CIVITAN INTERNATIONAL Audited Financial …civitan.org/financial.pdfCONTENTS Page INDEPENDENT...
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CIVITAN INTERNATIONAL
Audited Financial Statements September 30, 2015 and 2014
PEARCE, BEVILL, LEESBURG, MOORE, P.C. CERT I F I ED P UBLI C ACCOUNTAN T S
CONTENTS
Page
INDEPENDENT AUDITORS' REPORT ........... ...................................... ................. ........ .. ... 3
FINANCIAL STATEMENTS
Statements of Financial Position ............................. ................................ .......... .... .................. .. 5
Statements of Activities and Changes in Net Assets ............................................ .................... 6
Statements of Cash Flows ............ ...... .................................... ..................................... ......... ... 1 0
Notes to Financial Statements .............. ... ..... ........ .... ........................................... ....... .... ......... 12
PEARCE, BEVILL, LEESBURG, MOORE, P.C. C ERTIFIED PUBLI C A CC OUNTANT S
J. Wray Pearce, CPA Harold L Bevill, CPA (1946-1992) Charles W. Leesbuiio CPA, MBA Stephen L Moore, CPA Tommy B. Beam, CPA W. Glenn Bridges, Jr., CPA, MBA Hal (B=) Coons, ID, CPA Stephen B. Jones, JD, CPA, CVA Joseph M. Lassiter, CPA David T. Williams, CPA Je~ R. Thornton, CPA W. Robert Cook, CPA/ABV Michael B. Hawkins, CPA/ABV Carlos G. McDonald, CPA Robin A. Waldrup, CPA
To the Board of Directors Civitan International Birmingham, Alabama
PEARCE, BEVILL, LEESBURG, MOORE, P.C. CE RTIFIED PUBLIC ACCOUNTANTS
110 Office Park Drive, Suite 100
Birmingham, Alabama 35223-2402
205-323-5440 I fax 205-328-8523
www.pearcebevill.com
INDEPENDENT AUDITORS' REPORT
Matt Andrews, CPA Justin K. Berry, CPA Brittany Bingel, CPA Will Bonner, CPA Bill Brown, CPA Shannon D. Browne, CPA Daisy B. Buck, CPA Chase Campbell, CPA Patrick L. Dodd, CPA James W. E:reU, Jr., CPA Delphine E. Ford, CPA Kelly Higginbotham, CPA Tyler E. Jenkins, CPA, CFE Donna Jordan, CPA Jacob E Julian, rv, CPA JPKaai,CPA Taylor Martin, CPA Dennis Mazingo, CPA Heather Melson, CPA Karen A. Moore, CPA Glover Graham Pope, CPA, CITP Sarah B. Propper, CPA Misti B. Rasmussen, CPA Tony L Raycraft, CPA, CGMA Rob Shirley, CPA Jeffery S. Smith, CPA Emily E. Stein, CPA Jenna B. Stricklen, CPA Douglas K. Uhler, CPA, CVA, DABFA Thomas C. Zoebelein, CPA, MBA, CGMA
We have audited the accompanying financial statements ofCivitan International, which comprise the statements of financial position as of September 30, 2015 and 2014, and the related statements of activities and changes in net assets and cash flows for the years then ended and the related notes to the financial statements.
Members:
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.
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• The American Institute of Certified Public Accountants • The Alabama Society of Certified Public Accountants • PCPS • The AICPA Alliance for CPA Firms • National CPA Health Care Advisors Association
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Civitan International as of September 30, 2015 and 2014, and the changes in its net assets and its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America.
January 6, 2016
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PEARCE, BEVILL, LEESBURG, MOORE, P.C. CERTIFIED PUBLIC ACCOUNTANTS
CIVITAN INTERNATIONAL STATEMENTS OF FINANCIAL POSITION
SEPTEMBER 30, 2015 AND 2014
2015 ASSETS
Cash and cash equivalents $ 302,815 Investments 1,400,668 Accounts receivable, net of allowance for doubtful
accounts of$20,000 for 2015 and 2014 48,558 Inventories 126,261 Grant receivable 250,000 Prepaid expenses and other assets 47,827 Property and equipment, net 232,085 Property held-for-sale 91,700 Investment in cash surrender value of life insurance 39,612
$ 2,539,526
LIABILITIES AND NET ASSETS
Liabilities Accounts payable $ 272,377 Scholarships and grants payable 376,650 Accrued and withheld taxes 2,516 Other accrued expenses 158,720 Line of credit 250,000
1,060,263 Net Assets
Unrestricted: Board designated 1,677,483 Undesignated (1,221,401)
456,082
Temporarily restricted 529,447 Permanently restricted 493,734
1,479,263
$ 2,539,526
See auditors' report and accompanying notes to financial statements. - 5-
PEARCE, BEVILL, LEESBURG, MOORE, P.C. CERTIFIED PUBLIC ACCOUNTANTS
2014
$ 345,700 1,574,226
47,253 129,447 200,000
32,929 229,515
91,700 39,612
$ 2,690,382
$ 245,996 349,955
2,345 168,680 250,000
1,016,976
1,738,292 (1 ,046,81 0)
691,482
435,156 546,768
1,673,406
$ 2,690,382
CIVITAN INTERNATIONAL STATEMENT OF ACTIVITIES AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED SEPTEMBER 30, 2015
Revenue and Other Support Membership dues Liability and insurance premiums Supply sales Recording and initiation fees Enrollment and charter fees -junior clubs Royalties Investment income Realized and unrealized losses on
investments, net Candy box receipts Convention registration Contributions Capital campaign contributions Other income
Net Assets Released from Restrictions
Functional Expenses Program services
Member services Convention Grants Scholarships
Supporting services Management and general Fund-raising Membership and general Cost of supply sales
Unrestricted
$ 935,752 41,447
176,977 132,245 130,625 204,231
42,749
(83,917)
128,879 279,659
44,559 70,277
2,103,483
1,126,136
3,229,619
454,020 127,362 400,000
20,000
1,001,382
1,151,232 641,255 563,709 107,441
2,463,637
3,465,019
Temporarily Restricted
$
259,908
920,519
1,180,427
( 1 ,086, 136)
94,291
Permanently Restricted
$
21,596
(34,630)
(13,034)
(40,000)
(53,034)
See auditors' report and accompanying notes to financial statements. - 6-
PEARCE, BEVILL, LEESBURG, MOORE, P.C. CERTIFIED PUBLIC ACCOUNTANTS
Total
$ 935,752 41,447
176,977 132,245 130,625 204,231
64,345
(118,547) 259,908 128,879
1,200,178 44,559 70,277
3,270,876
3,270,876
454,020 127,362 400,000
20,000
1,001,382
1,151,232 641,255 563,709 107,441
2,463,637
3,465,019
CIVITAN INTERNATIONAL STATEMENT OF ACTIVITIES AND CHANGES IN NET ASSETS- CONTINUED
FOR THE YEAR ENDED SEPTEMBER 30, 2015
Unrestricted
CHANGE IN NET ASSETS (235,400)
NET ASSETS, beginning of year 691,482
NET ASSETS, end of year $ 456,082
Temporarily Restricted
94,291
435,156
$ 529,447
Permanently Restricted
(53,034)
546,768
$ 493,734
See auditors' report and accompanying notes to financial statements. - 7-
PEARCE, BEVILL, LEESBURG, MOORE, P.C. CERTIFIED PUBLIC ACCOUNTANTS
Total
(194,143)
1,673,406
$ 1,479,263
CIVITAN INTERNATIONAL STATEMENT OF ACTIVITIES AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED SEPTEMBER 30, 2014
Revenue and Other Support Membership dues Liability and insurance premiums Supply sales Recording and initiation fees Enrollment and charter fees -junior clubs Royalties Investment income Realized and unrealized gains on
investments, net Gain on sale of fixed assets Candy box receipts Convention registration Contributions Other income
Net Assets Released from Restrictions
Functional Expenses Program services
Member services Convention Grants Scholarships
Supporting services Management and general Fund-raising Membership and general Cost of supply sales
Unrestricted
972,808 43,657
186,263 138,552 126,523 158,988 28,572
83,105 4,500
111,964 260,867 68,935
2,184,734
1,164,740
3,349,474
457,676 120,996 411,000
16,454
1,006,126
1,102,854 655,822 541,431
96,203
2,396,310
3,402,436
Temporarily Restricted
$
284,501
895,129
I, 179,630
(1,141,740)
37,890
Permanently Restricted
$
17,890
21,087
38,977
(23,000)
15,977
See auditors' report and accompanying notes to financial statements. - 8-
PEARCE, BEVILL, LEESBURG, MOORE, P.C. CERTIFIED PUBLIC ACCOUNTANTS
Total
$ 972,808 43,657
186,263 138,552 126,523 158,988 46,462
104,192 4,500
284,501 111,964
1,155,996 68,935
3,403,341
3,403,341
457,676 120,996 411,000
16,454
1,006,126
1,102,854 655,822 541,431 96,203
2,396,310
3,402,436
CIVITAN INTERNATIONAL STATEMENT OF ACTIVITIES AND CHANGES IN NET ASSETS- CONTINUED
FOR THE YEAR ENDED SEPTEMBER 30, 2014
Temporarily Permanently Unrestricted Restricted Restricted
CHANGE IN NET ASSETS (52,962) 37,890 15,977
NET ASSETS, beginning of year 744,444 397,266 530,791
NET ASSETS, end of year $ 691 ,482 $ 435,156 $ 546,768
See auditors' report and accompanying notes to financial statements. - 9-
PEARCE, BEVILL, LEESBURG, MOORE, P.C. CE RTI F I ED P UB LI C ACCOU NT AN T S
Total
905
1,672,501
$ 1,673,406
CIVITAN INTERNATIONAL STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED SEPTEMBER 30, 2015 AND 2014
2015 Cash Flows from Operating Activities
Change in net assets $ (194, 143)
Adjustments to reconcile change in net assets to net cash used for operating activities:
Depreciation 21,948 Realized and unrealized (gains) losses on investments, net 118,547 Investment income restricted for permanent investments (21 ,596) Investment income (42,749) Changes in assets and liabilities
Accounts receivable (1,305) Inventories 3,186 Grant receivable (50,000) Prepaid expenses and other assets (14,898) Accounts payable 26,381 Scholarships and grants payable 26,695 Accrued and withheld taxes 171 Other accrued expenses (9,960)
Net cash used for operating activities (137,723)
Cash Flows from Investing Activities Purchases of property and equipment (24,518) Purchases of investments (852,375) Proceeds from sale of investments 950,135
Net cash provided by investing activities 73,242
CASH FLOWS FROM FINANCING ACTIVITIES: Investment income restricted for permanent investments 21,596
Net cash provided by financing activities 21,596
See auditors' report and accompanying notes to financial statements. - 10-
PEARCE, BEVILL, LEESBURG, MOORE, P.C. CERTI F I ED PU BLI C ACCOU N TANTS
2014
$ 905
16,831 (104,192)
(17,890) (28,572)
5,877 (8,455) 50,000 46,073 12,546
(30,051) 440
(15,523) (72,011)
(155,598) (403,652) 612,718
53,468
17,890 17,890
CIVITAN INTERNATIONAL STATEMENTS OF CASH FLOWS- CONTINUED
FOR THE YEARS ENDED SEPTEMBER30, 2015 AND 2014
2015
Net decease in cash and cash equivalents (42,885)
Cash and Cash Equivalents, beginning of year 345,700
Cash and Cash Equivalents, end of year $ 302,815
Supplemental Disclosure of Cash Flow Information Cash paid during the year for interest $ 7,965
See auditors' report and accompanying notes to financial statements. - 11 -
PEARCE, BEVILL, LEESBURG, MOORE, P.C. CERT IFI ED PU BLI C ACCOUN T ANTS
2014
(653)
346,353
$ 345,700
$ 8,669
CIVITAN INTERNATIONAL NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2015 AND 2014
NOTE A- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Business Civitan International (the "Organization") is a membership organization with the goal of fostering fellowship, community knowledge and service through local clubs. The Organization was also formed to allow Civitan members to widen the breadth and scope of their charitable activities by pooling their resources to finance various projects.
Basis of Financial Statement Presentation The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the reporting date and revenues and expenses during the reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents For purposes of the statements of financial position and cash flows, the Organization considers cash on hand, deposits with banks and short-term investments with original maturities of three months or less to be cash and cash equivalents. The Organization maintains cash in depository accounts which, at times, may exceed federally insured limits. The Organization has not experienced any losses in such accounts. Cash balances restricted for the Candy Box Fund were $13,569 and $32,082 at September 30, 2015 and 2014, respectively.
Investments The Organization accounts for its investments in accordance with Financial Accounting Standards Board ("F ASB") Accounting Standards Codification ("ASC") 958-320, Not-for-Profit Entities - Investments - Debt Equity Securities. Investments in equity securities with readily determinable fair values and all investments in debt securities are reported at fair value based on quoted prices in active markets (all Level 1 measurements) with unrealized gains and losses included in the statements of activities and changes in net assets. The fair values of marketable equity and debt securities traded on securities exchanges are as of the last sales price on the valuation date. Investment income is recorded when earned and consists of interest and dividend income, realized gains or losses and unrealized appreciation (depreciation) on those investments, and is included in the statements of activities and changes in net assets. The fair values of investments in nonmarketable mutual funds are determined by the trustee of those funds.
Accounts and Contributions Receivable The Organization reports receivables at net realizable value and determines the allowance for doubtful accounts based on historical losses and current economic conditions. On a continuing basis, the Organization analyzes delinquent receivables. Once these receivables are determined to be uncollectible, they are written-off through a charge against an existing allowance account or against earnings.
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PEARCE, BEVILL, LEESBURG, MOORE, P.C. CERTIFIED PUBLIC ACCOUNTANTS
CIVITAN INTERNATIONAL NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2015 AND 2014
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
Inventories Inventories consist of supplies for resale and are stated at the lower of cost or market with cost calculated using the first-in, first-out (FIFO) method.
Shipping Costs Shipping costs are expensed as incurred and are included in the cost of supply sales in the statements of activities and changes in net assets.
Property and Equipment, net Property and equipment of the Organization is either recorded at cost and carried at cost less accumulated depreciation and included in unrestricted net assets or expensed at the time of the purchase based on materiality. Items or expenditures adding to the utility and/or life of an existing asset, costing $500 or more with a useful life greater than one (1) year shall be capitalized and depreciated over their estimated useful lives. Maintenance, repairs and minor renovations are charged to operations as incurred. When property and equipment is retired or otherwise disposed of, the related costs and accumulated depreciation are removed from their respective accounts, and any gain or loss on the disposition is credited or charged to operations. In the case of any donated property, the Organization records assets at fair value as of the donation date.
The Organization provides for depreciation of property and equipment using the straight-line method to amortize costs over estimated useful lives as follows:
Item
Buildings Equipment Leasehold improvements
Fund Accounting
Estimated Useful Life
15-30 years 3-25 years 10-20 years
In order to ensure observance of limitations and restrictions placed on the use of the resources available to the Organization, the accounts of the Organization are maintained on the accrual basis in accordance with the principles of "fund accounting"; thus, resources for various purposes are classified internally into the following funds that are in accordance with activities or objectives specified:
The General Fund was established to record all transactions of the Organization's operations related to serving the senior and junior clubs. It also contains the major property and equipment accounts and includes the related allowances for depreciation. All liabilities incurred for the purchase of property and equipment are recorded in this fund.
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PEARCE, BEVILL, LEESBURG, MOORE, P.C. CERTIFIED PUBLIC ACCOUNTANTS
CIVIT AN INTERNATIONAL NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2015 AND 2014
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES- Continued
The Candy Box Fund was established to account for all operations of the Candy Box Project. The Organization assumed control of this project in April 1980 from the Louisville Civitan Club, which began the project in 1976. Civitan clubs participating in the Candy Box Project retain 25 percent of the candy box receipts, and the remaining net receipts are remitted to the Organization. All net receipts (recognized on the cash basis) generated from the project through December 31, 1981, were transferred to Cedar Lake Lodge for construction funds per the agreement with the Louisville Civitan Club. Since 1981, the Candy Box Fund has been administered and controlled by the Organization. Periodically, the net receipts are transferred to certain funds, where the disbursement of the funds is administered by the Organization.
The Convention Fund was established to provide separate accounting for transactions involving the annual convention. Surplus funds are to be transferred to the General Fund from time to time as needed, provided sufficient funds remain in the Convention Fund as working capital for expenses incurred in preparation for the next scheduled convention. Indirect expenses and board expenses are paid by the General Fund. In addition, the General Fund pays convention expenses for travel, lodging and meals of the Organization's staff.
One of the Organization's funds is designated by the Board of Trustees for paying scholarships. Income earned by the Shropshire Memorial Scholarship Fund - Principal is transferred to the Shropshire Memorial Scholarship Fund - Income and is designated for the purpose of granting scholarships. Investments in the Shropshire Fund consist of U.S. government bonds, corporate bonds, stocks, mutual funds and money market funds. These investments are carried at market value. The Shropshire Memorial Scholarship Fund is used to fund scholarships to students meeting certain qualifications.
Contributions to the Organization designated for a specific use are placed in the applicable fund. Contributions to the Organization not designated for a specific use are placed in the General Fund. Such amounts may be used, with the approval of the Organization's Board of Directors, for charitable or humanitarian projects outlined in the Bylaws.
Net Assets The accompanying statements are presented in accordance with F ASB ASC 958-205, Not-forProfit Entities- Presentation of Financial Statements. Under ASC 958-205, the Organization is required to report information regarding its financial position based on the existence or absence of donor-imposed restrictions according to three classes of assets: permanently restricted net assets, temporarily restricted net assets and unrestricted net assets. These classifications are defined as follows:
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PEARCE, BEVILL, LEESBURG, MOORE, P.C. CERTIFIED PUBLIC ACCOUNTANTS
CIVITAN INTERNATIONAL NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2015 AND 2014
NOTE A- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES- Continued
Unrestricted Net Assets Net assets that are not subject to donor-imposed stipulations. Included in unrestricted net assets are funds that have been designated by the Organization for certain specific purposes.
Temporarily Restricted Net Assets Net assets subject to donor-imposed stipulations that permit the Organization to use or expend the donated assets as specified that will be met either by actions of the Organization and/or the passage of time.
Permanently Restricted Net Assets Net assets subject to donor-imposed stipulations that they be maintained permanently by the Organization. The donors of these assets permit the Organization to use all or part of the income earned on related investments for either general or specific purposes.
Donor-imposed Restrictions All contributions are considered to be available for unrestricted use unless specifically restricted by the donor. Amounts received that are restricted for future periods or restricted by the donor for specific purposes are reported as temporarily restricted or permanently restricted support.
Contributions of property and equipment without donor stipulations concerning the use of such long-lived assets are reported as revenues of the unrestricted net asset class. Contributions of cash or other assets to be used to acquire property and equipment without donor stipulations concerning the use of such long-lived assets are reported as revenues of the temporarily restricted net asset class. The restrictions are accounted for as net assets released from restriction at the time of acquisition of such long-lived assets or the date the asset was placed in service.
When a donor restriction expires, that is, when a stipulated time restriction ends or purpose restriction is accomplished, restricted net assets are reclassified to unrestricted net assets and are reported in the statements of activities and changes in net assets as net assets released from restrictions. If a restriction is fulfilled in the same time period in which the contribution is received, the contribution is reported as unrestricted.
Donated Material and Services No amounts have been reflected in the financial statements for donated services as these materials and services do not create or enhance nonfinancial assets or require specialized skills.
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PEARCE, BEVILL, LEESBURG, MOORE, P.C. CERT IFIED PUBLIC ACCOUNTANTS
CIVITAN INTERNATIONAL NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2015 AND 2014
NOTE A- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
Income Tax The Organization is exempt from federal income tax under Section 501(a) as an organization described in Section 501(c)(3) of the U.S. Internal Revenue Code and from state income tax under the provisions of the State Internal Revenue Code; therefore, no provision for income taxes has been made in the accompanying financial statements. The Organization has filed its not-for-profit tax returns for all years through September 30, 2014. Years ended September 30, 2012 and subsequent remain subject to audit by tax authorities.
Advertising Costs The Organization expenses advertising costs as incurred. Advertising costs for the years ended September 30,2015 and 2014 were $16,893 and $12,147, respectively.
Internally Designated Funds The Organization has internal funds designated for particular use by the Board of Directors and are thus restricted in their use. Because these funds are not legally restricted, they are included in unrestricted net assets.
Fair Value Measurements The Organization adopted F ASB ASC 820 ("ASC 820"), Fair Value Measurements and Disclosure, which establishes a framework for measuring fair value. This guidance defines fair value for financial reporting purposes as the price that would be received to sell an asset or paid to transfer a liability in an orderly market transaction between market participants at the measurement date (reporting date). Fair value is determined in the most advantageous market where the entity could transact business.
For each asset and liability required to be reported at fair value, management has identified the unit of account and valuation premise to be applied for purposes of measuring fair value. The unit of account is the level at which an asset or liability is aggregated or disaggregated for purposes of measuring fair value. The valuation premise is a concept that determines whether an asset is measured on a stand-alone basis or in combination with other assets. The Organization measures its assets and liabilities on a stand-alone basis then aggregates assets and liabilities with similar characteristics for disclosure purposes.
The hierarchy for inputs used in measuring fair value maximizes the use of observable inputs and minimizes the use of unobservable input by requiring that the observable inputs be used when available. Observable inputs are inputs that market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the Organization. Unobservable inputs are inputs that reflect the Organization's assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances.
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PEARCE, BEVILL, LEESBURG, MOORE, P.C. CERTIFIED PUBLIC ACCOUNTANTS
CIVITAN INTERNATIONAL NOTES TO FINANCIAL STATEMENTS
SEPTEMBER30, 2015 AND 2014
NOTE A- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES- Continued
That framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements). The three levels of the fair value hierarchy under ASC 820 are as follows:
Level 1 Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the Organization has the ability to access.
Level 2 1) Inputs to the valuation methodology include:
Level3
a) Quoted prices for similar assets or liabilities in active markets; b) Quoted prices for identical or similar assets or liabilities in inactive
markets; 2) Inputs other than quoted prices that are observable for the asset or liability; 3) Inputs that are derived principally from or corroborated by observable market
data by correlation or other means.
If the asset or liability has a specified (contractual) term, the Level 2 input must be observable for substantially the full term of the asset or liability.
Inputs to the valuation methodology are unobservable and significant to the fair value measurement.
If the determination of fair value measurement for a particular asset or liability is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. Management's assessment of the significance of a particular input to the fair value measurement requires judgment and considers factors specific to the asset or liability measured.
Valuation techniques: The techniques used in the valuation of the Organization's assets and liabilities are noted below:
The fair value of investments is based on quoted market prices in an active market for identical assets and liabilities or other observable inputs as of the reporting date. The fair value of mutual funds, U.S. government obligations and equity securities are categorized within Level 1 of the fair value hierarchy. The Organization does not have Level2 or Level 3 investments.
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PEARCE, BEVILL, LEESBURG, MOORE, P.C. CE RTIFIED PUBLIC ACCOUNTANTS
CIVIT AN INTERNATIONAL NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2015 AND 2014
NOTE A- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES- Continued
The preceding methods described may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, although the Organization believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date.
Some of the Organization's financial instruments are not measured at fair value on a recurring basis. However, these instruments are carried at amounts that approximate fair value due to their liquid or short-term nature. Such financial assets and financial liabilities include cash and cash equivalents, accounts receivable, inventories, grant receivable, property held-for-resale, investment in cash surrender value of life insurance, note receivable, accounts payable, scholarship and grants payable, other accrued expenses and note payable.
In August 2008, accounting guidance was issued on the net asset classification of donorrestricted endowment funds for a not-for-profit organization that is subject to an enacted version of the Uniform Prudent Management of Institutional Funds Act of 2006 ("UPMIF A"). This guidance also improves disclosures about an organization's endowment funds (both donorrestricted endowment funds and board-designated endowment funds) whether or not the organization is subject to UPMIF A. See Note D for more information regarding the Organization's endowment funds.
The State of Alabama adopted UPMIF A effective January 1, 2009. The Board of Directors, on advice of legal counsel, has determined that the majority of the Organization's net assets meet the definition of endowment funds. The Organization is subject to the Bylaws of the Organization, and most contributions received are subject to the terms of the Bylaws.
Subsequent Events The Organization has evaluated subsequent events through January 6, 2016, which is the date the financial statements were available to be issued and concluded no events or transactions occurred during that period requiring recognition or disclosure.
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PEARCE, BEVILL, LEESBURG, MOORE, P.C. CERTIFIED PUBLIC ACCOUNTANTS
CIVITAN INTERNATIONAL NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2015 AND 2014
NOTE B- INVESTMENTS
At September 30, the Organization's investments consisted of the following:
2015
Mutual funds $ 758,181 Fixed income 216,056 Equity securities 426,431
$ 1AQQ!668
2014
$ 389,463 292,556 892,207
$ 115741226
Trustee fees included in the accompanying statements of activities and changes in net assets were $14,979 and $17,233 for the years ended September 30, 2015 and 2014, respectively. The investments are not insured with the Federal Deposit Insurance Corporation.
NOTE C -FAIR VALUE MEASUREMENTS
The Organization' s assets and liabilities recorded at fair value have been categorized based upon a fair value hierarchy. See Note A for a discussion of the Organization's policies regarding this hierarchy.
The following fair value hierarchy tables present information about the Organization's assets and liabilities measured or disclosed at fair value on a recurring basis.
Fair Value Measurements Using:
Fair Value Level 1 Level2 Level3 September 30, 2015:
Mutual funds $ 758,181 $ 758,181 $ $ Fixed income 216,056 216,056 Equity securities 426,431 426,431
$ 114001668 $ 1AQ01668 $ $
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PEARCE, BEVILL, LEESBURG, MOORE, P.C. CE R T IFI ED PU BLI C ACCOUN T A NT S
CIVITAN INTERNATIONAL NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2015 AND 2014
NOTE C - FAIR VALUE MEASUREMENTS - continued
Fair Value Measurements Using:
Fair Value Level 1 Level2 September 30, 2014:
Mutual funds $ 389,463 $ 389,463 $ $ Fixed income 292,556 292,556 Equity securities 892,207 892,207
$ 1.574.226 $ 1.574.226 $ $
NOTE D- ENDOWMENTS
Level3
The Organization's endowments consist of individual funds established for a variety of purposes. Its endowments include both donor-restricted endowment funds and funds designated by the Board of Directors to function as endowments. As required by accounting principles generally accepted in the United States of America, net assets associated with endowment funds, including funds designated by the Board of Directors to function as endowments, are classified and reported based on the existence or absence of donor-imposed restrictions.
Interpretation of Relevant Law The State of Alabama adopted UPMIFA effective January 1, 2009. The Board of Directors of the Organization has interpreted UPMIF A as requiring the preservation of the fair value of the original gift as of the gift date of the donor-restricted endowment funds absent explicit donor stipulations to the contrary. As a result of this interpretation, the Organization classifies as permanently restricted net assets (a) the original value of the gifts donated to the permanent endowment, (b) the original value of subsequent gifts to the permanent endowment (if any) and (c) accumulation to the permanent endowment made in accordance with the direction of the applicable donor gift instrument at the time the accumulation is added to the fund. The remaining portion of the donor-restricted endowment fund that is not classified in permanently restricted net assets is classified as temporarily restricted net assets until those amounts are appropriated for expenditure by the Organization in a manner consistent with the donor's stipulations or the standard of prudence prescribed by the UPMIF A. In accordance with UPMIF A, the Organization considers the factors which follow in making a determination to appropriate or accumulate donor-restricted endowment funds:
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PEARCE, BEVILL, LEESBURG, MOORE, P.C. CERTIFIED PUBLIC ACCOUNTANTS
CIVITAN INTERNATIONAL NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2015 AND 2014
NOTED- ENDOWMENTS -Continued
1) The duration and preservation of the fund. 2) The purpose of the Organization and donor-restricted endowment fund. 3) General economic decisions. 4) The possible effect of inflation and deflation. 5) The expected total return from income and the appreciation of investments. 6) Other resources of the Organization. 7) The investment policies of the Organization.
The following depicts the endowment funds, as well as the activity for the endowment funds, for the year ended September 30, 2015:
Temporarily Permanently Unrestricted Restricted Restricted Total
Endowment net assets - beginning of year $ 1,738,292 $ $ 546,768 $ 2,285,060
Contributions to endowment funds 58,414 58,414 Disbursements from endowment funds (100,749) (40,000) (140,749)
Interest and dividends, net of investment expenses 18,474 21 ,596 40,070
Net depreciation (36.948) (34,630) (71,578)
Change in endowment assets (60,809) (53,034) (113.843)
Endowment net assets - end of year $ l 677 483 $ $ 493 734 $ 2 171 217
The following depicts the endowment funds, as well as the activity for the endowment funds, for the year ended September 30, 2014:
Temporarily Permanently Unrestricted Restricted Restricted Total
Endowment net assets- beginning of year $ 1,735,812 $ $ 530,791 $ 2,266,603
Contributions to endowment funds 52,694 52,694 Disbursements from endowment funds (97,635) (23,000) (120,635)
Interest and dividends, net of investment expenses 13,810 17,890 31,700
Net appreciation 33 611 21,087 54 698
Change in endowment assets 2 480 15 977 18 457
Endowment net assets- end of year $ l 738 292 $ $ 546 768 $ 2 285 060
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PEARCE, BEVILL, LEESBURG, MOORE, P.C. C ERTIFIED PUBLI C A CCO UNTANTS
CIVITAN INTERNATIONAL NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2015 AND 2014
NOTE D - ENDOWMENTS - Continued
The following depicts the endowment net asset composition by type of fund as of the year ended September 30, 2015:
Donor-designated endowment funds
Board-designated endowment funds
Unrestricted
$
1.677.483
$ I 677 483
Temporarily Restricted
$
$'===,;;
Permanently Restricted
$ 493 ,734
$ 493 734
Total
$ 493,734
1.677.483
$ 2 171 217
The following depicts the endowment net asset composition by type of fund as of the year ended September 30, 2014:
Donor-designated endowment funds
Board-designated endowment funds
Unrestricted
$
1.738,292
$ I 738 292
Return Objectives and Risk Parameters
Temporarily Restricted
$
$==~
Permanently Restricted
$ 546,768
$ 546 768
Total
$ 546,768
1.738.292
$ 2 285 060
The Organization has adopted investment and spending policies for endowment assets that attempt to maximize return with reasonable and prudent levels of risk, while seeking to maintain the purchasing power of the current assets and all future contributions. The objective is to maintain the level of services and programs in relation to the average cost increases and maintain an appropriate asset allocation based on a total return policy that is compatible with a flexible spending policy, while still having the potential to produce positive real returns. Endowment assets include those assets of donor-restricted funds that the Organization must hold in perpetuity or for a donor-restricted period(s), as well as board-designated funds.
Strategies Employed for Achieving Objectives To satisfy its long-term rate-of-return objective that is at least 3.5 percent greater than the rate of inflation as measured by the Consumer Price Index, the Organization believes that long-term investment performance is in large part a function of asset class mix.
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PEARCE, BEVILL, LEESBURG, MOORE, P.C. CE RTIFIED PUBLIC ACCOUNTANTS
CIVITAN INTERNATIONAL NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2015 AND 2014
NOTE D - ENDOWMENTS - Continued
The current spending policy for grant making from the Organization's board-designated funds is as follows:
1) When necessary and/or available, cash inflows/outflows will be deployed in a manner consistent with the strategic asset allocation of the portfolio. If there are no cash flows, the allocation of the portfolio will be reviewed quarterly.
2) The fund will distribute, as directed, income defined to mean the accumulated interest and dividends of the fund reduced by the management fee applicable to this fund. Any capital gains/losses derived from security transactions will be added/deducted to/from the principal of the fund.
NOTE E- PROPERTY AND EQUIPMENT
At September 30, property and equipment was comprised of the following:
2015 2014
Land $ 72,000 $ 72,000 Construction in progress 74,916 51,300 Buildings 922,985 922,985 Equipment 182,003 181,101 Leasehold improvements 94 900 94,900
1,346,804 1,322,286
Less accumulated depreciation (1,114,719) (1,092,771)
$ 232,085 $ 229,515
Depreciation expense amounted to $21,948 and $16,831 in 2015 and 2014, respectively.
The Organization has land and a building with net book values totaling $91,700 at September 30, 2015 and 2014, which are listed as being held for resale. The net book values do not exceed estimated market values.
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PEARCE, BEVILL, LEESBURG, MOORE, P.C. CERTIFIED PUBLIC ACCOUNTANTS
CIVIT AN INTERNATIONAL NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2015 AND 2014
NOTE F - LINE OF CREDIT
The Organization has a line of credit with a bank. Under the agreement, the Organization may borrow up to the amount held by the Organization in a pledged collateral account ($433,702 and $453,243 for September 30, 2015 and 2014, respectively). Interest is charged at the prime rate plus 0.9 percent. Interest was charged at 4.15 percent at September 30,2015 and 2014. The line of credit is collateralized by the Organization's investments. The outstanding balance under this agreement as of September 30, 2015 and 2014 was $250,000. The line of credit matures in June 2016.
NOTE G - 401(k) PLAN
The Organization has a 401(k) plan (the "Plan") for all employees. The Plan provides for discretionary contributions with a base contribution of an amount equal to five percent of individual gross earnings after one year of continued service. Immediately upon participation in the Plan, employees are 100 percent vested in the Organization's contribution to the Plan. The Plan also provides for voluntary employee contributions of up to the legally allowable percentages of individual gross earnings with employer-matching contributions equal to 100 percent of the first five percent of employee earnings. The Organization's contribution to the Plan was $97,197 and $95,742 for the years ended September 30,2015 and 2014, respectively.
NOTE H- LEASE OBLIGATIONS
In 1974, under a lease agreement, the City of Birmingham (the "City"), Alabama issued 7.75 percent Revenue Bonds in the principal amount of $1,000,000. The bonds, which were issued to finance the purchase of land, construction of a building and purchase of furniture and equipment for the Civitan headquarters, were paid in full as of September 30, 1984. The lease agreement was amended to provide for annual rents of $6,250 that ended June 30, 2014. The Organization and the City negotiated a termination agreement in May 2015 in which the Organization will pay the City $62,500 in rent due and $1,000 as cost to purchase the property. The total due to the City at September 30,2015 of$63,500 is included in other accrued expenses on the Statement of Financial Position. The agreement is further contingent on the Organization holding its 2017 Civitan International Conference within the city of Birmingham.
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PEARCE, BEVILL, LEESBURG, MOORE, P.C. CERTIFIED PUBLIC ACCOUNTANTS
CIVITAN INTERNATIONAL NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2015 AND 2014
NOTE I- BOARD-DESIGNATED UNRESTRICTED NET ASSETS
At September 30, Board-designated unrestricted net assets were comprised of the following:
Amounts designated by the Board for Shropshire Fund
Amounts designated by the Board for Endowment
2015
$ 1,322,009 355,474
$ 1.677.483
2014
$ 1,382,818 355,474
$ 1.738.292
NOTE J - NATURE AND AMOUNT OF TEMPORARILY AND PERMANENTLY RESTRICTED NET ASSETS
At September 30, temporarily restricted net assets were available for the following purposes:
2015 2014
Club designated $ 157,100 $ 144,877 Civitan International Research Center 332,024 250,631 Junior Civitan 711 36 Other 39,612 39,612
Total temporarily restricted net assets $ 5221447 $ 4351156
At September 30, permanently restricted net assets were available for the following purpose:
Tommy McNulty Endowment
Total permanently restricted net assets
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2015
$ 493,734
$ 423)34
PEARCE, BEVILL, LEESBURG, MOORE, P.C. CERT IFIED PUBLIC ACCOUNTANTS
2014
$ 546,768
$ 5461768
CIVITAN INTERNATIONAL NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2015 AND 2014
NOTE K- COMMITMENTS
The Organization has a memorandum of understanding to contribute up to $1,000,000 per year to the Civitan International Research Center (the "Research Center") beginning October 1, 1989. The Research Center is a comprehensive research facility located on the campus of the University of Alabama at Birmingham, dedicated to clinical and basic research, and focused on the prevention, treatment and amelioration of mental retardation and developmental disabilities. During the years ended September 30, 2015 and 2014, the Organization contributed the following amounts to the Research Center from the indicated fund:
2015 2014
Civitan International Research Fund* $ 321,000 $ 363,000 Junior Civitan 39,000 25,000 The Tommy McNulty Fund 40,000 23,000
$ 400~000 $ 411~QQO
*This amount includes $250,000 grants in 2015 and 2014 from the Foundation for Intellectual and Developmental Disabilities, Chesapeake District, Civitan International, Incorporated.
The total amount given or accrued to date to the Research Center as of September 30, 2015 and 2014 was $17,850,000 and $17,450,000, respectively.
NOTE L -CONTRIBUTIONS
During the years ended September 30, 2015 and 2014, contributions to the Organization were as follows:
2015 2014 Unrestricted:
Contributions $ 279,659 $ 260,867
Total unrestricted contributions $ 279.659 $ 260.867
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PEARCE, BEVILL, LEESBURG, MOORE, P.C. CERTIFIED PUBLIC ACCOUNTANTS
CIVITAN INTERNATIONAL NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2015 AND 2014
NOTE L - CONTRIBUTIONS - Continued
2015 Temporarily restricted:
Designated by clubs and districts $ 118,057 Junior Civitan - Sno Do 62,621 Junior Civitan - Dance-a-thon 49,228 Civitan International Research Center* 690,384 Ryan Clark Memorial 217 Other 12
Total temporarily restricted contributions $ 22Ql512
2014
$ 85,182 53,034 50,520
706,365
28
$ 895)29
*This amount includes $250,000 grants in 2015 and 2014 from the Foundation for Intellectual and Developmental Disabilities, Chesapeake District, Civitan International, Incorporated.
NOTE M- NET ASSETS RELEASED FROM RESTRICTIONS
During the years ended September 30, 2015 and 2014, donor-imposed restrictions on temporarily restricted net assets were satisfied as follows:
2015 2014 Fund-raising:
Candy box activities $ 174,944 $ 184,046 Civitan International - Junior Civitan 111,186 104,055
Research Center grants 321,000 363,000 Employment costs and overhead charges:
Candy Box Fund 115,000 120,000 Research Center Fund 364,006 370,639
Total net assets released from restrictions $ 1!086)36 $ 1)41!740
During the year ended September 30,2015, permanent restrictions were released by the donor of $40,000 ($23,000 in 2014), and the funds were given to the Research Center.
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PEARCE, BEVILL, LEESBURG, MOORE, P.C. CERTIFIED PUBLIC ACCOUNTANTS