliation of the beginning and ending balances for fair value measurements made using significant unobservable inputs (Level 3) for perpetual trusts is as follows: 2014 2013 Beginning balance $ 504,276 $ 483,765 Investment return 2,981 43,996 Distributions (15,203) (23,485) Ending Balance $ 492,054 $ 504,276 17
Note 8 Interfund Promissory Note In 2010, the Council entered into a promissory note payable from the operating fund to the endowment fund for $633,746. The note is due in equal monthly payments over ten years plus interest at 6.5% per year on the unpaid balance. The loan had an unpaid balance of $0 and $321,524 at December 31, 2014 and 2013, respectively and is shown on the consolidated statements of financial position as inter fund promissory note in the operating and endowment funds. All scheduled payments were made in 2013 and the balance was repaid in full in 2014. Note 9 Boy Scouts of America Store Revenue The National Council is responsible for managing the Boy Scouts of America stores. Under this agreement, the National Council remits 8% of store revenues to the Council for use of its facilities plus an additional 5% of store revenues on sales in excess of $750,000 in a calendar year. This agreement was extended on a month to month basis and the Council is in the process of drafting a new agreement with the National Council. Revenue received from the National Council was $101,142 and $107,177 for 2014 and 2013, respectively. Note 10 Benefit Plans The Boy Scouts of America has a defined benefit multi employer plan, administered by the National Council, which covers substantially all full time employees of the national office and the local councils, including the Council. The plan name is the Boy Scouts of America Master Pension Trust Boy Scouts of America Retirement Plan for Employees and covers all employees who have completed one year of service and who have agreed to make contributions. Eligible employees contribute 2% of compensation, and the Council contributes an additional 7% to the plan. The Council s policy is to fund accrued pension costs when incurred. The Council s pension expense, net of contributions made by employees, was $136,011 and $146,016 for 2014 and 2013, respectively, which approximated the current service cost. The actuarial information for the plan as of February 1, 2014, indicates that it is in compliance with ERISA regulations regarding funding. Because the Council participates in the plan with the Boy Scouts of America and other local councils, specific identification of the Council s portion of net plan assets or the actuarial present value of accumulated plan benefits is not determined. Additionally, the Council has a 403(b) defined contribution retirement plan available to all employees. Employees may voluntarily contribute a portion of their compensation to the plan subject to limits set by the federal tax code. The Council contributes to the plan an amount equal to 50% of the first 6% of compensation contributed by eligible employees. Employees are eligible for Council contributions upon completing one year and one thousand hours of service. The Council s contributions under the plan are fully vested with the employee after five years of service. Defined contribution retirement plan expense amounted to $51,829 and $56,793 for 2014 and 2013, respectively. It is the policy of the Council to fund retirement costs accrued currently. The Council s employees participate in a healthcare plan provided by the National Council. The Council pays a portion of the cost for employees, and the employees pay the remaining portion and the cost for any of their dependents participating in the plan. During 2014 and 2013, the Council remitted approximately $237,756 and $263,652, on behalf of its employees to the National Council related to the health care plan. 18
Note 11 Temporarily Restricted Net Assets Temporarily restricted net assets are available for the following purposes or periods: December 31, 2014 2013 Purchase/maintenance of fixed assets $ 3,922,873 $ 7,301,004 Unappropriated earnings from permanently restricted net assets 2,208,231 2,148,649 Time restricted for future periods 360,055 415,769 $ 6,491,159 $ 9,865,422 Note 12 Permanently Restricted Net Assets Permanently restricted net assets are restricted for investment in perpetuity, the income from which is available to support: December 31, 2014 2013 General operations $ 3,475,526 $ 3,469,504 Camperships 431,256 430,286 Scoutreach 1,000,000 1,000,000 Camp operations 3,090 3,090 Camp maintenance 590,099 582,324 $ 5,499,971 $ 5,485,204 Note 13 Endowment The Council s endowment consists of both endowment funds restricted by donors and funds designated by the Board of Directors to function as endowments (quasi endowments). Net assets associated with endowment funds, including quasiendowments, are classified and reported based on the existence or absence of restrictions imposed by donors. Interpretation of Relevant Law The Council s Board of Directors has interpreted the Washington State Prudent Management of Institutional Funds Act (PMIFA), and, having considered its rights and obligations thereunder, has determined that it is desirable to preserve, on a long term basis, 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 determination, the Organization classifies as permanently restricted net assets (a) the original value of gifts donated to the permanent endowment, and (b) the original value of subsequent gifts to the permanent endowment. 19
Note 13 Continued 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 Council in a manner consistent with the standard of prudence prescribed by PMIFA. In accordance with PMIFA, the Council considers 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 Council 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 investment; - Other resources of the Council; and - The investment policies of the Council. As of December 31, 2014 and 2013, endowment net assets consisted of the following: Temporarily Permanently Unrestricted Restricted Restricted 2014 Total Donor restricted endowment funds $ $ 2,208,231 $ 5,499,971 $ 7,708,202 Board designated quasi endowment fund 11,586,191 11,586,191 Endowment Net Assets $ 11,586,191 $ 2,208,231 $ 5,499,971 $ 19,294,393 Temporarily Permanently Unrestricted Restricted Restricted 2013 Total Donor restricted endowment funds $ $ 2,148,649 $ 5,485,204 $ 7,633,853 Board designated quasi endowment fund 11,415,517 11,415,517 Endowment Net Assets $ 11,415,517 $ 2,148,649 $ 5,485,204 $ 19,049,370 20
Note 13 Continued Changes to endowment net assets for 2014 were as follows: Temporarily Permanently Unrestricted Restricted Restricted Total Endowment net assets, December 31, 2013 $ 11,415,517 $ 2,148,649 $ 5,485,204 $ 19,049,370 Endowment investment return Interest and dividends, net of fees 11 369,554 369,565 Realized and unrealized gains and losses 175,174 364,938 (11,161) 528,951 Total endowment investment return 175,185 734,492 (11,161) 898,516 Contributions 25,928 25,928 Endowment fundraising expenditures (4,511) (4,511) Appropriation of assets for expenditure (674,910) (674,910) Endowment Net Assets, December 31, 2014 $ 11,586,191 $ 2,208,231 $ 5,499,971 $ 19,294,393 Changes to endowment net assets for 2013 were as follows: Temporarily Permanently Unrestricted Restricted Restricted Total Endowment net assets, December 31, 2012 $ 10,483,961 $ 1,648,032 $ 5,102,828 $ 17,234,821 Endowment investment return Interest and dividends, net of fees 139 415,732 415,871 Realized and unrealized gains and losses 1,253,920 722,926 (60,689) 1,916,157 Total endowment investment return 1,254,059 1,138,658 (60,689) 2,332,028 Contributions 443,065 443,065 Interfund transfers (322,503) (322,503) Appropriation of assets for expenditure (638,041) (638,041) Endowment Net Assets, December 31, 2013 $ 11,415,517 $ 2,148,649 $ 5,485,204 $ 19,049,370 21
Note 13 Continued Funds With Deficiencies From time to time, the fair value of assets associated with individual donor restricted endowment funds may fall below the level that the donor or PMIFA requires the Council to retain as a fund of perpetual duration. Deficiencies of this nature that are reported in unrestricted net assets were $115,361 and $116,241 as of December 31, 2014 and 2013, respectively. This deficiency resulted from unfavorable market fluctuations that occurred shortly after the investment of new permanently restricted contributions. Subsequent gains that restored the fair value of the assets of the endowment fund to the required level were classified as an increase in unrestricted net assets. Return Objectives and Risk Parameters The Council has adopted investment and spending policies for endowment assets that attempt to provide a predictable stream of funding to programs supported by its endowment while seeking to maintain the purchasing power of the endowment assets. Endowment assets include those assets of donor restricted funds that the Council must hold in perpetuity or for a donor specified period as well as board designated funds. Under this policy, as approved by the Board, the endowment assets are invested in a manner that is intended to produce results that are comparable to the price and yield results of a weighted average of widely followed market indexes matching the asset allocation of the endowment investments while assuming a moderate level of investment risk. The Council expects its endowment funds, over time, to provide an average rate of return of approximately 8 percent annually. Actual returns in any given year may vary from this amount. Strategies Employed for Achieving Objectives To satisfy the long term rate of return objectives, the Council 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 Council targets a diversified asset allocation that places a greater emphasis on equity based investments to achieve the long term return objectives within prudent risk constraints. Spending Policy and How the Investment Objectives Relate to Spending Policy The Council has a policy of appropriating for distribution each year 4.5 percent in 2014 and 2013 of the endowment fund s average fair value over the prior 12 quarters ending one year prior to the year in which the distribution is planned. In establishing this policy, the Council considered the long term expected return on the endowment. Accordingly, over the long term, the Council expects the current spending policy to allow the endowment to grow at an average of 3.5 percent annually. This is consistent with the Council s objective to maintain the purchasing power of the endowment assets held in perpetuity or for a specified term as well as to provide additional real growth through new gifts and investment return. Transfers The Council has a policy of appropriating for distribution each year 4.5 percent of the endowment fund s average fair value over the prior 12 quarters ending one year prior to the year in which the distribution is planned. In the event investment income is insufficient to meet the amount required by the spending policy, the difference is recorded as a transfer between funds in the consolidated statements of activities and changes in net assets between the beginning net assets and the ending net assets. 22