Report of Independent Auditors and Financial Statements ... Page Files... · Oregon Research...

ReportofIndependentAuditorsandFinancialStatementswithFederalAwardsSupplementary

Informationfor

OregonResearchInstitute

December31,2014and2013

CONTENTS PAGEREPORTOFINDEPENDENTAUDITORS 1‐2FINANCIALSTATEMENTS Statementoffinancialposition 3 Statementofactivities 4 Statementoffunctionalexpenses 5 Statementofcashflows 6 Notestofinancialstatements 7‐15

SUPPLEMENTARYINFORMATION Scheduleofexpendituresoffederalawards 16‐18 Notestothescheduleofexpendituresoffederalawards 19REPORTOFINDEPENDENTAUDITORSONINTERNALCONTROLOVERFINANCIALREPORTINGANDONCOMPLIANCEANDOTHERMATTERSBASEDONANAUDITOFFINANCIALSTATEMENTSPERFORMEDINACCORDANCEWITHGOVERNMENTAUDITINGSTANDARDS 20‐21REPORTOFINDEPENDENTAUDITORSONCOMPLIANCEFOREACHMAJORFEDERALPROGRAMANDREPORTONINTERNALCONTROLOVERCOMPLIANCEREQUIREDBYOMBCIRCULARA‐133 22‐23SCHEDULEOFFINDINGSANDQUESTIONEDCOSTS 24

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REPORTOFINDEPENDENTAUDITORSTotheBoardofDirectorsOregonResearchInstituteReportontheFinancialStatements

WehaveauditedtheaccompanyingfinancialstatementsofOregonResearchInstitute,whichcomprisethestatementsoffinancialpositionasofDecember31,2014(and2013),andtherelatedstatementsofactivities, functional expenses, and cash flows for the years then ended, and the related notes to thefinancialstatements.Management’sResponsibilityfortheFinancialStatements

Management is responsible for the preparation and fair presentation of these financial statements inaccordancewithaccountingprinciplesgenerallyacceptedintheUnitedStatesofAmerica;thisincludesthe design, implementation, andmaintenance of internal control relevant to the preparation and fairpresentationoffinancialstatementsthatarefreefrommaterialmisstatement,whetherduetofraudorerror.Auditor’sResponsibility

Our responsibility is to express an opinion on these financial statements based on our audits. Weconductedouraudits inaccordancewithauditingstandardsgenerallyacceptedintheUnitedStatesofAmericaand the standardsapplicable to financial audits contained inGovernmentAuditingStandards,issued by the Comptroller General of the United States. Those standards require that we plan andperformtheauditstoobtainreasonableassuranceaboutwhetherthefinancialstatementsarefreefrommaterialmisstatement.Anauditinvolvesperformingprocedurestoobtainauditevidenceabouttheamountsanddisclosuresinthe financial statements. The procedures selected depend on the auditor’s judgment, including theassessmentof the risksofmaterialmisstatementof the financial statements,whetherdue to fraudorerror. Inmakingthoseriskassessments, theauditorconsiders internalcontrolrelevanttotheentity’spreparationand fairpresentationof the financial statements inorder todesignauditprocedures thatare appropriate in the circumstances, but not for the purpose of expressing an opinion on theeffectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit alsoincludes evaluating the appropriateness of accounting policies used and the reasonableness ofsignificantaccountingestimatesmadebymanagement,aswellasevaluatingtheoverallpresentationofthefinancialstatements.Webelievethattheauditevidencewehaveobtainedissufficientandappropriatetoprovideabasisforourauditopinion.

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Opinion

In our opinion, the financial statements referred to above present fairly, in allmaterial respects, thefinancialpositionofOregonResearchInstituteasofDecember31,2014(and2013),andthechangesinits net assets and its cash flows for the years then ended in accordance with accounting principlesgenerallyacceptedintheUnitedStatesofAmerica.OtherMatters

Ourauditwasconductedforthepurposeofforminganopiniononthefinancialstatementsasawhole.The scheduleof expendituresof federal awardsas requiredby theOfficeofManagementandBudgetCircular A‐133, Audits of States, Local Governments, and Non‐Profit Organizations, is presented forpurposesofadditionalanalysisandisnotarequiredpartofthefinancialstatements.Suchinformationisthe responsibility of management and was derived from and relates directly to the underlyingaccounting and other records used to prepare the financial statements. The information has beensubjected to the auditing procedures applied in the audit of the financial statements and certainadditionalprocedures,includingcomparingandreconcilingsuchinformationdirectlytotheunderlyingaccounting and other records used to prepare the financial statements or to the financial statementsthemselves,andotheradditionalproceduresinaccordancewithauditingstandardsgenerallyacceptedintheUnitedStatesofAmerica.Inouropinion,theinformationisfairlystated,inallmaterialrespects,inrelationtothefinancialstatementsasawhole.OtherReportingRequiredbyGovernmentAuditingStandards

In accordancewithGovernmentAuditing Standards, we have also issued our report datedMarch 13,2015onourconsiderationof theOregonResearchInstitute’s internalcontrolover financialreportingand on our tests of its compliance with certain provisions of laws, regulations, contracts, and grantagreements and othermatters. The purpose of that report is to describe the scope of our testing ofinternal control over financial reporting and compliance and the results of that testing, and not toprovide an opinion on internal control over financial reporting or on compliance. That report is anintegralpartof anauditperformed inaccordancewithGovernmentAuditingStandards in consideringOregonResearchInstitute'sinternalcontroloverfinancialreportingandcompliance.

Eugene,OregonMarch13,2015

OREGONRESEARCHINSTITUTESTATEMENTOFFINANCIALPOSITION

Seeaccompanyingnotes. 3

2014 2013CURRENTASSETSCashandcashequivalents 916,241$ 668,548$Grantsandcontractsreceivable 751,016 600,178Prepaidexpensesanddeposits 130,749 130,749Totalcurrentassets 1,798,006 1,399,475

PROPERTYANDEQUIPMENT,lessaccumulateddepreciationandamortization 391,777 501,541

OTHERASSETSBeneficialinterestinassetsheldbyothers 280,468 288,674

TOTALASSETS 2,470,251$ 2,189,690$

LIABILITIESANDNETASSETS

CURRENTLIABILITIESAccountspayable 687,867$ 620,969$Accruedpayrollandrelatedexpenses 413,054 79,584Accruedleavepayable,currentportion 99,985 86,648Long‐termdebt,currentportion 36,000 70,700Totalcurrentliabilities 1,236,906 857,901

LONG‐TERMLIABILITIESAccruedleavepayable 300,738 383,579Long‐termdebt 79,433 116,595

TOTALLIABILITIES 1,617,077 1,358,075

NETASSETSUnrestricted 853,174 831,615Totalnetassets 853,174 831,615

TOTALLIABILITIESANDNETASSETS 2,470,251$ 2,189,690$

ASSETS

DECEMBER31,

OREGONRESEARCHINSTITUTESTATEMENTOFACTIVITIES


2014 2013Unrestricted Unrestricted

Total TotalREVENUES,GAINSANDOTHERSUPPORTGrantsandcontracts 18,660,309$ 19,796,570$Interestincome 2,894 5,515Contributionsanddonations 7,903 9,876Otherincome 42,069 54,990

Totalrevenues,gains,othersupport 18,713,175 19,866,951

EXPENSESProgramservices:HealthyChildDevelopment 2,779,205 3,640,375PhysicalHealth 2,061,184 1,863,377PsychologicalHealth 2,411,683 2,656,384PreventionandTreatment 5,561,273 5,442,434

Totalprogramservices 12,813,345 13,602,570

Supportservices 5,709,399 6,007,207Depreciationandamortization 168,872 204,435

Totalsupportservices 5,878,271 6,211,642

Totalexpenses 18,691,616 19,814,212

CHANGEINNETASSETS 21,559 52,739

NETASSETS,beginningofyear 831,615 778,876

NETASSETS,endofyear 853,174$ 831,615$

YEARENDEDDECEMBER31,

OREGONRESEARCHINSTITUTESTATEMENTOFFUNCTIONALEXPENSES

FORTHEYEARSENDEDDECEMBER31,2014AND2013

2014 2014HealthyChild Physical Psychological Preventionand Support TotalDevelopment Health Health Treatment Total Services Expenses

Personnel 1,612,221$ 1,337,918$ 1,593,218$ 4,408,800$ 8,952,157$ 2,892,126$ 11,844,283$Subcontracts/Consultants 1,036,808 470,206 582,874 793,821 2,883,709 79,069 2,962,778Participantfeesandsimilarincentives 51,204 66,406 151,252 157,019 425,881 7,418 433,299Meetings,travel,andtraining 32,455 86,986 34,536 68,350 222,327 114,175 336,502Occupancy 46,517 82,381 45,896 54,437 229,231 1,861,952 2,091,183Financingandinvestmentcosts ‐ ‐ ‐ ‐ ‐ 9,194 9,194Equipment,below$5,000 ‐ 17,287 3,907 78,846 100,040 745,465 845,505Depreciationandamortization ‐ ‐ ‐ ‐ ‐ 168,872 168,872

Totalexpenses 2,779,205$ 2,061,184$ 2,411,683$ 5,561,273$ 12,813,345$ 5,878,271$ 18,691,616$

2013 2013HealthyChild Physical Psychological Preventionand Support TotalDevelopment Health Health Treatment Total Services Expenses

Personnel 2,301,607$ 1,200,954$ 1,738,352$ 4,070,316$ 9,311,229$ 3,065,409$ 12,376,638$Subcontracts/Consultants 1,117,016 414,262 676,234 954,676 3,162,188 125,156 3,287,344Participantfeesandsimilarincentives 110,110 83,804 142,203 231,750 567,867 14,504 582,371Meetings,travel,andtraining 37,190 87,218 36,092 87,034 247,534 154,038 401,572Occupancy 73,040 52,696 33,949 66,991 226,676 2,022,905 2,249,581Financingandinvestmentcosts ‐ ‐ ‐ ‐ ‐ 12,430 12,430Equipment,below$5,000 1,412 24,443 29,554 31,667 87,076 612,765 699,841Depreciationandamortization ‐ ‐ ‐ ‐ ‐ 204,435 204,435

Totalexpenses 3,640,375$ 1,863,377$ 2,656,384$ 5,442,434$ 13,602,570$ 6,211,642$ 19,814,212$


2014ProgramServices

2013ProgramServices

OREGONRESEARCHINSTITUTESTATEMENTOFCASHFLOWS

See accompanying notes. 6

2014 2013

CASHFLOWSFROMOPERATINGACTIVITIESChangeinnetassets 21,559$ 52,739$Adjustmentstoreconcileexcessofrevenuesoverexpensestonetcashfromoperatingactivities:Depreciationandamortization 168,872 204,435Unrealized(gain)loss‐beneficialinterest (11,778) (42,439)

Changesinassetsandliabilities:Grantsandcontractsreceivable (150,838) 350,386Prepaidexpensesanddeposits ‐ (105,302)Accountspayable 66,898 (190,136)Accruedpayrollandrelatedexpenses 333,470 (123,284)Accruedleavepayable (69,504) (104,755)

Netcashfromoperatingactivities 358,679 41,644

CASHFLOWSFROMINVESTINGACTIVITIESAdditionstoinvestmentsheldby

OregonCommunityFoundation (10,016) (10,896)Disbursementsfrominvestmentsheldby

OregonCommunityFoundation 30,000 ‐Additionstopropertyandequipment (59,108) (70,140)Netcashusedbyinvestingactivities (39,124) (81,036)

CASHFLOWSFROMFINANCINGACTIVITIESProceedsfromdebtissuance ‐ ‐Principalpaymentsonlong‐termdebt (71,862) (87,298)Netcashfromfinancingactivities (71,862) (87,298)

NET(DECREASE)INCREASEINCASH 247,693 (126,690)

CASHANDCASHEQUIVALENTS,beginningofyear 668,548 795,238

CASHANDCASHEQUIVALENTS,endofyear 916,241$ 668,548$

SUPPLEMENTALDISCLOSURECashpaidforinterest 9,194$ 12,430$

YEARENDEDDECEMBER31,

OREGONRESEARCHINSTITUTENOTESTOFINANCIALSTATEMENTS

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NOTE1‐NATUREOFORGANIZATIONANDSUMMARYOFSIGNIFICANTACCOUNTINGPOLICIESNatureoforganization‐OregonResearchInstitute(ORIortheInstitute)wasincorporatedunderthelawsoftheStateofOregon,withthepurposeofprovidingcharitable,scientificandeducationalresearch.TheInstituteissupportedprimarilybyresearchgrantsfromtheU.S.DepartmentofHealthandHumanServicesandtheU.S.DepartmentofEducation.TheInstitute’sprimaryfacilitiesarelocatedinEugene,Oregon,withbranchofficesinPortland,OregonandAlbuquerque,NewMexico.Theseparateforprofitentityestablishedin2013,OregonResearchBehavioralInterventionStrategies,hasdrawn$20,000ofthe$30,000lineofcreditauthorizedbytheORIBoard.ThelineofcreditisdueforrepaymentinDecember2016ata3.75%rateofinterest.TheInstituteowns100%ofthestockofORBIS,whichhasaseparateandindependentBoardofDirectors.Functional expenses ‐ Expenses for the Institute are summarized according to the functionalclassificationofprogramservicesandsupportservices.Theactivitiesaresegregatedasfollows: ProgramServices:

PromotingHealthy ChildDevelopment: Researchers in this area examine the role that families,schools, friends, neighborhoods, and communities play in promoting the positive development ofchildren, teens, and young adults. The research teams study what leads to social and academicsuccess aswell aswhat leads toproblembehaviors, suchas substanceuseand school failure.ORIscientists work with schools and parents to refine and adapt evidence‐based programs such asliteracystrengthening,socialskillsprograms,andparenttrainingprograms.PromotingPhysicalHealth:ORIresearchersarestudyingwaystokeeppeopleofallagesphysicallyhealthy.ORI’sworkinchronicillnesspreventionbeganinthe1980’swithresearchtofindwaystohelppeoplewithdiabetesmanagetheirillness.Thestudyandpromotionofphysicalactivitybeganinthe1990swithimportantlongitudinalresearchonthefactorswhichinfluencechildrenandyouthtobecome and remain physically active and with important clinical trials of the benefits of Tai Chiexercisefortheelderly.

PromotingPsychologicalHealth: ORIscientistsstudyemotionalandbehavioraldisordersaswellasnormativedevelopmentandpersonality, inordertobetterunderstandfactors thatmakepeoplevulnerabletoseriousmentalhealthdisordersaswellasfactorsthatincreaseresilience,thatis,thathelp people cope with daily challenges. An important component of research in this area isdevelopingandevaluatinginterventionsforthepreventionandtreatmentofdisorders.Treating Tobacco, Alcohol and Illegal Drug Use: ORI’s work in this area dates from researchfunding obtained in the late 1970’s to study tobacco use in young people. Since then, researchinterestshavebroadenedtoincluderesearchonthepreventionofalcoholandotherdruguseamongyouth.TwoimportantORIlongitudinalstudies‐oneonpeerandfamilyinfluencesonyouthdruguse,andtheotheronyoungchildren’sknowledgeofandintenttousealcoholanddrugs‐haveprovidedvaluableguidanceinthedevelopmentofsubstanceabusepreventionprograms.


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NOTE1 ‐NATUREOFORGANIZATIONAND SUMMARYOF SIGNIFICANTACCOUNTINGPOLICIES(Continued)Support services:These expenses relate to the administration, fiscal, personnel, andorganization‐widefunctionsnecessaryfortheInstitutetooperate.

Estimates‐ThepreparationoffinancialstatementsinconformitywithaccountingprinciplesgenerallyacceptedintheUnitedStatesofAmericarequiresmanagementtomakeestimatesandassumptionsthataffect certain reported amounts and disclosures. Accordingly, actual results could differ from thoseestimates.Basisofpresentation‐Theaccompanyingfinancialstatementshavebeenpreparedontheaccrualbasisofaccounting inaccordancewithaccountingprinciplesgenerallyaccepted in theUnitedStatesofAmerica.Net assets and revenues, expenses, gains, and lossesare classifiedbasedon theexistenceor absenceofdonor‐imposedrestrictions.Accordingly,netassetsoftheInstituteandchangesthereinareclassifiedandreportedasfollows: Unrestrictednetassets‐Netassetsthatarenotsubjecttodonor‐imposedstipulations. Temporarilyrestrictednetassets‐Netassetssubjecttodonor‐imposedstipulationsthatmayorwill

bemet, either by actions of the Institute and/or the passage of time. When a restriction expires,temporarily restricted net assets are reclassified to unrestricted net assets and reported in thestatementofactivitiesasnetassetsreleasedfromrestrictions.Whenrevenueisreceivedinthesamefiscalperiodastheexpendituresareincurred,therevenueisrecordedasunrestrictednetassets.In2014and2013,theInstitutehadnotemporarilyrestrictednetassets.

Permanentlyrestrictednetassets‐Netassetssubjecttodonor‐imposedstipulationsspecifythatthe

Institutemaintainthempermanently.Generally,thedonorsoftheseassetspermittheInstitutetouseallorpartofthe incomeearnedonanyrelatedinvestmentsforgeneralorspecificpurposes. AsofDecember31,2014and2013,theInstitutehadnopermanentlyrestrictednetassets.

Propertiesandequipment(property)‐Purchasedpropertiesarerecordedatcost.Donatedpropertiesarerecordedattheirestimatedfairmarketvalueonthedateofgift.Expendituresformaintenanceandrepairsareexpensed,whilerenewalsandbettermentsarecapitalized.Assetspurchasedwithacostoflessthan$5,000arenotaccountedforasproperty;however,theInstitutemaintainsrecordsforfederalgrant and insurancepurposes. The cost andaccumulateddepreciationofproperty soldorotherwisedisposedofareeliminatedfromtheaccountsandtheresultinggainsorlossesarereflectedinrevenueand expenses. Depreciation and amortization are computed using straight‐line methods over theestimatedlivesoftherelatedassetsrangingfrom3to15years.Depreciationandamortizationexpensewas$168,872and$204,435fortheyearsendedDecember31,2014and2013,respectively.


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NOTE1 ‐NATUREOFORGANIZATIONAND SUMMARYOF SIGNIFICANTACCOUNTINGPOLICIES(Continued)Revenuerecognition ‐TheInstituterecognizesrevenueasqualifiedexpensesare incurred,subjecttothe amount authorized in the grant agreement. Unreimbursed grant expenses due from grantoragenciesarereflectedinthefinancialstatementsasreceivablesandrevenues.Grantsandcontractsreceivable‐Grantsandcontractsreceivableincludeamountsbilledandunbilledon grants and other agreements through December 31. As of December 31, 2014 and 2013, noallowance for uncollectible receivables was deemed necessary by management, as all amounts areconsideredcollectible.Incometaxes‐TheInstituteisatax‐exemptorganizationandisnotsubjecttofederalorstateincometaxes, except for unrelated business income, in accordance with Section 501(c)(3) of the InternalRevenue Code. In addition, the Institute qualified for the charitable contribution deduction underSection 170(b)(1)(A) and has been classified as an organization that is not a private foundation.Unrelated business income tax, if any, is insignificant and no tax provision has been made in theaccompanyingfinancialstatements.The Institute follows theprovisionsofFASBAccountingStandardsCodification (ASC)740‐10, IncomeTaxes,relatingtoaccountingforuncertaintaxpositionsandthereisnofinancialstatementimpacttotheInstitute. The Institute recognizes the taxbenefit fromuncertain taxpositiononly if it ismore likelythan not that the tax positionswill be sustained on examination by the tax authorities, basedon thetechnicalmerits of the position. The tax benefit ismeasured based on the largest benefit that has agreater than 50% likelihood of being realized upon ultimate settlement. The Institute recognizesinterestandpenaltiesrelatedtoincometaxmattersinsupportexpenses.TheInstitutehadnouncertaintax positions atDecember31, 2014.Generally, the Institute is subject to examinationbyU.S. federal,state,andlocalincometaxauthoritiesforthreeyearsfromthefilingofataxreturn.Cashand cashequivalents ‐ For purposes of the statement of cash flows, the Institute considers allhighlyliquidinvestmentsanddebtinstrumentspurchasedwithamaturityofthreemonthsorlesstobecashequivalents.ThebalancesatDecember31,2014and2013arecomposedofthreeregionalbanks’demanddepositandmoneysweepaccounts.Grantsandcontracts ‐ Amounts receivedor receivable fromgrantor agencies are subject to audit andadjustmentbysuchagencies.AnydisallowedcostscouldbecomealiabilityoftheInstitute.Managementbelieves that unallowable costs, if any,wouldnotbe significant andwouldnothave amaterial adverseeffectontheInstitute’sfinancialposition.Concentrationofcreditrisk‐FinancialinstrumentsthatpotentiallysubjecttheInstitutetocreditriskconsist of cash and receivables. The Institute’s cash balances are with federally insured banks andperiodicallytheInstitute’sdepositsexceedinsuredlimits.TheInstitute’sreceivablesareprimarilyfromgovernmentalentities.


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NOTE1 ‐NATUREOFORGANIZATIONAND SUMMARYOF SIGNIFICANTACCOUNTINGPOLICIES(Continued)

Fairvalueoffinancialinstruments‐TheInstitutehasadoptedFinancialAccountingStandardsBoard(“FASB”) authoritative guidance that defines fair value, establishes a framework for measuring fairvalue, and expands disclosures about fair valuemeasurements. Fair value is the price thatwould bereceived to sell an asset or paid to transfer a liability in an orderly transaction between marketparticipantsatthemeasurementdate.Thefairvaluehierarchyrequiresanentitytomaximizetheuseofobservableinputsandminimizetheuseofunobservableinputswhenmeasuringfairvalue. Therearethreelevelsofinputsthatmaybeusedtomeasurefairvalue:

Level1‐Quotedpricesinactivemarketsforidenticalassetsorliabilities.

Level 2 ‐Observable inputs other thanLevel 1prices, such asquotedprices for similar assets orliabilities;quotedpricesinmarketsthatarenotactive;orotherinputsthatareobservableorcanbecorroboratedbyobservablemarketdataforsubstantiallythefulltermoftheassetsorliabilities.

Level 3 ‐ Unobservable inputs that are supported by little or no market activity and that aresignificanttothefairvalueoftheassetsorliabilities.

Financestaffdetermine fairvaluemeasurementpoliciesandproceduresunder thesupervisionof theExecutiveDirector andFinanceCommittee.Thesepolicies andprocedures are reassessedannually todetermineifcurrentvaluationtechniquesarestillappropriate.Avarietyofqualitativefactorsareusedtosubjectivelydeterminethemostappropriatevaluationmethodologies.Methodologiesareconsistentwiththemarket,incomeandcostapproaches.Unobservableinputsusedinfairvaluemeasurementsareevaluated and adjusted on an annual basis, or as necessary based on currentmarket conditions andotherthirdpartyinformation.The fair values of the Institute’s financial instruments have generally been determined to fallwithinLevel 1 of the valuation hierarchy, with the exception of funds held by The Oregon CommunityFoundationwhichareconsideredLevel3investments.SeeOtherAssetsFootnote4.

Supportconcentration ‐TheU.S.DepartmentofHealthandHumanServicesfunded$15,612,190and$16,176,084 in the years endedDecember 31, 2014 and 2013, respectively. The U.S. Department ofEducation funded $1,277,387 and $1,775,189 in the years ending December 31, 2014 and 2013respectively.Thisis83.4%and6.8%(81.4%and8.9%for2013),respectively,ofthetotaldirectgrantrevenuereceived.ThesegrantscoverprojectperiodsexpiringatvariousdatesthroughJune2019.

SubsequentEvents ‐ Subsequent events are events or transactions that occur after the statement offinancial position date but before financial statements are available to be issued. The Instituterecognizes in the financial statements the effects of all subsequent events that provide additionalevidenceaboutconditions thatexistedat thedateof thestatementof financialposition, including theestimates inherent in the process of preparing the financial statements. The Institute’s financialstatementsdonotrecognizesubsequenteventsthatprovideevidenceaboutconditionsthatdidnotexistatthedateofthestatementoffinancialpositionbutaroseafterthestatementoffinancialpositiondateandbeforefinancialstatementsareavailabletobeissued.


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NOTE1 ‐NATUREOFORGANIZATIONAND SUMMARYOF SIGNIFICANTACCOUNTINGPOLICIES(Continued)TheInstitutehasevaluatedsubsequenteventsthroughMarch13,2015,whichisthedatethefinancialstatementswereissued.NOTE2‐GRANTSANDCONTRACTSRECEIVABLEGrantsandcontractsreceivableconsistofthefollowing:

2014 2013

U.S.DepartmentofEducation 56,616$ 53,414$U.S.DepartmentofHealthandHumanServices 389,181 333,355Passthroughgrants 275,417 213,409Other 29,802 ‐

751,016$ 600,178$

DECEMBER31,

NOTE3‐PROPERTYANDEQUIPMENTPropertyandequipmentconsistofthefollowing:

2014 2013

Facilitiesequipment 355,881$ 310,803$Technologyequipmentandsoftware 311,445 795,096Researchequipment 121,218 107,189

788,544 1,213,088Lessaccumulateddepreciationandamortization (396,767) (711,547)

391,777$ 501,541$

DECEMBER31,


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NOTE4‐OTHERASSETSThe Instituteprovides funds for theOregonResearch InstituteEndowmentFund (theFund)with theOregon Community Foundation (OCF). OCF is the legal owner of the Fund. In accordance with aDecember1999agreement,OCFisrequiredtomakeannualdistributionsofaportionofthevalueoftheFund to ORI. However, the agreement also grants to OCF the power tomodify the restrictions andconditionsoftheFundagreementtoincludethenatureandtimingofdistributionsastheOCFBoardofDirectorsseesfit.Thisprovisionisconsideredvariancepower.AsofDecember31,2014,$280,468hasbeenrecognized in theStatementofFinancialPositionof theInstitute,andisconsideredabeneficialinterestinassetsheldbyothers($288,674asofDecember31,2013). Thebeneficial interest is investedintheBostonCommonAssetManagementFund, inamixofUnitedStatesequities, internationalequities,andfixed incomeinstruments;allofwhicharetraded inpublicmarkets.Thefairvalueofthebeneficialinterestisrecordedatcurrentmarketvalue.Theinterestissummarizedasfollows:

Fair UnrealizedCost Value Gain

217,360$ 280,468$ 63,108$

The following schedule summarizes the activity in the Fund, stated at fair value, for the years endedDecember31:

2014 2013

Beginningbalance 288,674$ 235,339$Increases:

TransferstoOCF 7,903 9,876Interestanddividendincomeoninvestments 2,190 5,061Realizedgain(loss)oninvestment 2,666 1,022Unrealizedgainoninvestment 11,778 42,439

Decreases:TransfersfromOCF (30,000) ‐OCFfees (2,743) (5,063)

Endingbalance 280,468$ 288,674$


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NOTE5‐SHORT‐TERMDEBTTheInstitutemaintainsalineofcreditfor$200,000withavariableinterestrateof1.0percentagepointovertheprimelendingrate.However,undernocircumstanceswilltheinterestrateonthelineofcreditbelessthan5.0%perannumin2014.Theinterestratewas5.0%asofDecember31,2014and2013.The balance on the line of credit as ofDecember31, 2014 and2013was zero, and the line of creditexpiresinJulyof2015.Thelineofcreditiscollateralizedwithpropertyandequipment.NOTE6‐LONG‐TERMDEBT

2014 2013

On June 30, 2008 the Institute initiated a $270,000,non‐revolving line of credit agreement with PacificContinental Bank to finance the purchase ofequipment. The note is payable in monthlyinstallments of $5,588 with an annual interest rate of6.95%. The note is secured by equipment andaccountsreceivableandmaturedinJuly2014. ‐$ 36,263$

On December 31, 2012 the Institute initiated a notewith a line of credit totaling $181,240. The note issecured by equipment and accounts receivable andpayable to Pacific Continental Bank in monthlyinstallments of $3,384 at an annual interest rate of4.5% at December 31, 2013. The note matures inJanuary2018. 115,433 151,032

115,433 187,295Lesscurrentportion (36,000) (70,700)

79,433$ 116,595$

DECEMBER31,


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NOTE6‐LONG‐TERMDEBT(Continued)Principalmaturitybyyearisasfollows:

YEARENDINGDECEMBER31,

2015 36,000$2016 38,0002017 39,0002018 2,4332019 ‐

Thereafter ‐

115,433$

NOTE7‐COMMITMENTSANDCONTINGENCIESOperatingleases‐TheInstituteisobligatedundernon‐cancelableoperatingleasesforofficespaceandequipment.Theleasesgenerallyprovideforrenewalsonsubstantiallythesametermsandconditionsasthose in effect during the initial term. The total annual rent expense under all agreements was$1,685,154 and $1,616,645 for 2014 and 2013, respectively. Approximate minimum annual rentalcommitmentsareasfollows:

YEARENDINGDECEMBER31,

2015 1,764,000$2016 1,735,0002017 1,712,0002018 1,627,0002019 1,658,000

Thereafter 17,120,000

25,616,000$

Total minimum annual rental payments have not been reduced by minimum sublease rentals ofapproximately$312,000dueinthefutureundernon‐cancelablesubleases,asofDecember31,2014.


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NOTE8‐RETIREMENTPLANTheInstitutemakescontributionstotaxshelteredannuitiesforallsalariedemployeeswhoareone‐halfthe full timeequivalentormore. Theannuities areestablishedunder InternalRevenueCodeSection403(b)which is available to certain tax exempt organizations. The Institute’s contribution ratewas7.5% of the employee’s salary in 2014 and 2013. In addition, effective October 1, 1993, for eligibleemployeeswhoelect salarydeferred contributionsofat least1%of their compensation, the Instituteincreasesby2%itscontributionsmadeontheirbehalf. Contributionstotheplanwere$787,790and$839,300in2014and2013,respectively.NOTE9‐INDIRECTADMINISTRATIVEEXPENSESIndirect administrative expenses have been allocated to the various programs. For the year endedDecember31,2014and2013, the indirect rate toon‐siteprogramswas55.7%. Theprovisional rategrantedbytheFederalGovernmentis55.6%in2014andin2013.

SUPPLEMENTARYINFORMATION

OREGONRESEARCHINSTITUTESCHEDULEOFEXPENDITURESOFFEDERALAWARDS

FORTHEYEARENDEDDECEMBER31,2014

The accompanying notes are an integral part of this schedule. 16

Federal Pass‐Through

CFDA EntityIdentifying Federal

Number Number Expenditures

RESEARCHANDDEVELOPMENTCLUSTER

DEPARTMENTOFEDUCATION

DirectPrograms

EducationResearch 84.305 478,143$SpecialEducation‐ResearchandInnovationtoImproveServices

andResultsForChildrenWithDisabilities 84.324 767,679

SpecialEducation‐TechnologyandMediaServicesFor

IndividualsWithDisabilities 84.327 31,565

TOTALDEPARTMENTOFEDUCATIONDIRECTPROGRAMS 1,277,387

Pass‐ThroughProgramFrom:

UniversityofTexasHealthScienceCenteratHouston‐Education,

Research,Development,Dissemination 84.305 R305A140386 139,856

TheUniversityofKansasCenterforResearch,Inc.‐Innovationsin

AppliedPublicHealthResearch 84.324 R324A100041 37,328

IRISEducationalMedia 84.324 R324A110074 4,546

OregonStateBoardofHigherEducationforandon

behalfoftheUniversityofOregon‐ResearchandInnovationto

ImproveServicesandResultsForChildrenWithDisabilities 84.324 R324A090104 21,340


behalfoftheUniversityofOregon‐ResearchandInnovationto


BoardofRegents,UniversityofWisconsinSystem‐ResearchandInnovationto


TOTALDEPARTMENTOFEDUCATIONSUBRECIPIENTPROGRAMS 385,426

TOTALDEPARTMENTOFEDUCATIONALLPROGRAMS 1,662,813$

FederalGrantor/

Pass‐ThroughGrantor/ProgramorClusterTitle

OREGONRESEARCHINSTITUTESCHEDULEOFEXPENDITURESOFFEDERALAWARDS(Continued)



Federal Pass‐Through

CFDA EntityIdentifying Federal

Number Number Expenditures

FederalGrantor/

Pass‐ThroughGrantor/ProgramorClusterTitle

DirectPrograms

InnovationsinAppliedPublicHealthResearch 93.061 588,734$

FamilySmokingPreventionandTobaccoControlActRegulatoryResearch 93.077 549,089

ResearchandTraininginComplementaryandAlternativeMedicine 93.213 232,131MentalHealthResearchGrants 93.242 1,750,816AlcoholResearchPrograms 93.273 753,877DrugAbuseResearchPrograms 93.279 5,637,072CancerCauseandPreventionResearch 93.393 1,507,398

Diabetes,Digestive,andKidneyDiseasesExtramuralResearch 93.847 1,086,010

PopulationResearch 93.864 1,252CenterforResearchforMothersandChildren 93.865 1,451,073

AgingResearch 93.866 2,038,772

InternationalResearchandResearchTraining 93.989 15,966TOTALDHHSDIRECTPROGRAMS 15,612,190$

OREGONRESEARCHINSTITUTESCHEDULEOFEXPENDITURESOFFEDERALAWARDS(Continued)



Federal Pass‐ThroughCFDA EntityIdentifying FederalNumber Number Expenditures

DEPARTMENTOFHEALTHANDHUMANSERVICES(DHHS)(continued)Pass‐ThroughProgramFrom:

UniversityofKansasCenterforResearch‐MaternalandChild

HealthFederalConsolidatedPrograms 93.110 1R40MC26822 94,813$

ColumbiaUniversity‐OralDiseasesandDisordersResearch 93.121 5R34DE022293 10,459

UniversityofSouthCarolina‐MentalHealthResearch 93.242 5RO1MH097699 218,625FamilyWorks‐DrugAbuseResearchPrograms 93.279 2R44DA026658 284,270VirginiaCommonwealthUniversity‐DrugAbuseResearchPrograms 93.279 RO1DA031724 30,974UniversityofPittsburgh‐DrugAbuseResearchPrograms 93.279 5R21DA033612 8,671RegentsoftheUniversityofMinnesota‐DrugAbuseResearchPrograms 93.279 3U54DA031659 246,825OregonHealthandScienceUniversity‐DrugAbuseResearchPrograms 93.279 3R33DA035640 61,940BoardofRegents,UniversityofNevada,Reno‐MentalHealth

NationalResearchServiceAwardsforResearchTraining 93.282 RO1MH083740 22,162RegentsoftheUniversityofMinnesota‐CancerResearchPrograms 93.393 RO1CA135884 27,603RegentsoftheUniversityofMinnesota‐CancerResearchPrograms 93.393 RO1CA141531 208,517

KleinBlundel,Inc.‐CancerResearchPrograms 93.393 R42HD051244 6,348

OregonHealthandScienceUniversity‐CancerTreatmentResearch 93.395 5RO1CA1634740 108,724

RegentsoftheUniversityofColorado,UniversityofColoradoDenver

UrologyandHematologyResearch 93.847 5R18DK096387 18,747

DeschutesResearchInstitute‐CenterforResearchforMothersandChildren 93.865 R41HD055718 5,520


behalfoftheUniversityofOregon‐AgingResearch 93.866 1R01AG046401 15,071TOTALDHHSSUBRECIPIENTPROGRAMS 1,369,269

TOTALDHHSALLPROGRAMS 16,981,459

TOTALRESEARCHANDDEVELOPMENTCLUSTER 18,644,272

TOTALEXPENDITURESOFFEDERALAWARDS 18,644,272$

FederalGrantor/Pass‐ThroughGrantor/ProgramorClusterTitle

OREGONRESEARCHINSTITUTENOTESTOTHESCHEDULEOFEXPENDITURESOFFEDERALAWARDS


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Note1‐BasisofPresentationTheaccompanying ScheduleofExpendituresof FederalAwards (Schedule) includes the federal grantactivity of Oregon Research Institute under programs of the federal government for the year endedDecember31,2014.TheinformationinthisScheduleispresentedinaccordancewiththerequirementsofOfficeofManagementandBudget(OMB)CircularA‐133,AuditsofStates,LocalGovernments,andNon‐ProfitOrganizations.BecausetheSchedulepresentsonlyaselectedportionoftheoperationsofOregonResearchInstitute,itisnotintendedtoanddoesnotpresentthefinancialposition,changesinnetassetsorcashflowsofOregonResearchInstitute.

Note2‐SummaryofSignificantAccountingPoliciesExpenditures reported on this Schedule are reported on the accrual basis of accounting. Suchexpenditures are recognized following the cost principles contained in OMB Circular A‐122, CostPrinciples forNon‐profitOrganizations,whereincertaintypesofexpendituresarenotallowableorarelimitedtoreimbursement.Pass‐throughentityidentifyingnumbersarepresentedwhereavailable.Note3‐AmountsProvidedtoSubrecipientsOf the federal expenditures presented in the Schedule, Oregon Research Institute provided federalawardstosubrecipientsasfollows:

AmountProvidedtoSubrecipients

EducationResearch 84.305 14,928$

SpecialEducation‐ResearchandInnovationtoImproveServices 84.324 337,911

ResearchandTraininginComplementaryandAlternativeMedicine 93.213 604

MentalHealthResearchGrants 93.242 193,240

AlcoholResearchPrograms 93.273 136,860

DrugAbuseResearchPrograms 93.279 726,328

CancerCauseandPreventionResearch 93.393 121,140

Diabetes,Digestive,andKidneyDiseasesExtramuralResearch 93.847 173,321

CenterforResearchforMothersandChildren 93.865 309,189

AgingResearch 93.866 345,107

Total 2,358,628$

FederalCFDANumberProgramTitle

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REPORTOFINDEPENDENTAUDITORSONINTERNALCONTROLOVERFINANCIALREPORTINGANDONCOMPLIANCEANDOTHERMATTERSBASEDONANAUDITOFFINANCIALSTATEMENTS

PERFORMEDINACCORDANCEWITHGOVERNMENTAUDITINGSTANDARDSTheBoardofDirectorsOregonResearchInstituteWehaveaudited, inaccordancewiththeauditingstandardsgenerallyacceptedintheUnitedStatesofAmerica and the standards applicable to financial audits contained inGovernmentAuditingStandardsissued by the Comptroller General of the United States, the financial statements of Oregon ResearchInstitute,whichcomprisethestatementoffinancialpositionasofDecember31,2014,andtherelatedstatements of activities, functional expenses and cash flows for the year then ended, and the relatednotestothefinancialstatements,andhaveissuedourreportthereondatedMarch13,2015.InternalControlOverFinancialReportingIn planning and performing our audit of the financial statements, we considered Oregon ResearchInstitute’sinternalcontroloverfinancialreporting(internalcontrol)todeterminetheauditproceduresthat are appropriate in the circumstances for the purpose of expressing our opinion on the financialstatements,butnot for thepurposeofexpressinganopinionon theeffectivenessofOregonResearchInstitute’s internal control. Accordingly,wedonot express anopinionon the effectivenessofOregonResearchInstitute’sinternalcontrol.A deficiency in internal control exists when the design or operation of a control does not allowmanagementoremployees,inthenormalcourseofperformingtheirassignedfunctions,toprevent,ordetect and correct, misstatements on a timely basis. A material weakness is a deficiency, or acombinationofdeficiencies,ininternalcontrolsuchthatthereisareasonablepossibilitythatamaterialmisstatementoftheentity'sfinancialstatementswillnotbeprevented,ordetectedandcorrected,onatimelybasis.Asignificantdeficiency isadeficiency,oracombinationofdeficiencies,ininternalcontrolthatislessseverethanamaterialweakness,yetimportantenoughtomeritattentionbythosechargedwithgovernance.Ourconsiderationofinternalcontrolwasforthelimitedpurposedescribedinthefirstparagraphofthissection and was not designed to identify all deficiencies in internal control that might be materialweaknessesorsignificantdeficiencies.Giventheselimitations,duringourauditwedidnotidentifyanydeficiencies in internal control that we consider to be material weaknesses. However, materialweaknessesmayexistthathavenotbeenidentified.

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REPORTOFINDEPENDENTAUDITORSONINTERNALCONTROLOVERFINANCIALREPORTINGANDONCOMPLIANCEANDOTHERMATTERSBASEDONANAUDITOFFINANCIALSTATEMENTS

PERFORMEDINACCORDANCEWITHGOVERNMENTAUDITINGSTANDARDS(Continued)ComplianceandOtherMattersAs part of obtaining reasonable assurance about whether Oregon Research Institute’s financialstatements are free from material misstatement, we performed tests of its compliance with certainprovisionsoflaws,regulations,contracts,andgrantagreements,noncompliancewithwhichcouldhaveadirectandmaterialeffectonthedeterminationoffinancialstatementamounts.However,providinganopiniononcompliancewiththoseprovisionswasnotanobjectiveofouraudit,andaccordingly,wedonotexpresssuchanopinion.TheresultsofourtestsdisclosednoinstancesofnoncomplianceorothermattersthatarerequiredtobereportedunderGovernmentAuditingStandards.

PurposeofthisReportThe purpose of this report is solely to describe the scope of our testing of internal control andcompliance and the results of that testing, and not to provide an opinion on the effectiveness of theentity’s internal control or on compliance. This report is an integral part of an audit performed inaccordance with Government Auditing Standards in considering the entity’s internal control andcompliance.Accordingly,thiscommunicationisnotsuitableforanyotherpurpose.


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REPORTOFINDEPENDENTAUDITORSONCOMPLIANCEFOREACHMAJORFEDERALPROGRAMANDREPORTONINTERNALCONTROLOVERCOMPLIANCEREQUIREDBYOMBCIRCULARA‐133

TotheBoardofDirectorsOregonResearchInstituteReportonComplianceforEachMajorFederalProgram

We have audited Oregon Research Institute’s compliancewith the types of compliance requirementsdescribedintheOMBCircularA‐133ComplianceSupplementthatcouldhaveadirectandmaterialeffectonOregonResearch Institute’smajor federalprogramfor theyearendedDecember31,2014.OregonResearch Institute'smajor federalprogramis identified in thesummaryofauditor'sresultssectionoftheaccompanyingscheduleoffindingsandquestionedcosts.

Management’sResponsibilityManagement is responsible for compliancewith the requirements of laws, regulations, contracts, andgrantsapplicabletoitsfederalprogram.Auditor’sResponsibilityOurresponsibilityistoexpressanopiniononcomplianceforOregonResearchInstitute'smajorfederalprogrambasedonourauditofthetypesofcompliancerequirementsreferredtoabove.WeconductedourauditofcomplianceinaccordancewithauditingstandardsgenerallyacceptedintheUnitedStatesofAmerica; the standards applicable to financial audits contained in Government Auditing Standards,issuedbytheComptrollerGeneraloftheUnitedStates;andOMBCircularA‐133,AuditsofStates,LocalGovernments,andNon‐ProfitOrganizations. Those standardsandOMBCircularA‐133require thatweplanandperformtheaudittoobtainreasonableassuranceaboutwhethernoncompliancewiththetypesof compliancerequirementsreferred toabove thatcouldhaveadirectandmaterialeffectonamajorfederalprogramoccurred.Anauditincludesexamining,onatestbasis,evidenceaboutOregonResearchInstitute'scompliancewiththoserequirementsandperformingsuchotherproceduresasweconsiderednecessaryinthecircumstances.We believe that our audit provides a reasonable basis for our opinion on compliance for the majorfederal program. However, our audit does not provide a legal determination of Oregon ResearchInstitute'scompliance.OpiniononEachMajorFederalProgramIn our opinion, Oregon Research Institute complied, in all material respects, with the types ofcompliance requirements referred to above that could have a direct andmaterial effect on itsmajorfederalprogramfortheyearendedDecember31,2014.

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REPORTOFINDEPENDENTAUDITORSONCOMPLIANCEFOREACHMAJORFEDERALPROGRAMANDREPORTONINTERNALCONTROLOVERCOMPLIANCEREQUIREDBYOMBCIRCULARA‐133

(Continued)

ReportonInternalControlOverCompliance

Management of Oregon Research Institute is responsible for establishing and maintaining effectiveinternal control over compliance with the types of compliance requirements referred to above. Inplanningandperformingourauditof compliance,weconsideredOregonResearch Institute's internalcontrolovercompliancewiththetypesofrequirementsthatcouldhaveadirectandmaterialeffectonthe major federal program to determine the auditing procedures that are appropriate in thecircumstances for thepurposeofexpressinganopiniononcompliance for themajor federalprogramandtotestandreportoninternalcontrolovercomplianceinaccordancewithOMBCircularA‐133,butnot for thepurposeofexpressinganopinionon theeffectivenessof internalcontrolovercompliance.Accordingly,wedonotexpressanopinionontheeffectivenessofOregonResearchInstitute'sinternalcontrolovercompliance.Adeficiency in internal controlover complianceexistswhen thedesignor operationof a control overcompliance does not allow management or employees, in the normal course of performing theirassigned functions, to prevent, or detect and correct, noncompliance with a type of compliancerequirement of a federal program on a timely basis. A material weakness in internal control overcomplianceisadeficiency,oracombinationofdeficiencies,ininternalcontrolovercompliancesuchthatthereisareasonablepossibilitythatmaterialnoncompliancewithatypeofcompliancerequirementofafederal program will not be prevented, or detected and corrected, on a timely basis. A significantdeficiencyininternalcontrolovercomplianceisadeficiency,oracombinationofdeficiencies,ininternalcontrolovercompliancewithatypeofcompliancerequirementofafederalprogramthatislessseverethanamaterialweaknessininternalcontrolovercompliance,yetimportantenoughtomeritattentionbythosechargedwithgovernance.Ourconsiderationofinternalcontrolovercompliancewasforthelimitedpurposedescribedinthefirstparagraph of this section and was not designed to identify all deficiencies in internal control overcompliance that might be material weaknesses or significant deficiencies. We did not identify anydeficienciesininternalcontrolovercompliancethatweconsidertobematerialweaknesses.However,materialweaknessesmayexistthathavenotbeenidentified.Thepurpose of this report on internal control over compliance is solely to describe the scopeof ourtestingofinternalcontrolovercomplianceandtheresultsofthattestingbasedontherequirementsofOMBCircularA‐133.Accordingly,thisreportisnotsuitableforanyotherpurpose.


OREGONRESEARCHINSTITUTESCHEDULEOFFINDINGSANDQUESTIONEDCOSTS


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SectionI‐SummaryofAuditor’sResults

Financial Statements

Typeofauditor’sreportissued: Unmodified

Internalcontroloverfinancialreporting:

Materialweakness(es)identified? Yes No

Significantdeficiency(ies)identified? Yes Nonereported

Noncompliancematerialtofinancialstatementsnoted? Yes No

FederalAwards

Internalcontrolovermajorfederalprograms:

Materialweakness(es)identified? Yes No

Significantdeficiency(ies)identified? Yes Nonereported

Anyauditfindingsdisclosedthatarerequiredtobereportedinaccordancewithsection510(a)ofCircularA‐133? Yes No

IdentificationofMajorFederalPrograms

CFDANumbers NameofFederalProgramorClusterTypeofAuditor’sReportIssued

Various ResearchandDevelopmentCluster Unmodified

DollarthresholdusedtodistinguishbetweentypeAandtypeBprograms: $ 559,328

Auditeequalifiedaslow‐riskauditee? Yes No

SectionII‐FinancialStatementFindingsNonereported

SectionIII‐FederalAwardFindingsandQuestionedCostsNonereported

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