FINANCIAL STATEMENTS YEAR ENDED
C O N T E N T S Page INDEPENDENT AUDITORS' REPORT 1 FINANCIAL STATEMENTS: Statement of Financial Position 2 Statement of Activities 3-4 Statement of Cash Flows 5-6 7-22 INDEPENDENT AUDITORS REPORT ON SUPPLEMENTARY INFORMATION 23 SUPPLEMENTARY SCHEDULE: Supporting Schedule of Program Services Revenues and Expenses 24-25
STATEMENT OF FINANCIAL POSITION ASSETS Current Assets: Cash & cash equivalents (Notes 1 & 2) $ 358,030 Accounts receivable (Notes 1 & 3) 181,817 Contributions receivable (net) (Notes 1 & 4) 76,651 Inventory (Notes 1 & 6) 74,608 Prepaid items (Note 7) 66,302 Total Current Assets $ 757,408 Property & Equipment, Net Of Depreciation: (Notes 1 & 8) $ 18,813,728 Collections: (Note 1) $ - Other Assets: Prepaid items (Note 7) $ 100,556 Deposits with suppliers (Note 5) 5,000 Endowment investments (Notes 1 & 9) 94,887 Cash restricted to investment in long-term assets (Note 10) 176,512 Contributions receivable (Net) (Notes 1 & 4) 11,183 Prepaid loan fees (net) (Note 1) 60,553 Total Other Assets $ 448,691 $ 20,019,827 LIABILITIES & NET ASSETS Current Liabilities: Accounts payable (Note 11) $ 446,913 Accrued expenses (Note 12) 52,847 Current portion of deposits and advance payments received (Note 13) 151,944 Current portion of long-term debt (Note 14) 708,669 Current portion of obligations under capital leases (Note 15) 6,581 Total Current Liabilities $ 1,366,954 Noncurrent Liabilities: Deposits and advance payments received (Note 13) $ 32,000 Long-term debt (Note 14) 11,272,969 Obligations under capital leases (Note 15) 3,546 $ 11,308,515 Net Assets: (Note 1) Unrestricted (Note 21) $ 5,896,483 Temporarily Restricted (Note 22) 1,247,875 Permanently Restricted (Note 23) 200,000 Total Net Assets $ 7,344,358 $ 20,019,827 See Accompanying Notes 2
STATEMENT OF ACTIVITIES YEAR ENDED Permanently Temporarily Restricted Restricted Unrestricted Total Revenues & Other Support: Programs (from Schedule 1): $ - $ - $ 2,344,014 $ 2,344,014 Contributions: Cash - 470,645 91,727 562,372 In-kind - - 46,000 46,000 Provision for uncollectible contributions (Notes 1 & 4) - - (46,449) (46,449) Grants - 196,347-196,347 Fundraising events - 12,904-12,904 Rent - net of expenses (Note 16) - - 16,173 16,173 Investment income- net - 6,051 4,586 10,637 Loss on sale of investments - - (1,579) (1,579) Decrease in value of investments - - (2,723) (2,723) Assets released from restrictions (Notes 1 & 17): Restrictions satisfied by payments - (693,386) 693,386 - Restrictions satisfied by awarding Junior Program scholarships - (97,937) 97,937 - $ - $ (105,376) $ 3,243,072 $ 3,137,696 Cost Of Revenues: Programs (from Schedule 1): $ - $ - $ 321,622 $ 321,622 Revenue before operating expenses $ - $ (105,376) $ 2,921,450 $ 2,816,074 Operating Expenses: Programs (from Schedule 1): $ - $ - $2,694,218 $ 2,694,218 Fundraising: Wages $ - $ - $ 97,263 $ 97,263 Other fundraising expenses - - 40,478 40,478 Payroll taxes - - 7,894 7,894 Depreciation - - 6,115 6,115 Employee benefits - - 1,926 1,926 $ - $ - $ 153,676 $ 153,676 Administrative: Professional fees $ - $ - $ 38,022 $ 38,022 Management fee- VSGA - - 36,000 36,000 Meetings - - 659 659 Taxes - - 433 433 $ - $ - $ 75,114 $ 75,114 $ - $ - $ 2,923,008 $ 2,923,008 Net (Decrease) In Net Assets Before Other Income & Expenses $ - $ (105,376) $ (1,558) $ (106,934) See Accompanying Notes 3
STATEMENT OF ACTIVITIES (continued) YEAR ENDED Permanently Temporarily Restricted Restricted Unrestricted Total Net (Decrease) In Net Assets Before Other Income & Expenses (from previous page) $ - $ (105,376) $ (1,558) $ (106,934) Other Income: Refund of prior years' real estate taxes (Note 29) $ - $ - $ 113,696 $ 113,696 Other Expenses: Programs (from Schedule 1): - - (537,113) (537,113) Net (Decrease) in Net Assets $ - $ (105,376) $ (424,975) $ (530,351) Net Assets - Beginning Of Year $ 200,000 $ 1,353,251 $ 6,321,458 $ 7,874,709 Net Assets - End Of Year $ 200,000 $ 1,247,875 $ 5,896,483 $ 7,344,358 See Accompanying Notes 4
STATEMENT OF CASH FLOWS YEAR ENDED Cash Flows From Operating Activities: Net (decrease) in net assets $ (530,351) Adjustment to reconcile net (decrease) in net assets to net cash (used in) operating activities: Depreciation $ 625,569 Amortization 20,506 Contributions restricted to the purchase of long-term assets (26,000) In-kind contributions (10,000) Loss on sale of investments 1,579 Decrease in value of investments 2,723 (Increase) decrease in: Accounts receivable (161,354) Contributions receivable 78,945 Inventory (6,382) Prepaid items (148,683) Deposits with suppliers (1,250) Increase (decrease) in: Accounts payable (248,994) Accrued expenses 14,936 Deposits received 11,328,105 Total Adjustments 11,469,700 Net Cash (Used in) Operating Activities $ 10,939,349 Cash Flows From Investing Activities: Purchase of property & equipment $ (112,889) Proceeds from the sale of investment securities 24,989 Purchases of investment securities (21,872) Net Cash (Used in) Investing Activities (109,772) See Accompanying Notes 5
STATEMENT OF CASH FLOWS (continued) YEAR ENDED Cash Flows From Financing Activities: Repayment of loans from cash contributed for the purchase of long-term assets $ (41,826) Use of cash contributed for the purchase of long-term assets 32,333 Principal payments on capital leases (4,158) Principal payments on long-term debt (260,110) Net Cash (Used in) Financing Activities (273,761) Net (Decrease) in Cash & Cash Equivalents $ 10,555,816 Cash & Cash Equivalents - Beginning Of Year 1,043,183 Cash & Cash Equivalents - End Of Year $ 358,030 Additional Information: Interest paid in 2011 $ 495,680 Noncash investing activities: Purchase of vehicle with installment note $ 19,528 See Accompanying Notes 6
Note 1: Summary Of Significant Accounting Policies: Organization The VSGA Foundation, Inc. is a Virginia non-stock corporation. The Foundation's purpose is to engage in activities to foster amateur golf in the Commonwealth of Virginia including, but not limited to, the construction of facilities and the operation of programs for education, instruction, research, competition, and other charitable purposes through the operation of the Independence Golf Club, located in Powhatan County, Virginia, and preservation of history through the museum program. The focus of the Foundation is to provide these services to the public, with a focus on groups of individuals which historically have not been exposed to the game of golf. The Foundation is associated with the Virginia State Golf Association, Inc. Basis of Accounting All assets, liabilities, revenue, and expenses are recorded using the accrual method of accounting. Promises to give are recorded when the pledge is considered unconditional, or when there is considered only a remote possibility that donor conditions will not be met. Golf course revenue is recognized at the point of sale or when services have been performed and are billable. Basis of Presentation The financial statements are presented in a format that conforms to the standards promulgated by the Financial Accounting Standards Board in Accounting Standards Codification (ASC) 958, which requires the Foundation to report information regarding its financial position and activities using three classes of net assets that recognize the existence and nature of restrictions on its net assets. These net asset classifications are described as follows: Unrestricted net assets represent resources over which the Board of Directors has unlimited discretionary control to carry out the activities of the Foundation in accordance with the Articles of Incorporation and By-Laws. Temporarily restricted net assets represent resources whose usage is limited by donorimposed restrictions that will be met either by actions of the Foundation or by the passage of time. Permanently restricted net assets represent resources whose use is limited by donorimposed restrictions that require the net assets to be maintained permanently. Tax Status The Foundation is a tax-exempt organization under Section 501(c)(3) of the Internal Revenue Code and, as such, is not subject to income taxes on net income from exempt purposes. The Foundation recognizes the effects of income tax positions only when they are more likely than not of being sustained. Management has determined that the Foundation has no uncertain tax positions that would require financial statement recognition or disclosure. The Foundation is no longer subject to audits by the applicable taxing jurisdictions for periods prior to 2008. 7
Note 1: Summary Of Significant Accounting Policies: (continued) Cash Equivalents For purposes of the statement of cash flows, all highly liquid investment instruments with a maturity of three months or less are considered cash equivalents. Contributions Receivable Unconditional pledges that are expected to be collected within one year are recorded at net realizable value. Unconditional pledges that are expected to be collected in future years are recorded at the present value of their estimated future cash flows. The discounts on those amounts are computed using risk-free interest rates applicable to the years in which the pledges are receivable. Amortization of the discounts is included in contribution revenue. Management periodically reviews pledges to give, writing off those pledges that are deemed uncollectible. In addition, a provision for uncollectible pledges has been established. The balance of the provision for uncollectible pledges at December 31, 2011 is $133,601. Accounts Receivable Management periodically reviews accounts receivable for collectibility. Accounts deemed uncollectible are written off. Management considers accounts receivable at year end to be fully collectible. Consequently, no allowance for doubtful accounts is required. Investments Investments are composed of mutual funds carried at fair value. The fair value of these securities is determined by quoted market price. Unrealized gains and losses are included in the net gain or loss on investments in the statement of activities. Inventory Inventory consists of pro shop merchandise valued on a moving-average basis, and food, beverages, and tobacco products valued at the lower of cost or market on a FIFO basis. Property and Equipment Property and equipment is recorded at cost at the date of acquisition or fair market value at the date of donation in the case of gifts. Depreciation is computed based on the straight-line method over the estimated useful lives of the applicable assets as follows: Asset Land improvements - depreciable Buildings Automotive Furniture and fixtures Golf course equipment Estimated Useful Life 20 years 39 years 5-7 years 5-7 years 7 years Maintenance and repairs are charged to operations as incurred and major improvements are capitalized. 8
Note 1: Summary Of Significant Accounting Policies: (continued) Museum Collection The VSGA Foundation museum program maintains a collection of artifacts relating to the history of golf in Virginia. The Foundation s policy is not to capitalize purchases of additions to the collection. In 2011, there were no major additions to the collection. Classification of Contributions The Foundation reports gifts of cash and other assets as restricted support if they are received with donor stipulations that limit the use of the donated assets. When a donor restriction expires, that is, when a stipulated time restriction ends or purpose restriction is accomplished, temporarily restricted net assets are reclassified to unrestricted net assets and reported in the statement of activities as net assets released from restrictions. Contributions received with restrictions that are met in the same period as the contribution is received are reported as restricted contributions. The Foundation 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 long those long-lived assets must be maintained, the Foundation reports expirations of donor restrictions when the donated or acquired long-lived assets are placed in service. The Foundation frequently receives securities as a contribution and it is the Foundation's policy to sell such securities as soon as is practical. Securities are recorded at fair market value when contributed and are carried at market value. If the subsequent disposal occurs within days of receipt and the sale proceeds very closely approximate the contributed value, the sales proceeds will be recorded as contribution income and no gain or loss will be separately recognized. Contributed Services The Foundation recognizes contributed services as contribution revenue only if they create or enhance a nonfinancial asset (such as property or equipment), or if the contributed services require special skills, is provided by individuals who possess such skills, and would typically need to be purchased if not contributed. Many volunteers contributed numerous hours of administrative and fundraising services to the Foundation. However, these hours do not meet the requirements to be recorded as revenue and expense under ASC 958. 9
Note 1: Summary Of Significant Accounting Policies: (continued) 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, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates, making it reasonably possible that a change in these estimates could occur in the near term. Advertising Costs Advertising and sales promotion costs are expensed as incurred. Advertising expenses for the year were $19,054 and are included in marketing expense. Loan Fees Loan fees are capitalized and amortized over the life of the loan. Amortization expense totaled $20,506 for 2011. Note 2: Cash And Cash Equivalents: Cash and cash equivalents as of December 31, 2011 consisted of the following: Cash on hand $ 3,609 Cash in bank 530,933 Total cash and cash equivalents $ 534,542 Less: Cash restricted to investment in long-term assets 176,512 Net cash and cash equivalents $ 358,030 Net cash and cash equivalents are restricted to the following amounts and purposes: Debt service reserve $ 352,657 Development expenses 354 Charles Fund Junior Program endowment 1,764 $ 354,775 The restricted amounts listed above are maintained in separate accounts. The financing agreement with the Bank of Powhatan requires a minimum of $200,000 per year be deposited into the debt service reserve account. The Virginia State Golf Association has agreed to deposit $3 of the membership fee of each user of the handicap program to this account, with a guaranteed minimum deposit of $100,000, which is due June 30 of each year, irrespective of the handicap fees collected. The balance of handicap fees in excess of $100,000, if any, are to be deposited by December 30 of each year. The VSGA Foundation is responsible for depositing any shortfall in the event that total deposits from the Virginia State Golf Association are less than $200,000 in a given year. Payments on the note held by the Bank of Powahatan are paid out of the debt service reserve account. 10
Note 2: Cash And Cash Equivalents: (continued) Cash restricted to investment in long-term assets is excluded from cash and cash equivalents and is shown in the other assets section of the Statement of Financial Position. The cash of The Foundation not held in trust is maintained in bank deposit accounts at financial institutions. The balances, at times, may exceed federally insured limits. At December 31, 2011, cash maintained in trust and in banks exceeded insured limits by $357,457. Note 3: Accounts Receivable: Accounts receivable consisted of the following at December 31, 2011: Receivable from: Amount Virginia State Golf Association- debt service reserve receivable $ 130,233 Powhatan County- refund of overpaid real estate taxes 20,000 Trade accounts receivable due from unrelated parties 22,187 Trade accounts receivable due from affiliated organizations $ 9,397 181,817 The debt service reserve receivable is the December deposit pledged by the Virginia State Golf Association as described in Note 2. Affiliated organizations include the Virginia State Golf Association, Virginia Golf Foundation, and the VSGA Women's Division. All accounts receivable are considered current and collectible. Note 4: Contributions Receivable: Contributions receivable at December 31, 2011 are summarized below: Provision for Expected Amount Uncollectible Unamortized Cash Year Pledged Pledges Discount Receipts 2012 $ 189,859 $ 113,208 $ - $ 76,651 2013 3,600 2,147 46 1,407 2014 3,300 1,968 83 1,249 2015 2,400 1,431 89 880 2016 2,400 1,431 116 853 Beyond 2016 22,500 13,416 2,290 6,794 $ 224,059 $ 133,601 $ 2,624 $ 87,834 Contributions receivable is shown on the Statement of Financial Position net of a Provision for Uncollectible Pledges of $133,601. Contributions that are due in more than one year are reflected at the present value of estimated future cash flows using a discount rate of 3.25%. 11
Note 5: Deposits with Suppliers: Virginia Alcoholic Beverage Control Board regulations prohibit purchases of alcoholic beverages from distributors on credit. In order to avoid the inconvenience of making payments at the time of delivery, the Independence Golf Club has funds on deposit with the distributors from whom it purchases beer and wine that exceed the amount of a typical purchase. Note 6: Inventory: At December 31, 2011 merchandise inventory totaled $49,051 and food & beverage inventory totaled $25,557. Note 7: Prepaid Items: Prepaid items at December 31, 2011 consisted of the following: Real estate taxes $ 148,931 Cart lease 9,664 Advertising 5,333 Insurance 1,930 Other 1,000 $ 166,858 Less: Non-current portion of prepaid real estate taxes 100,556 $ 66,302 Prepaid real estate taxes are discussed at Note 29. Note 8: Property And Equipment: Property and equipment at December 31, 2011 is summarized as follows: Buildings $ 8,098,414 Land improvements depreciable 6,361,520 Furniture and fixtures 1,136,725 Golf course and kitchen equipment 1,140,096 Museum 273,510 Automotive 45,274 Less: accumulated depreciation (7,199,453) $ 9,856,086 Land 1,677,721 Land improvements non-depreciable 7,279,921 $ 18,813,728 Note 9: Endowment Investments: The Foundation's endowment consists of endowed funds established to provide scholarships for participants in the Junior Program of the Independence Golf Club. As required by GAAP, net assets associated with endowment funds are classified and reported based on the existence or absence of donor-imposed restrictions. 12
Note 9: Endowment Investments: (continued) Interpretation of Relevant Law The Foundation's Board of Directors has interpreted the State Prudent Management of Institutional Funds Act (SPMIFA) 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 permanently restricted net assets (a) the original value of gifts donated to the permanent endowment, (b) the original value of subsequent gifts to the permanent endowment, and (c) accumulations to the permanent endowment made in accordance with the direction of the applicable donor gift instrument at the time the accumulation is added to the fund. The remaining portion of the donor-restricted endowment fund that is not classified in permanently restricted net assets is classified as temporarily restricted net assets until those amounts are expended by the Organization in a manner consistent with the standard of prudence prescribed by the SPMIFA. In accordance with SPMIFA, the Foundation 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 Foundation 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 Foundation (7) The investment policies of the Foundation Endowment Net Asset Composition by Type of Fund as of December 31, 2011 Temporarily Permanently Unrestricted Restricted Restricted Total Donor-restricted endowment funds Cash & cash equivalents $ - $ - $ 1,764 $ 1,764 Investments- Mutual funds - - 94,887 94,887 Loan to General Fund 100,624 100,624 Accumulated deficit due to investment losses - - 2,725 2,725 $ - $ - $ 200,000 $ 200,000 13
Note 9: Endowment Investments: (continued) Changes in Endowment Assets for the Year Ended December 31, 2011 Temporarily Permanently Unrestricted Restricted Restricted Total Endowment net assets, beginning of year $ - $ - $ 200,000 $ 200,000 Investment return: Investment income $ 2,612 $ - $ 2,612 Investment expenses (1,034) - (1,034) Net depreciation (realized) (1,580) (1,580) Net depreciation (unrealized) (2,723) - (2,723) Total investment return (deficit) $ (2,725) $ - $ - $ (2,725) Endowment net assets, end of year $ (2,725) $ - $ 200,000 $ 197,275 In addition, $5,000 was loaned to the general fund from endowment assets in 2011. Description of Amounts Classified as Permanently Restricted Net Assets The portion of perpetual endowment funds that is required to be retained permanently either by explicit donor stipulation or by SPMIFA $ 200,000 Funds with Deficiencies From time to time, the fair value of assets associated with individual donorrestricted endowment funds may fall below the level that the donor or SPMIFA requires the Foundation to retain as a fund of perpetual duration. Such a deficiency occurred in 2011 due to a net investment loss of $2,725. Strategies Employed for Achieving Objectives To satisfy its long-term rate-of-return objectives, the Foundation 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 Foundation targets a diversified asset allocation that places a greater emphasis on equity-based investments to achieve its long-term return objectives within prudent risk constraints. Spending Policy and How the Investment Objectives Relate to Spending Policy The Foundation makes available for distribution the entire amount of income and the capital balance of the endowment that exceeds $200,000, as measured at December 31 of each year. In years that the value of the investment falls below $200,000, income earned subsequently is retained in the endowment until the value of the investment exceeds $200,000. This policy is subject to needs and available resources of the Foundation. In some circumstances, The Foundation may borrow funds from the endowment, resulting in a deficit balance. At December 31, 2011, the endowment had 14
Note 9: Endowment Investments: (continued) deficiency of $100,624 due to borrowings by the general fund and $2,725 due to net investment losses in 2011 for a total deficiency of $103,349. Note 10: Cash Restricted To The Construction Of Long-Term Assets: At December 31, 2011, a total of $176,512 in cash was temporarily restricted for the construction or purchase of long-term assets as listed in Note 22. Note 11: Accounts Payable: Accounts payable at December 31, 2011 consisted of the following: Payable to B.K. Katherman & Co., Inc. for the construction of Haley Hall $ 221,077 Expenses of Independence Golf operations 187,924 Expenses of fundraising operations $ 37,912 446,913 Note 12: Accrued Expenses: Accrued expenses consisted of the following: Salaries $ 28,797 Interest 19,342 Other $ 4,708 52,847 Note 13: Deposits and Advance Payments Received: Deposits received consisted of advance payments received for goods and services to be rendered in the future, such as gift certificates, rain checks, store credits, and advance deposits on outings and events. Additionally, in December 2011 the Virginia State Golf Association made an advance payment of $92,000 on the office space rented from the Foundation. Deposits and advanced payments received consisted of the following: Advance deposits and payments- golf course $ 91,944 Advance payment- rent 92,000 $ 183,944 Less: Non-current portion of advance payment- rent 32,000 $ 151,944 Note 14: Long-Term Debt: Note payable, Bank of Powhatan, monthly principal and interest payments of $38,978 for 60 months, interest at an annual rate of 6%, secured by the real estate, personal property, deposits, and receivables of the Foundation. The principal balance due at December 24, 2014 is estimated to be $5,413,351. $ 5,781,869 15
Note 14: Long-Term Debt: (continued) Note payable, monthly payments of interest at LIBOR rate plus 2.50%, but not below 3.50% (3.50% at December 31, 2011). Quarterly principal curtailments beginning July 1, 2010 at amounts from $20,000 to $40,000, with remaining principal balance of $2,279,980 due on February 2, 2013. This note is guaranteed by a member of the board of directors, who is a beneficiary of a second deed of trust that is shared ratably with the guarantor of the note listed below and with the Viriginia State Golf Association, the holder of a $1,000,000 note. Note payable, monthly payments of interest only, interest at onemonth LIBOR rate plus 1% (1.30% at December 31, 2011), secured by a guaranty from a member of the board of directors, and by a second deed of trust on Foundation property, shared ratably with the guarantor of the note listed above and the noteholder listed below. All outstanding principal and interest is due in full on December 24, 2014. Note payable to the Virginia State Golf Association, no interest rate stated, secured by a second deed of trust shared ratably with the guarantor of the second note listed above and the grantor of the third note listed above, balance due at December 22, 2039. Notes payable to board member, monthly payments of interest at 5%, principal curtailment terms unstated. The entire amount of this note is included in the current portion of long-term debt on the statement of financial position. Note payable to board member, interest rate and repayment terms unstated. The entire amount of this note is included in the current portion of long-term debt on the statement of financial position. 2,399,979 2,348,093 1,000,000 375,000 60,000 Note payable, monthly principal and interest payments of $478, interest at an annual rate of 8%, secured by a vehicle owned by the Foundation. The final payment is due in April 2015. 16,697 Total notes payable $ 11,981,638 Less: current maturities 708,669 Maturities due in greater than one year $ 11,272,969 16
Note 14: Long-Term Debt: (continued) Current maturities of long-term debt are as follows: Year Ending December 31, 2012 2013 2014 VSGA FOUNDATION, INC. $ 708,669 2,381,491 7,889,598 1,880 2015 2016 and beyond 1,000,000 $ 11,981,638 Note 15: Capital Lease Obligations: The Foundation is the lessee of golf course maintenance equipment with a lease expiring in 2013 with an option to purchase the equipment at the end of the lease for $1. The asset under the capital lease is recorded at the present value of the minimum lease payments. The asset is depreciated over a period of five years. Depreciation of $2,980 is included in depreciation expense for 2011. Summary of property held under capital leases at December 31, 2011: Machinery and equipment $ 14,899 Less: Accumulated depreciation 4,470 $ 10,429 Future minimum lease payments under capital leases as of December 31, 2011 are as follows: Year Ending December 31, 2012 $ 6,838 2013 4,103 Total minimum lease payments $ 10,941 Less: Interest 814 Present value of net minimum leases $ 10,127 Note 16: Rent Income: The Foundation leases 4,000 square feet of office space to the Virginia State Golf Association, Inc. for $60,000 per year, plus a charge for housekeeping. Income: Rent $ 60,000 Housekeeping 6,000 $ 66,000 Expenses: Utilities $ 16,210 Real estate taxes 3,856 Depreciation 29,761 49,827 Net Income $ 16,173 As disclosed in Note 13, the Association made an advance payment on rent totaling $92,000 for periods after December 31, 2011. 17
Note 17: Restrictions Satisfied: The following restrictions were fulfilled by payments made in 2011: Description of Restriction Junior Program operating expenses $ 405,850 Debt reduction 202,360 Range cover 32,090 Fundraising expenses 29,972 Donor approved expenses 15,000 VSGA High School Invitational Tournament 6,000 Newsletter $ 2,114 693,386 An additional $97,937 in restrictions were fulfilled by providing Junior Program scholarships. Note 18: Operating Leases: The Foundation leases golf carts, greens maintenance equipment, and office equipment under operating leases that expire in 2012, 2014, 2015 and 2016 with an option to purchase the maintenance equipment and office equipment for fair market value at the end of the lease terms and to continue the cart lease on a month-to-month basis at the end of the lease term. In 2011, payments under these leases totaled $121,838. Future minimum payments due on these non-cancelable leases are as follows: Year Ending December 31, 2012 $ 70,198 2013 39,590 2014 22,111 2015 2016 $ 8,771 2,623 143,293 Note 19: Related Parties: The Board of Directors consists of twenty-two voting directors, seven of whom are also on the Board of Directors of Virginia State Golf Association, Inc. The Foundation received contributed administrative and management services from the Virginia State Golf Association valued at $36,000, and grants of $196,347 for debt reduction from the Virginia State Golf Association for the year ended December 31, 2011. In addition the Virginia State Golf Assocation has loaned $1,000,000 to the Foundation, as discussed in Note 14, and also rents office space from the Foundation as discussed in Note 16. In 2011, the Foundation received $25,500 in contributions from members of the Board of Directors. In 2008, $221,077 (net of a $25,000 contribution to sponsor the 2009 Legends of Golf fundraising tournament) was incurred to Katherman & Co., which is owned by a member of the Board of Directors, for the construction of Haley Hall, a dormitory for the Junior Program. This amount is included in accounts payable at December 31, 2011. 18
s VSGA FOUNDATION, INC. Note 19: Related Parties: (continued) The Foundation also has a management agreement for 2011 with Golf Business Advisors, a company owned by the president of the Foundation, which is discussed in Note 20. In 2011, the Foundation agreed to pay Golf Business Advisors $87,600, plus reimbursement for normal business expenses, for services rendered in fundraising and refinancing of the Foundation's long-term debt. Total payments to Golf Business Advisors in 2011 were $92,937. Note 20: Management Agreement: The Foundation has an agreement with Golf Business Advisors, a company owned by the president of the Foundation. The agreement calls for Golf Business Advisors to provide specific management and fundraising services for the Foundation in 2011. The annual fee for these services is $87,600 payable in installments of $12,514 per month in the months April through October, plus normal travel and business expense The agreement includes an incentive bonus related to the operation of the Independence Golf Club. The incentive provides for Golf Business Advisors to receive an incentive bonus of 25% of Independence net operating income for 2011 up to $100,000, and 10% of all Independence net operating income in excess of $100,000. Net operating income excludes fundraising income, expenses, and debt service. Note 21: Unrestricted Net Assets: Unrestricted net assets include deficits arising from losses on (permanently restricted) endowment asset investments as follows: Unrestricted Net Assets: For operating purposes $ 5,892,459 Deficit of permanently restricted assets (2,725) $ 5,889,734 Note 22: Temporarily Restricted Net Assets: Contributions Loaned to Total Program or Restriction Cash Receivable Operating Fund Net Assets Junior Program $ - $ - $ 1,062,714 $ 1,062,714 Haley Hall (new junior dormitory) 146,512 6,243 152,755 Fountain 5,000 5,000 Grill refrigerator 906 906 Brick campaign 500 500 Junior Program van 25,000 25,000 Museum 1,000 1,000 Total $ 176,512 $ 500 $ 1,070,863 $ 1,247,875 At December 31, 2011, $1,066,489 of the cash collected for restricted uses had been loaned to the operating fund, leaving $176,512 in cash restricted to use in constructing long-term assets, which is included in the Other Assets section of the Statement of Financial Position. 19
Note 23: Permanently Restricted Net Assets: Permanently restricted net assets consist of contributions to be held indefinitely. The income earned by these contributions is to be spent in support of Junior Program scholarships. At December 31, 2011 permanently restricted net assets consisted of an endowment of $200,000. At December 31, $100,624 of the endowment funds collected had been loaned to the operating fund, with an additional accumulated deficit of $2,725 due to investment losses. Of the remaining $96,651, $1,764 is held in cash and $94,887 is invested in stock and bond mutual funds as discussed in note 9. In 2011 there was a net loss on permanently restricted net assets of $2,725. Net losses on permanently restricted net assets reduce unrestricted net assets. Subsequent income earned by permanently restricted net assets is applied first to reduce the deficit assigned to unrestricted net assets. Income earned by permanently restricted assets is available for use according to the instructions of the donor once the deficit has been eliminated. Note 24: Contributed Services: The Foundation recognized as contributed revenue the management and administrative services provided by the Virginia State Golf Association for 2011, valued at $36,000. These values are based on amounts paid to the Virginia State Golf Association in prior years for such services and primarily benefit the fundraising efforts of the Foundation. Note 25: Loans From Temporarily And Permanently Restricted Net Assets: As disclosed in Notes 22 and 23, the Organization s unrestricted operating fund has borrowed $1,070,863 from temporarily restricted net assets and $100,624 from permanently restricted net assets for fundraising, debt reduction, and program expenses. Note 26: Promises To Give: The Foundation has received a conditional promise to give of $400,000, receivable in amounts of $100,000 each year for the years 2009-2012, in support of the Robins Junior Program. The receipt of this pledge is contingent upon no adverse changes in the Junior Program, Independence Golf Club, or the funding capacity of the donor, as judged by the donor. This conditional pledge does not meet the criteria necessary to allow recognition as revenue any amounts not actually received in the current year. $100,000 of this pledge was received in 2011. The board of directors of the Virginia State Golf Association (VSGA) approved a motion to increase their grant to the Foundation from $2 per member to $3 per member beginning in 2010. This grant is restricted to the curtailment of long term debt. The Foundation received $69,417 from the VSGA for 2011 under this grant, with an additional $130,233 receivable as of December 31, 2011. Note 27: Concentrations: In 2011,the $196,347 grant from the Virginia State Golf Association represented 24.40% of total contributions and grants pledged. Pledges from two contributors represented another 42.87% of the contributions and grants pledged in 2011. 20
Note 28: Fair Value Measurements: In September 2006, the Financial Accounting Standards Board (FASB) issued ASC 820-10, Fair Value Measurements. ASC 820-10 defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. ASC 820-10 establishes a three-level hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The fair value hierarchy gives the highest priority to quoted prices in active markets for indentical assets or liabilites (Level 1) and the lowest priority to unobservable inputs (Level 3). If inputs used to measure the financial instruments fall within different levels of the hierarchy, the classification is based on the lowest level that is significant to the fair value measurement of the asset or liability. The three levels of the fair value hierarchy are as follows: Level 1: Unadjusted quoted prices that are available in active markets for the identical assets or liabilities at the measurement date. Level 2: Quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data. Level 3: Unobservable inputs that cannot be corroborated by observable market data and reflect the use of significant management judgment. These values are generally determined using pricing models for which the assumptions utilize management's estimates of market participant assumptions. The following table summarizes information about the Foundation's assets that are measured at fair value on a recurring basis at December 31, 2011: Fair Value Using Assets at Level 1 Level 2 Level 3 Fair Value Assets: Money market funds $ 1,764 $ - $ - $ 1,764 Investments: Mutual funds 94,887 - - 94,887 $ 96,651 $ - $ - $ 96,651 Note 29: Subsequent Events: Management has evaluated subsequent events through February 1, 2013 the date on which the financial statements were available to be issued. On December 5, 2012 an agreement was reached between Powhatan County and the Foundation regarding the assessed value of the real estate of the Foundation and resulting real estate taxes paid for the years 2008 through 2011. As a result of the agreement, Powhatan County agreed to refund $168,930.62 of the real estate taxes, interest, and penalty that was collected for the years at issue. This amount will be refunded in the following manner: The County will pay to the Foundation $20,000 by December 31, 2012. The remaining amount will be applied to the real estate tax, interest, and penalty 21
Note 29: Subsequent Events: (continued) due for 2012 (estimated to be $48,375.) Any amount remaining (estimated to be $100,555.62) will be applied to the real estate taxes of the Foundation for the years 2013 through 2015. Any unused balance remaining after paying the 2015 real estate taxes will revert to Powhatan County. 22
SCHEDULE 1 SUPPORTING SCHEDULE OF PROGRAM SERVICE REVENUES AND EXPENSES YEAR ENDED Independence Junior Golf Program Museum Total Revenues: Course & grounds $ 884,247 $ - $ - $ 884,247 Food & beverage 573,697 - - 573,697 Carts 389,342 - - 389,342 Golf shop 246,150 - - 246,150 Range 89,540 - - 89,540 High School Invitational Tournament 3,635 - - 3,635 Junior Program (net of scholarships) - 157,403-157,403 $ 2,186,611 $ 157,403 $ - $ 2,344,014 Cost of Revenues: Food & beverage $ 196,947 $ - $ - $ 196,947 Golf shop 89,718 - - 89,718 Junior Program meals & supplies - 34,957-34,957 $ 286,665 $ 34,957 $ - $ 321,622 Gross Profit $ 1,899,946 $ 122,446 $ - $ 2,022,392 Expenses: Salaries $ 729,248 $ 196,950 $ - $ 926,198 Depreciation 483,549 84,982 21,162 589,693 Course maintenance & supplies 203,792 31,182-234,974 Payroll taxes & benefits 149,077 34,955-184,032 Repairs & maintenance 96,266 13,132-109,398 Cart 82,501 13,545-96,046 Utilities 73,320 20,742-94,062 Management fee & consulting 79,831 13,107-92,938 Taxes 65,520 4,391-69,911 Insurance 45,495 3,565-49,060 Equipment lease & rental 41,090 6,708-47,798 Bank charges 36,904 6,059-42,963 Marketing 19,112 7,200-26,312 Laundry & uniforms 25,292 397-25,689 Employee meals & other costs 19,057 1,204-20,261 Cleaning 17,218 1,601-18,819 Telephone 13,660 2,858-16,518 Supplies 9,466 1,576-11,042 Dues, subscriptions, & education 9,807 491-10,298 Professional fees 6,168 1,013-7,181 Computer service & support 5,927 973-6,900 Security 3,536 580-4,116 Travel & entertainment 2,784 1,197-3,981 Miscellaneous 3,856 - - 3,856 Postage 1,942 230-2,172 $2,224,418 $448,638 $21,162 $2,694,218 24
SCHEDULE 1 SUPPORTING SCHEDULE OF PROGRAM SERVICE REVENUES AND EXPENSES (continued) YEAR ENDED Independence Junior Golf Program Museum Total (Loss) From Program Services Before Other Expenses: $ (324,472) $ (326,192) $ (21,162) $ (671,826) Other Expenses: Interest $ (510,988) $ (5,619) $ - $ (516,607) Loan cost amortization (19,525) (620) (361) (20,506) $ (530,513) $ (6,239) $ (361) $ (537,113) Net (Loss) From Program Services $ (854,985) $ (332,431) $ (21,523) $ (1,208,939) 25