Marin Humane Society...2019/06/30 · Marin Humane Society dba Marin Humane Statements of Financial...

Marin Humane Societydba Marin Humane

Financial Statements

June 30, 2019 and 2018

TABLE OF CONTENTS

Page No.

Independent Auditor's Report 1 - 2

Statements of Financial Position 3

Statements of Activities 4 - 5

Statements of Functional Expenses 6 - 7

Statements of Cash Flows 8

Notes to Financial Statements 9 - 26

INDEPENDENT AUDITOR'S REPORT

To the Board of DirectorsMarin Humane Societydba Marin HumaneNovato, California

We have audited the accompanying financial statements of Marin Humane Society dba Marin Humane,which comprise the statements of financial position as of June 30, 2019 and 2018, and the relatedstatements of activities, functional expenses, and cash flows for the years then ended, and the relatednotes to the financial statements.

Management's Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these financial statements inaccordance with accounting principles generally accepted in the United States of America; this includesthe design, implementation, and maintenance of internal control relevant to the preparation and fairpresentation of financial statements that are free from material misstatement, whether due to fraud orerror.

Auditor's Responsibility

Our responsibility is to express an opinion on these financial statements based on our audits. Weconducted our audits in accordance with auditing standards generally accepted in the United States ofAmerica. Those standards require that we plan and perform the audit to obtain reasonable assuranceabout whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures inthe financial statements. The procedures selected depend on the auditor's judgment, including theassessment 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 preparationand fair presentation of the financial statements in order to design audit procedures that are appropriate inthe circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity'sinternal control. Accordingly, we express no such opinion. An audit also includes evaluating theappropriateness of accounting policies used and the reasonableness of significant accounting estimatesmade 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 forour audit opinion.

Opinion

In our opinion, the financial statements referred to above present fairly, in all material respects, thefinancial position of Marin Humane Society dba Marin Humane as of June 30, 2019 and 2018, and thechanges in its net assets and its cash flows for the years then ended in accordance with accountingprinciples generally accepted in the United States of America.

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Change in Accounting Principle

As described in Note 2 to the financial statements, Marin Humane Society dba Marin Humane hasadopted ASU 2016-14, Presentation of Financial Statements of Not-for-Profit Entities. Our opinion isnot modified with respect to that matter.

Correction of Error

As discussed in Note 14 to the financial statements, certain errors resulting in understatement of assetsand net assets as of June 30, 2018 and contribution revenue for the year ended June 30, 2018 werediscovered during the current year. Accordingly, the financial statements have been restated to reflectMarin Humane Society dba Marin Humane's beneficial interest in a perpetual trust, the relatedcontribution and bequest revenue, and interest and dividend income and an adjustment has been made tonet assets as of June 30, 2017 to correct the error. Our opinion is not modified with respect to this matter.

ArmaninoLLP

San Ramon, California

November 26, 2019

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Statements of Financial PositionJune 30, 2019 and 2018 (Restated)

(Restated)2019 2018

ASSETS

Cash and cash equivalents $ 1,118,359 $ 735,037Accounts receivable 314,377 297,042Prepaid expenses 90,799 68,130Contributions and grants receivable, net 283,061 152,741Inventory 39,962 43,868Investments 8,281,088 8,961,362Investments held for long-term purposes 1,534,373 1,522,826Other investments 1,463,905 138,055Property and equipment, net 4,989,803 5,133,632Beneficial interest in perpetual trust 262,582 267,814

Total assets $ 18,378,309 $ 17,320,507

LIABILITIES AND NET ASSETS

LiabilitiesAccounts payable $ 226,755 $ 192,014Accrued expenses 617,959 516,503Deferred revenue 71,500 18,455

Total liabilities 916,214 726,972

Net assetsWithout donor restrictions 14,562,219 13,782,183With donor restrictions 2,899,876 2,811,352

Total net assets 17,462,095 16,593,535

Total liabilities and net assets $ 18,378,309 $ 17,320,507

The accompanying notes are an integral part of these financial statements.3


Statement of ActivitiesFor the Year Ended June 30, 2019

Without DonorRestrictions

With DonorRestrictions Total

Revenues, gains, and other supportAnimal services and other county fees $ 3,489,769 $ - $ 3,489,769Fees for services 363,345 - 363,345Education fees 542,726 - 542,726Contributions 1,635,053 439,755 2,074,808Bequests 1,064,889 2,000 1,066,889Change in value of beneficial interest in perpetual trust - (5,232) (5,232)In-kind contributions 145,143 - 145,143Interest and dividend income, net 229,621 34,267 263,888Realized gains, net 19,815 4,223 24,038Unrealized gains, net 1,268,341 25,476 1,293,817Merchandise sales 230,068 - 230,068Special events, net of expenses of $29,881 65,841 - 65,841Grants 58,000 152,425 210,425Thrift shop sales 28,903 66,656 95,559Other revenue 12,009 - 12,009Net assets released from restriction 631,046 (631,046) -

Total revenues, gains, and other support 9,784,569 88,524 9,873,093

Functional expensesProgram services 7,129,230 - 7,129,230Management and general 946,547 - 946,547Fundraising and development 928,756 - 928,756

Total functional expenses 9,004,533 - 9,004,533

Change in net assets 780,036 88,524 868,560

Net assets, beginning of year, as restated 13,782,183 2,811,352 16,593,535

Net assets, end of year $ 14,562,219 $ 2,899,876 $ 17,462,095



Statement of ActivitiesFor the Year Ended June 30, 2018 (Restated)


With DonorRestrictions

(Restated)Total

Revenues, gains (losses), and other supportAnimal services and other county fees $ 3,355,547 $ - $ 3,355,547Fees for services 410,487 - 410,487Education fees 546,541 - 546,541Contributions 1,463,794 241,447 1,705,241Bequests 2,048,735 52,500 2,101,235Change in value of beneficial interest in perpetual trust - 11,659 11,659In-kind contributions 160,301 - 160,301Interest and dividend income, net 155,473 25,590 181,063Realized gains, net 66,924 13,426 80,350Unrealized gains, net 333,536 61,728 395,264Merchandise sales 241,296 - 241,296Special events, net of expenses of $105,607 85,555 202,182 287,737Grants 54,000 223,311 277,311Thrift shop sales 28,064 68,274 96,338Other revenue 14,583 - 14,583Loss on disposal of fixed assets (1,000) - (1,000)Net assets released from restriction 728,969 (728,969) -

Total revenues, gains (losses), and other support 9,692,805 171,148 9,863,953

Functional expensesProgram services 6,678,072 - 6,678,072Management and general 922,844 - 922,844Fundraising and development 918,887 - 918,887

Total functional expenses 8,519,803 - 8,519,803

Change in net assets 1,173,002 171,148 1,344,150

Net assets, beginning of year, as restated 12,609,181 2,640,204 15,249,385

Net assets, end of year, as restated $ 13,782,183 $ 2,811,352 $ 16,593,535



Statement of Functional ExpensesFor the Year Ended June 30, 2019

AnimalServices

Clinic,Adoption, and

Foster Care

Education andCommunityEngagement

AnimalOutfitters Thrift Shop

Total ProgramServices

Managementand General

Fundraisingand

Development TotalPersonnel expenses

Salaries and wages $ 1,843,646 $ 791,427 $ 1,244,504 $ 79,818 $ - $ 3,959,395 $ 565,685 $ 463,422 $ 4,988,502Payroll taxes and benefits 469,587 217,984 341,415 31,556 - 1,060,542 155,762 102,757 1,319,061

Total personnel expenses 2,313,233 1,009,411 1,585,919 111,374 - 5,019,937 721,447 566,179 6,307,563

Supplies and servicesSupplies 87,982 196,158 59,754 1,848 483 346,225 8,798 3,552 358,575Depreciation 75,872 70,264 141,847 5,938 - 293,921 29,870 9,566 333,357Professional services 62,571 15,155 111,967 2,172 - 191,865 55,500 211,688 459,053Cost of goods sold - - - 150,035 - 150,035 - - 150,035Utilities 36,386 35,359 68,027 2,847 2,395 145,014 15,352 4,586 164,952In-kind expense 39,656 21,450 39,638 8,013 - 108,757 12,090 24,296 145,143Veterinary services - 62,955 163,889 - - 226,844 - - 226,844Computer expenses 16,662 7,119 12,025 1,628 - 37,434 5,998 3,261 46,693Fees 6,096 8,959 23,162 6,494 159 44,870 2,444 18,122 65,436Administration expense 14,227 4,741 28,041 679 - 47,688 41,601 21,799 111,088Maintenance 40,708 37,806 75,415 3,157 1,919 159,005 14,032 5,085 178,122Insurance 27,336 23,098 28,468 1,100 974 80,976 4,889 1,773 87,638Telephone 16,540 5,346 8,433 493 1,023 31,835 6,590 2,326 40,751Printing 7,325 3,367 17,483 5 - 28,180 2,497 8,283 38,960Advertising - - 22,791 - - 22,791 - - 22,791Vehicle expenses 43,598 1,840 603 - - 46,041 1,049 - 47,090Rent - - 7,735 - 21,950 29,685 - - 29,685Travel 5,451 3,313 20,920 - - 29,684 7,472 2,101 39,257Meetings 2,984 1,040 3,916 - - 7,940 10,309 297 18,546Postage 7,500 402 5,190 1 - 13,093 4,655 45,450 63,198Feed 38,164 27 6,868 - - 45,059 - - 45,059Taxes and licenses 3,388 4,650 5,819 780 - 14,637 1,806 392 16,835Uniforms 7,120 94 - - - 7,214 148 - 7,362Special event expenses - - - - - - - 29,881 29,881Scholarships - - 500 - - 500 - - 500

Total supplies and services 539,566 503,143 852,491 185,190 28,903 2,109,293 225,100 392,458 2,726,851Less expenses included in revenues, gains,

and other support: special events - - - - - - - (29,881) (29,881)

Total expenses included in expensesection on the statement of activities $ 2,852,799 $ 1,512,554 $ 2,438,410 $ 296,564 $ 28,903 $ 7,129,230 $ 946,547 $ 928,756 $ 9,004,533



Statement of Functional ExpensesFor the Year Ended June 30, 2018

AnimalServices

Clinic,Adoption, and

Foster Care

Education andCommunityEngagement

AnimalOutfitters Thrift Shop

Total ProgramServices

Managementand General

Fundraisingand

Development TotalPersonnel expenses

Salaries and wages $ 1,619,701 $ 765,246 $ 1,176,720 $ 85,568 $ - $ 3,647,235 $ 511,347 $ 466,121 $ 4,624,703Payroll taxes and benefits 444,861 222,082 326,854 26,712 - 1,020,509 129,458 98,584 1,248,551

Total personnel expenses 2,064,562 987,328 1,503,574 112,280 - 4,667,744 640,805 564,705 5,873,254

Supplies and servicesSupplies 81,664 178,961 50,582 1,718 755 313,680 12,400 5,857 331,937Depreciation 96,589 53,540 104,507 6,017 - 260,653 41,149 14,884 316,686Professional services 53,060 13,536 77,413 1,661 - 145,670 47,137 162,461 355,268Cost of goods sold - - - 151,722 - 151,722 - - 151,722Utilities 54,376 32,425 58,835 3,387 2,232 151,255 22,645 8,380 182,280In-kind expense 40,825 25,446 33,406 1,129 - 100,806 23,039 36,456 160,301Veterinary services - 33,034 160,097 - - 193,131 - - 193,131Computer expenses 42,695 14,610 28,387 3,673 - 89,365 16,023 9,360 114,748Fees 9,529 11,581 22,047 6,641 156 49,954 4,326 27,008 81,288Administration expense 12,178 5,718 20,030 997 360 39,283 26,334 19,123 84,740Maintenance 55,847 32,667 59,773 3,442 2,105 153,834 23,004 8,514 185,352Insurance 34,673 21,269 23,230 1,855 1,166 82,193 7,956 2,946 93,095Telephone 19,571 7,994 10,316 669 990 39,540 8,607 2,959 51,106Printing 5,336 2,628 37,324 4 - 45,292 8,791 11,652 65,735Advertising - - 15,691 - - 15,691 - - 15,691Vehicle expenses 40,720 2,491 458 - - 43,669 10,959 - 54,628Rent - - 9,898 - 20,300 30,198 - - 30,198Travel 967 6,303 9,437 - - 16,707 14,428 4,103 35,238Meetings 2,498 3,379 9,588 - - 15,465 7,687 2,260 25,412Postage 6,398 372 8,941 23 - 15,734 4,958 37,511 58,203Feed 31,681 - 4,818 - - 36,499 - - 36,499Taxes and licenses 4,958 3,798 4,933 880 - 14,569 2,596 708 17,873Uniforms 4,722 196 - - - 4,918 - - 4,918Special event expenses - - - - - - - 105,607 105,607Scholarships - - 500 - - 500 - - 500

Total supplies and services 598,287 449,948 750,211 183,818 28,064 2,010,328 282,039 459,789 2,752,156Less expenses included in revenues, gains,

and other support: special events - - - - - - - (105,607) (105,607)

Total expenses included in expensesection on the statement of activities $ 2,662,849 $ 1,437,276 $ 2,253,785 $ 296,098 $ 28,064 $ 6,678,072 $ 922,844 $ 918,887 $ 8,519,803



Statements of Cash FlowsFor the Years Ended June 30, 2019 and 2018 (Restated)

(Restated)2019 2018

Cash flows from operating activitiesChange in net assets $ 868,560 $ 1,344,150Adjustments to reconcile change in net assets to net cash

provided by (used in) operating activitiesDepreciation 333,357 316,686Donations of investments (258,280) (363,576)Proceeds from sale of donated investments 49,029 316,676Net realized and unrealized gains on investments (1,317,855) (475,614)Loss on disposal of property and equipment - 1,000Contributions restricted for long-term purposes - (34,188)Change in value of beneficial interest in perpetual trust 5,232 (11,659)Changes in operating assets and liabilities

Accounts receivable (17,335) (16,083)Prepaid expenses and other assets (22,669) 6,874Contributions and grants receivable, net (130,320) 18,967Inventory 3,906 4,078Accounts payable 34,741 (49,545)Accrued expenses 101,456 (12,706)Deferred revenue 53,045 12,205

Net cash provided by (used in) operating activities (297,133) 1,057,265

Cash flows from investing activitiesPurchase of property and equipment (189,528) (286,996)Purchase of investments (869,321) (2,708,519)Proceeds from the sale or maturity of investments 1,739,304 2,177,604

Net cash provided by (used in) investing activities 680,455 (817,911)

Cash flows from financing activitiesCollection of contributions restricted for long-term purposes - 5,000

Net cash provided by financing activities - 5,000

Net increase in cash and cash equivalents 383,322 244,354

Cash and cash equivalents, beginning of year 735,037 490,683

Cash and cash equivalents, end of year $ 1,118,359 $ 735,037



Notes to Financial StatementsJune 30, 2019 and June 30, 2018 (Restated)

1. ORGANIZATION

Marin Humane Society, dba Marin Humane ("Marin Humane"), is a nonprofit corporationorganized in 1907. In 2017, Marin Humane created its dba as part of a rebranding project tobetter articulate its mission and purpose. Marin Humane is not a chapter or affiliate of any otheranimal welfare organization. Principally serving Marin County, California, Marin Humane'swork and impact go beyond the county borders. Marin Humane is committed to a world in whichanimals are treated with compassion and respect and where resources are readily available tothose who require support for the animals in their lives. Marin Humane envisions a humaneworld for every animal.

Marin Humane's mission is to transform lives through exceptional animal care, humaneeducation, and advocacy. The mission is carried out 24 hours a day, 365 days a year, throughmany programs and services for the community. Since 1979, Marin Humane has contracted withMarin County and its 11 cities and towns through a Joint Powers Agreement ("JPA"), to provideanimal services. Marin Humane's Animal Services program is responsible for responding toanimal-related complaints, investigating animal cruelty and neglect cases, rescuing animals indistress, assisting with lost and found animal reports, administering dog licensing, and enforcingcounty and municipal animal ordinances. Marin Humane also responds to wildlife rescue callsand is recognized by the County of Marin as a first responder for animal-related needs in theevent of a disaster.

Best known for operating the animal shelter and adoption center on its Novato campus, MarinHumane provides shelter services for thousands of animals surrendered by their guardians, foundlost or stray, and transferred from overcrowded or under-resourced shelters. In 2015, MarinHumane opened a satellite cat adoption center ("Kitty Corner") in San Anselmo. Marin Humane'sBehavior & Training department assesses the temperament of animals prior to their being madeavailable for adoption; in the best interest of the animals, there is no set time limit once they havebeen made available for adoption. The Clinic team medically evaluates and treats all shelteranimals. It also operates a public Spay/Neuter Clinic for low-income pet guardians who live inMarin County and an annual low cost vaccination Clinic for the public.

Volunteers are active in all departments, including fostering animals who may be too young or inneed of home treatment, recuperation, or extra care before becoming available for adoption.

Educational programs are offered to people of all ages, including two humane law academies,classroom presentations, dog and cat training classes, workshops, summer camps, and afterschool youth programs.

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1. ORGANIZATION (continued)

Under the Community Engagement department, Marin Humane's Pet Assistance programprovides free pet food and financial assistance to the pets of hundreds of low-income seniorsthroughout Marin County. In March 2018, Marin Humane began fundraising to expand its petfood and pet care assistance to any pet guardian in Marin County who qualifies as low-income.This program, titled Pet Safety Net, provides guardians with resources to keep their pets in theirhome as long as possible. The Community Engagement department also coordinates teams ofvolunteers and their trained dogs to offer reading programs in local schools and libraries as wellas thousands of visits to hospitals, senior communities, hospice facilities, and others.

For over 50 years, auxiliary volunteers have operated a Thrift Shop in San Anselmo. Revenuesfrom the Thrift Shop support the Spay/Neuter Clinic.

All of the programs and services at Marin Humane are intended to bring animals and humanstogether, forging a bond that not just impacts people's homes but makes neighborhoods happierand healthier.

During the year ended June 30, 2019, Marin Humane received and cared for 4,831 animals,including 1,101 wild animals. Marin Humane met its goal of at least a 90% Live Release Rate(the percentage of animals received leaving with positive outcomes), with the followingpercentages of animals who left either adopted, returned to guardian or transferred out to anotherresponsible animal organization: 93% of the dogs and puppies, 92% of the cats and kittens, and94% of all other domestic animals.

Marin Humane rehomed a total of 2,220 animals, returned 739 animals to their guardians, andtransferred 272 domestic animals to other animal organizations. For wildlife, Marin Humanegenerally transfers them to a licensed wildlife rehabilitation center.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of accounting and financial statement presentation

Marin Humane's financial statements have been prepared on the accrual basis of accounting inaccordance with accounting principles generally accepted in the United States of America ("U.S.GAAP") applicable to non-profit organizations. Accordingly, net assets and revenues, gains andlosses are classified based on the existence or absence of donor-imposed restrictions.

Net assets and changes therein are classified as follows:

Net assets without donor restrictions - net assets not subject to donor-imposed restrictions.

Net assets with donor restrictions - net assets subject to donor-imposed restrictions that may

or will be met by actions of Marin Humane and/or the passage of time and those net assets

subject to donor-imposed stipulations that they be maintained permanently by Marin Humane.

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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Basis of accounting and financial statement presentation (continued)

Revenues are reported as increases in net assets without donor restrictions unless use of therelated assets is limited by donor-imposed restrictions. Expenses are reported as decreases in netassets without donor restrictions. Investment income and gains or losses on investments andother assets or liabilities are reported as increases or decreases in net assets without donorrestrictions unless their use is restricted by explicit donor restriction or by law. Expirations of netassets with donor restrictions (i.e., the donor-stipulated purpose has been fulfilled and/or thestipulated time period has elapsed) are reported as reclassifications between the applicable classesof net assets.

Revenue recognition

Revenue, other than from contributions, bequests, and unconditional grants, is recognized in theperiod in which the service has been provided. Animal services, veterinary fees, and educationalprogram revenue is recognized when services are provided.

Contributions

Contributions received and promises to give are reported as net assets without donor restrictionsor net assets with donor restrictions, depending on donor restrictions (if any).

Contributions, including unconditional promises to give, are recognized as revenues in the periodthe promise is received. Conditional promises to give are not recognized until they becomeunconditional, which is when the conditions on which they depend are substantially met.Contributions that are promised in one year but are not expected to be collected until after the endof that year are considered contributions receivable and are recorded at fair value by discountingat an appropriate discount rate commensurate with the risks involved. Amortization of any suchdiscounts is recorded as additional contribution revenue in accordance with donor-imposedrestrictions, if any, on the contributions. An allowance for doubtful contributions receivable isprovided based upon management's judgment including such factors as prior collection history,type of contribution, and current aging of the promise to give.

Donated materials, services, and equipment

Donated materials and equipment are recorded based on the estimated fair value at the date thecontribution is made. Donated services are recognized as contribution revenue for certainservices received at the fair value of those services, if the services (a) create or enhance non-financial assets, or (b) require specialized skills that are provided by individuals possessing thoseskills, and would be purchased if not donated.

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Donated materials, services, and equipment (continued)

Over 675 unpaid volunteers have made significant contributions of their time to Marin Humane.Throughout the year, volunteers provided services to all programs and departments; the value ofthese services is not recognized as contributions in the financial statements since the recognitioncriteria were not met.

Donated materials and services received during each year were valued as follows:

2019 2018

Legal services $ 4,843 $ 6,630Kitty Corner rent 21,450 21,450Other services 42,682 68,192

68,975 96,272Contributed supplies 76,168 56,974Other contributed goods - 7,055

$ 145,143 $ 160,301

Cash and cash equivalents

Marin Humane considers all highly liquid investments with original maturities of three months orless when purchased to be cash equivalents. Marin Humane places its cash and temporary cashinvestments with high-quality institutions. Periodically, such deposits may be in excess offederally insured limits.

Beneficial interest in perpetual trust

Marin Humane has a beneficial interest in a perpetual trust; the donor established and funded aperpetual trust that is administered by an external trustee. Under the terms of the trust, MarinHumane receives 15% of the income, revenue, and profits from the trust in perpetuity, but willnot receive the assets held in the trust. The value of Marin Humane's interest in the trust assets ismeasured annually using the fair value of the trust assets; changes in the fair value of MarinHumane's interest in the beneficial trust are reported as an increase or decrease in net assets withdonor restrictions in the accompanying statements of activities.

Investments

Investments primarily include corporate stocks, real estate funds, and government and corporatebonds. Purchased investments in equity and debt securities with readily determinable fair valuesare reported at fair value based upon quoted market prices. Investments received by donation arerecorded at the fair value at the date of donation.

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Investments (continued)

Investment securities are exposed to various risks such as interest rate, market, and credit risks.Due to the level of risk associated with certain investments, it is at least reasonably possible thatchanges in the values of investments will occur in the near term and that such changes couldmaterially affect the amounts reported in the statements of financial position.

Fair value measurements

Fair value is defined as the exchange price that would be received for an asset or paid to transfer aliability (an exit price) in the principal or most advantageous market for the asset or liability in anorderly transaction between market participants on the measurement date. Marin Humanedetermines the fair values of its assets and liabilities based on the fair value hierarchy thatincludes three levels of inputs that may be used to measure fair value (Level 1, Level 2, and Level3). Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets orliabilities that Marin Humane has the ability to access at the measurement date. An active marketis a market in which transactions occur with sufficient frequency and volume to provide pricinginformation on an ongoing basis. Level 2 inputs are inputs other than quoted prices that areobservable for the asset or liability, either directly or indirectly. Level 3 inputs are unobservableinputs for the asset or liability. Unobservable inputs reflect Marin Humane's own assumptionsabout the assumptions market participants would use in pricing the asset or liability (includingassumptions about risk). Unobservable inputs are developed based on the best informationavailable in the circumstances and may include Marin Humane's own data.

In certain cases, the inputs used to measure fair value may fall into different levels of the fairvalue hierarchy. In such cases, the determination of which category within the fair valuehierarchy is appropriate for any given investment is based on the lowest level of input that issignificant to the fair value measurement. Marin Humane's assessment of the significance of aparticular input to the fair value measurement in its entirety requires judgment and considersfactors specific to the investment.

Management has elected, as a practical expedient, to measure the fair value of investments which(a) do not have a readily determinable fair value and (b) prepare their financial statementsconsistent with the measurement principles of an investment company or one that has theattributes of an investment company, on the basis of the net asset value ("NAV") per share of theinvestment (or its equivalent) if the NAV of the investment (or its equivalent) is calculated in amanner consistent with the measurement principles of accounting for investment companies as ofthe entity's measurement date. The relevant guidance also requires disclosures by major categoryof investment about the attributes of investments. Management has elected to adopt the practicalexpedient for its investment in a limited partnership.

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Inventory

Animal Outfitters store merchandise and supplies inventory is stated at lower of cost (on a first-in, first-out basis) or net realizable value.

Property and equipment

Property and equipment are recorded at cost if purchased, or if donated, at the estimated fair valueon the date of the donation. Marin Humane generally capitalizes property and equipment with acost greater than $5,000 and a life expectancy of more than three years. Maintenance and repaircosts are charged to operations as incurred. Depreciation is computed using the straight-linemethod over the estimated useful lives of the assets, which ranges from three to fifty years.

Functional allocation of expenses

The costs of providing Marin Humane's various programs and supporting activities have beensummarized on a functional basis in the statements of activities. The statements of functionalexpenses presents the natural classification detail of expenses by function. Accordingly, certaincosts have been allocated among the programs and supporting services benefited.

Direct identification of specific expenses is Marin Humane's preferable method of chargingexpenses to various functions. Marin Humane has a number of expenses which relate to morethan one program or supporting services, or to a combination of programs and supportingservices. Expenses are allocated using an allocation methodology based upon time studies, full-time equivalents in the functional categories, and full-time equivalents including volunteers in thefunctional categories.

Advertising costs

Marin Humane's policy is to expense advertising costs as the costs are incurred. Advertisingcosts for the years ended June 30, 2019 and 2018 totaled $22,791 and $15,691, respectively.

Income tax status

Marin Humane is a qualified organization exempt from Federal income and California franchisetaxes under the provisions of Sections 501(c)(3) of the Internal Revenue Code and 23701d of theCalifornia Revenue and Taxation Code, respectively. Marin Humane recognizes the effect ofincome tax positions only if those positions are more likely than not of being sustained andchanges in recognition or measurement are reflected in the period in which the change injudgment occurs. Marin Humane has evaluated its current tax positions and has concluded that asof June 30, 2019 and 2018 , it does not have any significant tax positions for which a reservewould be necessary.

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Use of estimates

The preparation of financial statements, in conformity with U.S. GAAP, requires management tomake estimates and assumptions that affect the reported amounts of assets and liabilities, anddisclosure of contingent assets and liabilities, at the date of the financial statements and thereported amounts of revenue and expenses during the reporting period. Actual results coulddiffer from those estimates. Uses of estimates include, but are not limited to, accounting for theallocation of operating expenses and depreciation.

Reclassifications

Certain amounts presented in the prior year financial statements have been reclassified to confirmwith the current year's presentation.

Change in accounting principle

In August 2016, the Financial Accounting Standards Board (FASB) issued Accounting StandardsUpdate (ASU) 2016-14, Presentation of Financial Statements of Not-for-Profit Entities. ASU2016-14 makes certain improvements to current reporting requirements, including:

1. Reducing the classes of net assets from three (unrestricted, temporarily restricted, andpermanently restricted) to two (with donor restrictions and without donor restrictions).

2. Enhancing disclosures about:

a. Amounts and purposes of governing board designations, appropriations, and similaractions that result in self-imposed limits on the use of resources without donor-imposed restrictions.

b. Composition of net assets with donor restrictions and how the restrictions affect theuse of resources.

c. Qualitative information about management of liquid resources and quantitativeinformation about the availability of liquid resources to meet cash needs for generalexpenditures within one year of the statement of financial position date.

d. Amounts of expenses by both their natural classification and their functionalclassification in one location as a separate statement or in the notes to the financialstatements.

e. Methods used to allocate costs among program and support functions.

f. Underwater endowment funds.

3. Reporting investment return net of external and direct internal investment expenses.

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Change in accounting principle (continued)

4. Use, in the absence of explicit donor stipulations, of the placed-in-service approach forreporting expirations of restrictions on gifts of cash or other assets to be used to acquireor construct a long-lived asset and reclassify any amounts from net assets with donorrestrictions to net assets without donor restrictions for such long-lived assets that havebeen placed in service as of the beginning of the period of adoption (thus eliminating thecurrent option to release the donor-imposed restriction over the estimated useful life ofthe acquired asset).

The amendments have been applied on a retrospective basis in 2019. The amendments have beenapplied to 2018, with the option to omit the disclosure about liquidity and availability ofresources for the comparative period.

Subsequent events

Marin Humane has evaluated subsequent events through November 26, 2019, the date thefinancial statements were available to be issued. No subsequent events have occurred that wouldhave a material impact on the presentation of Marin Humane's financial statements.

3. CONTRIBUTIONS AND GRANTS RECEIVABLE, NET

Unconditional promises to give and grants, which are not expected to be collected until after theyear promised or granted, are reflected in the accompanying statements of financial position ascontributions and grants receivable, net and revenue in appropriate net asset category.Contributions receivable are recorded using discount rates ranging from 1.04% to 1.85% for theyear ended June 30, 2019 and discount rates ranging from 2.33% to 2.81% for the year endedJune 30, 2018.

Contributions and grants receivable, net consisted of the following:

2019 2018

Receivable in less than one year $ 229,411 $ 90,188Receivable in one to five years 60,000 70,000

289,411 160,188Less: discount to present value (6,350) (7,447)

$ 283,061 $ 152,741

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4. INVESTMENTS

Investments, investments held for long-term purposes, and other investments consisted of thefollowing:

2019 2018

Equities $ 6,950,685 $ 5,925,012Fixed income securities 3,661,846 4,032,740Real estate securities 575,680 526,436Investment in limited partnership 91,155 91,155Pre-IPO stock - 46,900

$ 11,279,366 $ 10,622,243

Investment earnings consisted of the following:

2019 2018

Interest and dividends, net $ 263,888 $ 181,063Realized and unrealized gains 1,317,855 475,614

$ 1,581,743 $ 656,677

Marin Humane incurred investment expenses totaling $56,389 and $56,696 for the years endedJune 30, 2019 and 2018, respectively; interest and dividends income is presented net ofinvestment expenses in the accompanying statements of activities.

On June 11, 2019, Marin Humane entered into a lock-up agreement for the 47,500 shares of pre-IPO stock, The RealReal, Inc. (REAL), wherein Marin Humane is precluded from selling orotherwise assigning its holdings of the securities until 180 days after the public offering date.The public offering date was June 28, 2019 and Marin Humane recognized an unrealized gain of$1,115,900 on its holdings. Marin Humane's holdings in the stock under the lock-up agreementtotaled $1,372,750 as of June 30, 2019 and is reported as other investments on the accompanyingstatements of financial position.

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5. FAIR VALUE MEASUREMENTS

The following table sets forth by level, within the fair value hierarchy, Marin Humane's assets atfair value as of June 30, 2019:

Level 1 Level 2 Level 3 Fair Value

Equities $ 6,950,685 $ - $ - $ 6,950,685Fixed income securities - 3,661,846 - 3,661,846Real estate securities 575,680 - - 575,680Investment in limited partnership - - 91,155 91,155Beneficial interest in perpetual trust - 262,582 - 262,582

$ 7,526,365 $ 3,924,428 $ 91,155 $ 11,541,948

The following table sets forth by level, within the fair value hierarchy, Marin Humane's assets atfair value as of June 30, 2018:

Level 1 Level 2 Level 3 Fair Value

Equities $ 5,925,012 $ - $ - $ 5,925,012Fixed income securities - 4,032,740 - 4,032,740Real estate securities 526,436 - - 526,436Investment in limited partnership - - 91,155 91,155Pre-IPO stock - - 46,900 46,900Beneficial interest in perpetual trust - 267,814 - 267,814

$ 6,451,448 $ 4,300,554 $ 138,055 $ 10,890,057

The following table sets forth a summary of changes in the fair value of Level 3 investments forthe year ended June 30, 2019:

LimitedPartnership Pre-IPO Stock Total

Balance, beginning of year $ 91,155 $ 46,900 $ 138,055

Donation of pre-IPO stock - 209,250 209,250Pre-IPO stock public offering - (256,150) (256,150)

Balance, end of year $ 91,155 $ - $ 91,155

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5. FAIR VALUE MEASUREMENTS (continued)

The following table sets forth a summary of changes in the fair value of Level 3 investments forthe year ended June 30, 2018:

LimitedPartnership Pre-IPO Stock Total

Balance, beginning of year $ 91,155 $ - $ 91,155

Donation of pre-IPO stock - 46,900 46,900

Balance, end of year $ 91,155 $ 46,900 $ 138,055

6. PROPERTY AND EQUIPMENT, NET

Property and equipment, net consisted of the following:

2019 2018

Land $ 252,597 $ 252,597Buildings and improvements 8,472,076 8,377,735Furniture and fixtures 557,835 644,157Equipment 137,576 168,275Vehicles 359,451 358,066

9,779,535 9,800,830Accumulated depreciation (4,789,732) (4,667,198)

$ 4,989,803 $ 5,133,632

Depreciation expense totaled $333,357 and $316,686 for the years ended June 30, 2019 and 2018,respectively.

7. ACCRUED EXPENSES

Accrued expenses consisted of the following:

2019 2018

Accrued vacation $ 308,092 $ 294,304Accrued salaries and wages 183,983 96,305Retirement plan contributions payable 123,140 123,025Other accrued expenses 2,744 2,869

$ 617,959 $ 516,503

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8. NET ASSETS WITH DONOR RESTRICTIONS

Net assets with donor restrictions consisted of the following:

2019 2018

Donor-restricted endowment funds corpus $ 1,534,373 $ 1,522,826Unappropriated endowment earnings 533,059 480,640Beneficial interest in perpetual trust 262,582 267,814Pet Safety Net funds 135,730 216,686Veterinary Assistant sponsorships 87,000 -Time restricted funds 63,650 122,553Specialized medical and behavior funds 57,576 -Thrift shop bequest 47,731 50,000The Joe Willie Project funds 36,363 18,317Capital projects 35,400 57,894Behavior and Training funds 29,618 30,600Pen Pals of San Quentin Program funds 16,640 7,484Other 60,154 36,538

$ 2,899,876 $ 2,811,352

For the years ended June 30, 2019 and 2018, net assets released from restrictions were $631,046and $728,969, respectively, which were released from purpose and time restrictions.

9. ENDOWMENT

Marin Humane's endowment consists of several individual donor-restricted endowment fundsestablished for a variety of purposes. As required by generally accepted accounting principles,net assets associated with endowment funds, including funds designated by the board of directorsto function as endowments, are classified and reported based on the existence or absence ofdonor-imposed restrictions.

Interpretation of relevant law

Marin Humane's board of directors has interpreted the California enacted version of the UniformPrudent Management of Institutional Funds Act ("UPMIFA") as requiring the preservation of thefair value of the original gift as of the gift date of the donor-restricted endowment funds absentexplicit donor stipulations to the contrary. As a result of this interpretation, Marin Humaneclassifies as permanently restricted net assets (a) the original value of gifts donated to thepermanent 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 theapplicable donor gift instrument at the time the accumulation is added to the fund. Amounts areclassified as net assets with donor restrictions until Marin Humane's board of directorsappropriates amounts for expenditure and any purpose restrictions have been met, in a mannerconsistent with the standard of prudence prescribed by UPMIFA.

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9. ENDOWMENT (continued)

Interpretation of relevant law (continued)

In accordance with UPMIFA, Marin Humane considers the following factors in making adetermination to appropriate or accumulate donor-restricted endowment funds:

(1) The duration and preservation of the fund

(2) The purposes of the organization and the donor-restricted endowment fund

(3) General economic conditions

(4) The possible effect of inflation and deflation

(5) The expected total return from income and the appreciation of investments

(6) Other resources of Marin Humane

(7) The investment policies of Marin Humane

Return objectives and risk parameters

Marin Humane has adopted investment and spending policies for endowment assets that attemptto provide a predictable stream of funding to programs supported by its endowment while seekingto maintain the purchasing power of the endowment assets. The return objectives are to providereasonable and stable returns to supplement the operating budget, provide liquidity for theoperation of Marin Humane, and support the long-term viability of Marin Humane throughaccumulation of reserves as well as to assure donors that Marin Humane manages its endowmentfunds prudently. The primary investment objectives are to preserve capital, maintain anadequately balanced portfolio, and distribute income. Marin Humane's investment policyincludes social responsibility guidelines; Marin Humane avoids investing in companies whichmay harm or exploit animals or harm the environment. Endowment assets are invested in adiversified asset mix, including cash, cash equivalents, fixed income securities, and equitysecurities.

Funds with deficiencies

From time to time, the fair value of assets associated with individual donor-restricted endowmentfunds may fall below the level that the donor or UPMIFA requires Marin Humane to retain as afund of perpetual duration. There were no such deficiencies as of June 30, 2019 and 2018.

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Strategies employed for achieving objectives

To satisfy its long-term rate-of-return objectives, Marin Humane relies on a total-return strategyin which investment returns are achieved through both capital appreciation (realized andunrealized) and current yield (interest and dividends). Marin Humane targets a diversified assetallocation that places a greater emphasis on equity-based investments to achieve its long-termreturn objectives of maintaining the purchasing power of the endowment while producing stableincome within prudent risk constraints.

Spending policy

Marin Humane has a policy of transferring any investment returns, other than those which arestipulated by the donor to remain in perpetuity, to either net assets with donor restrictions or netassets without donor restrictions. Marin Humane is reinvesting the interest and gains to allow itsinvestments to grow annually after distributions to fund future operations. This is consistent withMarin Humane's objective to maintain the purchasing power of the endowment assets held inperpetuity or for a specified term as well as provide additional real growth through new gifts andinvestment returns.

Endowment composition

Endowment net asset composition by type of fund as of June 30, 2019 is as follows:



Donor-restricted endowment funds $ - $ 2,067,432 $ 2,067,432

Endowment net asset composition by type of fund as of June 30, 2018 is as follows:



Donor-restricted endowment funds $ - $ 2,003,466 $ 2,003,466

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Endowment composition (continued)

Changes in endowment net assets for the fiscal year ended June 30, 2019 is as follows:



Balance, June 30, 2018 $ - $ 2,003,466 $ 2,003,466

Investment returnInvestment income, net - 34,267 34,267Net appreciation - 29,699 29,699

Balance, June 30, 2019 $ - $ 2,067,432 $ 2,067,432

Changes in endowment net assets for the fiscal year ended June 30, 2018 is as follows:



Balance, June 30, 2017 $ - $ 1,902,722 $ 1,902,722

Investment returnInvestment income, net - 25,590 25,590Net appreciation - 75,154 75,154

Balance, June 30, 2018 $ - $ 2,003,466 $ 2,003,466

10. RETIREMENT PLAN

Marin Humane maintains a defined contribution plan (the "Plan") covering all employees whoregularly work more than 20 hours per week. The Plan is a 403(b) elective deferral plan whichprovides for discretionary contributions to be made by eligible employees. Marin Humaneprovides a 3% matching contribution for eligible employees who have completed the servicerequirement of one year and worked at least 1,000 hours; the Plan also provides for discretionarycontributions to be made by Marin Humane on behalf of plan participants. Discretionarycontributions are determined annually by the board of directors; discretionary contributionstotaled 3% of eligible compensation for the years ended June 30, 2019 and 2018. Participantsbecome fully vested in employer matching and discretionary contributions over a period of fiveyears. Marin Humane made contributions to the Plan totaling $226,841 and $211,460 for theyears ended June 30, 2019 and 2018, respectively.

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11. COMMITMENTS AND CONTINGENCIES

Obligations under operating lease

Marin Humane leases the retail space for its Thrift Shop under a non-cancelable operating leaseagreement that expires in September 2021 and leases a copier under a non-cancelable operatinglease agreement that expires in September 2024. The retail lease currently requires monthlypayments of $1,855, which are subject to nominal annual increases.

The scheduled minimum lease payments under the lease terms are as follows:

Year ending June 30,

2020 $ 30,9392021 31,6262022 14,0882023 8,1842024 1,364

$ 86,201

Rent expense under the operating lease agreements totaled $22,477 and $20,250 for the yearsended June 30, 2019 and 2018, respectively.

In April 2015, Marin Humane entered into an agreement with a pet supply retailer under whichthe pet supply retailer provides the space for the Kitty Corner rent free. The initial term of thelease is five years. The estimated fair value of the donated rent was $21,450 for the years endedJune 30, 2019 and 2018 and is reflected as a component of in-kind contributions and in-kindexpenses in the accompanying statements of activities.

Litigation

Marin Humane received donated legal services totaling $4,843 during the year ended June 30,2019; services rendered during 2019 were related to Marin Humane serving as plaintiff in a casechallenging the U.S. Forest Service's decision to sell wild horses gathered from the ModocNational Forest in a manner for commercial purposes. Marin Humane received donated legalservices totaling $6,630 during the year ended June 30, 2018; services rendered during 2018 wereprimarily in connection with Marin Humane's renegotiation of its animal services contract withthe JPA (see Note 1). The fair value of legal services received was based upon the number ofhours contributed at appropriate billing rates and is reflected as an in-kind contribution andexpense in the accompanying statements of activities for the years ended June 30, 2019 and 2018.

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12. CONCENTRATIONS

Revenue earned under Marin Humane's agreement for animal services with the JPA (see Note 1)comprised 35% and 34% of Marin Humane's total revenue, gains, and other support for the yearsended June 30, 2019 and 2018, respectively. If a significant reduction in the revenue earnedunder the JPA agreement were to occur, it could materially affect Marin Humane's programs andfinancial position.

Contributions and grants receivable from three donors comprise 92% of Marin Humane'scontributions and grants receivable balance as of June 30, 2019. Contributions and grantsreceivable from four donors comprise 99% of Marin Humane's contributions and grantsreceivable balance as of June 30, 2018.

Grants from three organizations comprise approximately 57% of Marin Humane's total grantrevenue for the year ended June 30, 2019. Grants from four organizations comprisedapproximately 74% of Marin Humane's total grant revenue for the year ended June 30, 2018.Contributions from one donor comprise approximately 11% of Marin Humane's total contributionrevenue for the year ended June 30, 2019. There were no such concentrations in contributionrevenue for the year ended June 30, 2018.

13. LIQUIDITY AND FUNDS AVAILABLE

As part of Marin Humane's liquidity management, it has a policy to structure its financial assetsto be available as its general expenditures, liabilities, and other obligations come due while alsostriving to maximize the investment of its available funds. As part of this policy, Marin Humanemaintains a minimum balance of $250,000 in cash equivalents and short-term fixed incomeinstruments within its investment accounts which can be readily liquidated for operating needs.

In addition to financial assets available to meet general expenditures over the next 12 months,Marin Humane operates with a balanced budget and anticipates collecting sufficient revenues tocover general expenditures not covered by donor-restricted resources.

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13. LIQUIDITY AND FUNDS AVAILABLE (continued)

The following is a quantitative disclosure which describes assets that are available within one yearof June 30, 2019 to fund general expenditures and other obligations when they become due:

Financial Assets Cash and cash equivalents $ 1,118,359 Accounts receivable 314,377 Contributions and grants receivable, net 283,061 Investments 11,279,365

12,995,162

Less: amounts unavailable for general expenditure within one year: Receivables to be collected in more than one year (60,000) Investments not convertible to cash within the next 12 months (91,155) Other investments* (1,372,750) Endowment fund (2,067,432) Other donor restrictions (506,210)

(4,097,547)

$ 8,897,615

*The balance of the other investments is excluded from financial assets available for generalexpenditure due to uncertainty for the future carrying value of the underlying securities. SeeNote 4.

Marin Humane has financial assets available at June 30, 2019 to cover approximately one year ofoperating expenses based on its fiscal year 2020 operating budget.

14. CORRECTION OF ERROR

Marin Humane was notified of its beneficial interest in a trust in September 1949 and hashistorically accounted for the distributions that it received from the trust as bequest revenue anddid not recognize its beneficial interest in the trust. Under the terms of the trust, Marin Humanereceives 15% of the income, revenue, and profit from the trust in perpetuity, but will not receivethe assets held in the trust. During 2019, Marin Humane determined that as it is a beneficiary ofthe trust and it has an unconditional right to receive a portion of the trust's cash flows, MarinHumane should recognize its beneficial interest in the trust at fair value. Accordingly, MarinHumane restated its financial statements for the year ended June 30, 2018. The effect of thecorrection was to increase net assets $256,155 as of June 30, 2017 to recognize its beneficialinterest in the trust as of June 30, 2017, an increase in change in value of beneficial interest inperpetual trust of $11,659 to recognize the change in fair value of its beneficial interest during theyear ended June 30, 2018, and to reclassify distributions from the trust during the year ended June30, 2018 totaling $7,507 from bequest revenue to interest and dividend income.

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