1 THE GIRL SCOUTS OF GREATER CHICAGO AND NORTHWEST INDIANA, INC. FINANCIAL STATEMENTS
2 FINANCIAL STATEMENTS CONTENTS INDEPENDENT AUDITOR S REPORT... 1 FINANCIAL STATEMENTS STATEMENTS OF FINANCIAL POSITION... 3 STATEMENTS OF ACTIVITIES AND CHANGES IN NET ASSETS... 4 STATEMENTS OF CASH FLOWS
3 Crowe Horwath LLP Independent Member Crowe Horwath International INDEPENDENT AUDITOR'S REPORT The Board of Directors The Girl Scouts of Greater Chicago and Northwest Indiana, Inc. Report on the Financial Statements We have audited the accompanying financial statements of The Girl Scouts of Greater Chicago and Northwest Indiana, Inc. ( the Council ), which comprise the statements of financial position as of September 30, 2014 and 2013, and the related statements of activities and changes in net assets, and cash flows for the years then ended, and the related notes to the financial statements. Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor s Responsibility Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. 1.
4 Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of The Girl Scouts of Greater Chicago and Northwest Indiana, Inc. as of September 30, 2014 and 2013, and the changes in its net assets and its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America. Chicago, Illinois February 19, 2015 Crowe Horwath LLP 2.
5 STATEMENTS OF FINANCIAL POSITION ASSETS Cash and cash equivalents $ 1,572,904 $ 1,369,619 Accounts receivable, net 3,226 2,852 Pledges receivable, net 408, ,592 Inventories 618, ,969 Prepaid expenses 312, ,183 Other assets 60,397 48,839 Investments 11,852,667 12,690,227 Property, plant and equipment, net 14,043,404 14,809,157 Assets held for sale 150, ,194 Total assets $ 29,022,904 $ 30,547,632 LIABILITIES Accounts payable $ 491,481 $ 470,009 Accrued expenses 633, ,751 Membership dues owed GSUSA 35, ,980 Deferred revenue 401, ,594 Line of credit - 500,000 Notes payable 2,633,873 2,760,936 Deferred rent 107, ,936 Total liabilities 4,302,858 5,200,206 NET ASSETS Unrestricted 23,765,547 23,982,005 Temporarily restricted 813,442 1,224,364 Permanently restricted 141, ,057 Total net assets 24,720,046 25,347,426 Total liabilities and net assets $ 29,022,904 $ 30,547,632 See notes to the financial statements. 3.
6 STATEMENT OF ACTIVITIES AND CHANGES IN NET ASSETS For the Year Ended September 30, 2014 Unrestricted Operating activities: Public support Individual gifts 163,609 Temporarily Restricted Permanently Restricted $ $ 112,378 $ - $ 275,987 Corporate gifts and grants 481, , ,234 Government grants 6,396 5,550-11,946 Foundation grants 82, , ,390 Family partnership campaign 81, ,693 United Way allocations , ,233 Special event revenue, net 329, , ,718 Net assets released from restrictions 1,742,766 (1,742,766) - - Total public support 2,889,123 (410,922) - 2,478,201 Revenue: Program-related revenue Cookie sales, net of direct costs 10,126, ,126,722 Fall sales, net of direct costs 702, ,575 Program fees 1,472, ,472,977 Sales of merchandise, net of direct costs 705, ,538 Other revenue Interest and dividend, net 122, ,042 Miscellaneous 57, ,419 Total revenue 13,187, ,187,273 Total public support and revenue 16,076,396 (410,922) - 15,665,474 Expenses: Programs Membership services 12,189, ,189,459 Camping 832, ,829 Supporting services Management and general 1,536, ,536,888 Fundraising 1,017, ,017,248 Total expenses 15,576, ,576,424 Changes in net assets from operating activities 499,972 (410,922) - 89,050 Non-operating activities: Net realized and unrealized gain on investments 311, ,717 GSUSA pension contribution (1,067,210) - - (1,067,210) Gain on sale of property 39, ,063 Total non-operating activities (716,430) - - (716,430) Changes in net assets (216,458) (410,922) - (627,380) Net assets, beginning of period 23,982,005 1,224, ,057 25,347,426 Net assets, end of period $ 23,765,547 $ 813,442 $ 141,057 $ 24,720,046 Total See notes to the financial statements. 4.
7 STATEMENT OF ACTIVITIES AND CHANGES IN NET ASSETS For the Year Ended September 30, 2013 Unrestricted Operating activities: Public support Individual gifts 161,317 Temporarily Restricted Permanently Restricted $ $ 182,168 $ - $ 343,485 Corporate gifts and grants 205, , ,790 Government grants 13,592 6,000-19,592 Foundation grants 71, , ,653 Family partnership campaign 93, ,026 United Way allocations 138,050 69, ,970 Special event revenue, net 467, , ,997 Net assets released from restrictions 1,326,622 (1,326,622) - - Total public support 2,477, ,391-2,592,513 Revenue: Program-related revenue Cookie sales, net of direct costs 10,808, ,808,365 Fall sales, net of direct costs 722, ,909 Program fees 1,320, ,320,657 Sales of merchandise, net of direct costs 782, ,061 Other revenue Interest and dividend, net 156, ,081 Miscellaneous 84, ,996 Total revenue 13,875, ,875,069 Total public support and revenue 16,352, ,391-16,467,582 Expenses: Programs Membership services 13,507, ,507,160 Camping 709, ,492 Supporting services Management and general 1,826, ,826,895 Fundraising 1,422, ,422,875 Total expenses 17,466, ,466,422 Changes in net assets from operating activities (1,114,231) 115,391 - (998,840) Non-operating activities: Net realized and unrealized gain on investments 283, ,007 GSUSA pension contribution (857,581) - - (857,581) Gain on sale of property 353, ,871 Total non-operating activities (220,703) - - (220,703) Changes in net assets (1,334,934) 115,391 - (1,219,543) Net assets, beginning of period 25,316,939 1,108, ,057 26,566,969 Net assets, end of period $ 23,982,005 $ 1,224,364 $ 141,057 $ 25,347,426 Total See notes to the financial statements. 5.
8 STATEMENTS OF CASH FLOWS For the Years Ended Cash flows from operating activities Change in net assets $ (627,380) $ (1,219,543) Adjustments to reconcile change in net assets to net cash flow from operating activities: Depreciation 1,045,137 1,123,573 Realized and unrealized gain on investments (311,717) (283,007) Deferred rent (28,770) 10,057 Gain on sale of property (39,063) (353,871) Decrease (increase) in operating assets: Accounts receivable (374) (2,302) Pledges receivables 28, ,155 Inventories (28,292) 349,307 Prepaid expenses (55,690) 237,332 Other assets (11,558) 3,942 (Decrease) increase in operating liabilities: Accounts payable 21,472 (85,509) Accrued expenses (318,412) 102,475 Membership dues owed GSUSA (159,192) 174,321 Deferred revenue 214, ,284 Net cash flows from operating activities (271,139) 401,214 Cash flows from investing activities Proceeds from sale of investments 4,109,321 2,599,193 Purchase of investments (2,960,044) (5,417,817) Proceeds from sale of property 367, ,819 Purchase of property, plant and equipment (415,495) (249,304) Net cash flows from investing activities 1,101,487 (2,539,109) Cash flows from financing activities Net repayment of line of credit (500,000) - Borrowings on notes payable - 34,550 Repayment of notes payable (127,063) (124,876) Net cash flows from financing activities (627,063) (90,326) Net change in cash and cash equivalents 203,285 (2,228,221) Cash and cash equivalents, beginning of year 1,369,619 3,597,840 Cash and cash equivalents, end of year $ 1,572,904 $ 1,369,619 Supplemental cash flow information Cash paid during the period for interest $ 176,510 $ 184,534 See notes to the financial statements. 6.
9 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Nature of Organization: Membership in Girl Scouting is open to all girls, ages, 5-17, who are in grades kindergarten through 12. Girl Scouting builds girls of courage, confidence, and character, who make the world a better place. The program is an out-of-school educational program designed to help girls put into practice the fundamental principles of the Girl Scout movement. It is carried out in small groups with adult leadership and provides a wide range of activities developed around the interests and needs of girls. Use of Estimates: The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. Cash and Cash Equivalents: Cash and cash equivalents include deposits in financial institutions and shortterm investments with original maturities of 90 days or less. Cash and cash equivalents included in the investment portfolio are reported as investments. The Council s cash on deposit at financial institutions is potentially exposed to concentrations of credit risk. However, the deposits are placed with major financial institutions, which management believes limits its exposure to risk of loss. Receivables: On a periodic basis, the Council evaluates its receivables and establishes an allowance for doubtful accounts based on history of past collections and write-offs. At, the allowance for doubtful accounts was approximately $220,000 and $96,000, respectively, for accounts receivable and approximately $55,000 and $22,000, respectively, for pledges receivable. Interest is not charged on past due accounts. Investments: Investments are reported at fair value. Changes in fair value during the year are recorded as realized and unrealized gains or losses in the statement of activities and changes in net assets. Fair Values of Financial Instruments Other Than Investments: The fair values of financial instruments other than investments are based on a variety of factors. In some cases, fair values represent quoted market prices for identical or comparable instruments. In other cases, fair values have been estimated based on assumptions about the amount and timing of estimated future cash flows and assumed discount rates reflecting varying degrees of risk. Accordingly, the fair values may not represent actual values that could have been realized at year end or that will be realized in the future. The carrying value of financial instruments approximates fair value as of. Inventories: Inventories consist primarily of Girl Scout patches, badges, uniforms and publications and are stated at the lower of cost or market with cost determined on an average pricing basis. Deferred Revenue: Fees collected in advance for program, camp events, camp rentals, and insurance reimbursement for rebuilding of fixed assets subsequent to September 30 are reflected as deferred revenue in the unrestricted fund. These fees will be reported as revenue upon completion of the event and dates of rental. Property, Plant and Equipment: Property, plant and equipment, with estimated useful lives in excess of one year, and a cost in excess of $2,000, are recorded at acquisition cost, or fair value as of the date of receipt if acquired by donation, less accumulated depreciation. Expenditures for routine maintenance are charged to operations. The Council s buildings, including improvements and camp units, are depreciated on the straight-line method over their estimated useful lives of 25 to 55 years. 7.
10 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Equipment consists of various camping equipment, vehicles, computer equipment, and office furniture and equipment. These assets are depreciated on the straight-line method over their estimated useful lives, which range from 3 to 10 years. Asset Impairment Assessments: The Council reviews long-lived assets for impairment whenever events or circumstances indicate that the carrying value of such assets may not be fully recoverable. Impairment is evaluated based on the sum of undiscounted estimated future cash flows expected to result from use of the asset compared to its carrying value. If impairment is recognized, the carrying value of the impaired asset is reduced to its fair value, based on discounted estimated future cash flow. No impairment has been recognized through. Basis of Presentation: The Council reports information regarding its financial position and activities according to three classes of net assets based on the existence or absence of donor imposed restrictions as follows: Unrestricted: Net assets not subject to donor-imposed stipulations. Revenues are reported in unrestricted net assets unless use of the related assets is limited by donor-imposed stipulations. Expenses are reported as decreases in unrestricted net assets. Expiration of temporary restrictions on net assets (i.e., the donor-imposed stipulated purpose has been fulfilled or the stipulated time period has elapsed) is reported as reclassifications between the applicable classes of net assets. Temporarily Restricted: Net assets subject to donor-imposed stipulations that may be met by actions of the Council or by the passage of time. The following funds have net asset balances as of : Girl Space $ 31,936 $ 169,756 Wallace Foundation-Financial Systems 125, ,000 STEM 87, ,367 Healthy Living 55,623 84,505 GOTO ,000 Journey World 61,577 48,912 MacArthur Foundation-Digital Media - 26,824 Reading Literacy - 26,734 Other 42, ,674 Pledges receivable 408, ,592 Total $ 813,442 $ 1,224,364 Release of temporarily restricted net assets from restriction of $1,742,766 and $1,326,622 for the years ended, respectively, were related primarily to direct program activities. Permanently Restricted: Net assets subject to donor-imposed stipulations that they be maintained permanently by the Council. At, the Council had $141,057 in permanently restricted net assets. 8.
11 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Operating Activities: Operating activities include all revenue and expenses except for gains and losses on investments, contributions to GSUSA s frozen multi-employer defined benefit plan, and gains and losses on sale of properties. Grants and Contributions: Grants and contributions are recorded as public support in the year earned. Donor-restricted amounts are reported as temporarily restricted support until the donor restriction expires, or the passage of time, at which time the temporarily restricted net assets are reported in the statement of activities and changes in net assets as net assets released from restriction. Revenue Net of Direct Costs: As part of its fundraising efforts, the Council holds periodic special events. Revenue for special events is recognized in the period in which the event is held. Direct expenses associated with special events are netted against such revenue as follows: Special event revenue $ 848,557 $ 798,895 Special event direct expenses (218,839) (207,898) Special event revenue, net $ 629,718 $ 590,997 Program-related revenues include that of cookie and fall sales. Fall sales include that of magazine and nut sales. Direct expenses associated with program-related revenue are netted against such revenue as follows: Cookie sales revenue $ 17,190,831 $ 18,338,289 Cookie sales direct expenses (7,064,109) (7,529,924) Cookie sales revenue, net $ 10,126,722 $ 10,808, Magazine sales revenue $ 656,631 $ 668,146 Magazine sales direct expenses (543,566) (516,455) Nut sales revenue 1,341,435 1,274,688 Nut sales direct expenses (751,925) (703,470) Fall sales revenue, net $ 702,575 $ 722,909 9.
12 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Direct expenses associated with the sale of merchandise are netted against such revenue as follows: Sales of merchandise $ 1,828,737 $ 1,903,809 Cost of sales (1,123,199) (1,121,748) Sales of merchandise, net $ 705,538 $ 782,061 Income Taxes: The Council has received a letter from the Internal Revenue Service indicating that the Council is exempt from Federal income taxes under Internal Revenue Code Section 501(c)(3). However, the Council does pay federal income taxes on unrelated business income. No provision has been made for income taxes in the accompanying financial statements, as the Council has had no significant unrelated business income. If the Council incurs interest and penalties, the Council recognizes interest and penalties related to unrecognized tax benefits in interest and income tax expense, respectively. The Council has no amounts accrued for interest or penalties as of. The Council has not been examined by any tax jurisdiction. The Council has no on-going federal, state or local tax audits; however, the Council s tax returns for 2010 and subsequent years are open to examination. The Council does not expect the total amount of unrecognized tax benefits to significantly change in the next 12 months. Assets Held for Sale: In October 2007, as part of a cost saving measure, the Council relocated one of its operations to the former headquarters of Drifting Dunes Girl Scout Council in Merrillville, Indiana. As a result of the move and the realignment of the Council in July of 2008, it was determined by the Board of Directors to proceed with the sale of the Council s previous headquarters in Highland, Indiana. Effective November 1, 2007, the building was listed for sale by the Council. On December 17, 2013, the Council sold its Highland Office property for $390,000. The property included land, buildings, and building improvements. The total net book value included in asset held for sale was $343,194 as of the date of sale. The Council realized a gain of approximately $39,000 on the sale in the fiscal year ended September 30, In July 2014, the Council classified the Apple Acres property, a long-lived asset that was previously used for operations, as held for sale. On February 13, 2015, subsequent to year end, the Council sold the Apple Acres property for $452,000. The asset was valued at its carrying value of $150,663 on September 30, NOTE 2 - RELATED-PARTY TRANSACTIONS For the years ended, approximately 81% and 87%, respectively, of the Council s inventory purchases were from the GSUSA. The Council owed the GSUSA $365,335 and $225,243 at, respectively, for inventory purchased. These amounts are included in accounts payable. The Council owed the GSUSA $35,788 and $194,980 at, respectively, which represents membership dues collected by the Council on behalf of members and subsequently remitted to the GSUSA. These membership dues are considered funds of GSUSA. 10.
13 NOTE 3 - PLEDGES RECEIVABLE Pledges receivable represent amounts due from donors for multiyear unconditional pledges. Pledges receivable are shown net of a discount on future collections. Payments on the pledges are expected to be received as follows: Year ending September 30, Amount 2015 $ 462, , ,735 Less allowance for doubtful accounts 55,226 Pledges receivable, net $ 408,509 NOTE 4 - INVESTMENTS AND FAIR VALUE MEASUREMENTS The Financial Accounting Standards Board (FASB) Codification Fair Value Measurements and Disclosures Topic standard defines fair value as the price that would be received for an asset or paid to transfer a liability (an exit price) in the Council s principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. This standard also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value: Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date. Level 2: Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data. Level 3: Significant unobservable inputs that reflect a reporting entity s own assumptions about the assumptions that market participants would use in pricing an asset or liability. In many cases, a valuation technique used to measure fair value includes inputs from multiple levels of the fair value hierarchy. The lowest level of significant input determines the placement of the entire fair value measurement in the hierarchy. The following are descriptions of the valuation methods and assumptions used by the Council to estimate the fair values of investments: Cash and cash equivalents: Fair values are estimated to approximate deposit account balances, payable on demand, as no discounts for credit quality or liquidity were determined to be applicable. (Level 2 inputs)(income approach) Equity Mutual Funds: The fair value of equities, including domestic stocks, international stocks and equity funds that are readily marketable are determined by obtaining quoted prices on nationally recognized securities exchanges. (Level 1 inputs) 11.
14 NOTE 4 - INVESTMENTS AND FAIR VALUE MEASUREMENTS Fixed Income Mutual Funds: The fair value of fixed income mutual funds, including government agency and corporate bonds that are readily marketable are determined by obtaining quoted prices on nationally recognized securities exchanges. (Level 1 inputs) Assets and liabilities measured on a recurring basis at fair value at, are summarized below: Level 1 Level 2 Level 3 Total 2014 Assets Cash and cash equivalents $ - $ 4,749,002 $ - $ 4,749,002 Equity funds 2,894, ,894,972 Fixed income mutual funds Government agencies 163, ,492 Corporate 4,045, ,045,201 $ 7,103,665 $ 4,749,002 $ - $ 11,852,667 Level 1 Level 2 Level 3 Total 2013 Assets Cash and cash equivalents $ - $ 5,360,369 $ - $ 5,360,369 Equities Domestic stocks 2, ,118 Equity funds 3,273, ,273,906 Fixed income mutual funds Government agencies 350, ,772 Corporate 3,703, ,703,062 $ 7,329,858 $ 5,360,369 $ - $ 12,690,
15 NOTE 5 - PROPERTY, PLANT AND EQUIPMENT Cost: Land $ 3,746,054 $ 3,809,054 Land improvement 641, ,444 Buildings and improvements 24,648,664 24,907,536 Equipment and vehicles 7,511,033 7,412,508 Total cost 36,547,195 36,770,542 Accumulated depreciation (22,503,791) (21,961,385) Property, plant and equipment, net $ 14,043,404 $ 14,809,157 The aggregate depreciation charged to operations was $1,045,137 and $1,123,573 for the years ended, respectively. NOTE 6 - ENDOWMENT The Council follows the FASB Codification Topic Endowments of Not-for-Profit Organizations: Net Assets Classification of Funds Subject to an Enacted Version of the Uniform Prudent Management of Institutional Funds Act (UPMIFA), and Enhanced Disclosures for All Endowment Funds. The Council s endowment consists only of donor-restricted endowment funds and no funds are designated by the Board of Directors to function as endowments. The Council s donor-restricted endowment funds are used for various Girl Scout programs and activities. Endowment net assets of $141,057 are classified as permanently restricted as of September 30, 2014 and Interpretation of Relevant Law: The Council has interpreted the Uniform Prudent Management of Institutional Funds Act (UPMIFA) as requiring the preservation of the fair value of the original gift as of the gift date of the donor-restricted endowment funds absent explicit donor stipulations to the contrary. As a result of this interpretation, the Council classifies as permanently restricted net assets (a) the original value of gifts donated to the permanent endowment, (b) the original value of subsequent gifts to the permanent endowment, and (c) accumulations to the permanent endowment made in accordance with the direction of the applicable donor gift instrument at the time the accumulation is added to the fund. The remaining portion of the donor-restricted endowment fund that is not classified in permanently restricted net assets is classified as temporarily restricted net assets until those amounts are appropriated for expenditure by the organization in a manner consistent with the standard of prudence prescribed by UPMIFA. In accordance with UPMIFA, the organization considers the following factors in making a determination to appropriate or accumulate donor-restricted endowment funds: (1) The duration and preservation of the fund (2) The purposes of the 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 the organization (7) The investment policies of the organization 13.
16 NOTE 6 - ENDOWMENT Return Objectives and Risk Parameters: The Council has adopted investment and spending policies for endowment assets that attempt to provide a predictable stream of funding to programs supported by its endowment while seeking to maintain the purchasing power of the endowment assets. Endowment assets include those assets of donor-restricted funds that the organization must hold in perpetuity. Under this policy, the endowment assets are invested in a manner that is intended to produce results that match earnings on long-term fixed income securities. Strategies Employed for Achieving Objectives: To satisfy its long-term rate-of-return objectives, the Council relies on a strategy in which investment returns are achieved through investments in long-term fixed income index funds. Spending Policy: The Council has adopted an annual spending guideline based on withdrawing an amount equal to earnings in the current year that are spent within the year earned. Donor-Restricted Funds with Deficiencies: From time to time, the fair value of assets associated with individual donor restricted endowment funds may fall below the level that the donor or UPMIFA requires the Council to retain as a fund of perpetual duration. Deficiencies of this nature that are in excess of related temporarily restricted amounts are reported in unrestricted net assets. There were no donor-restricted deficiencies as of. NOTE 7 - NOTES PAYABLE On September 30, 2010, the Council borrowed $3,000,000 from BMO Harris Bank (Bank) for a five-year term that is scheduled to mature on October 1, The loan will amortize over fifteen years at a rate of 4.5% with equal monthly payments of principal and interest of $19,085 and a final balloon payment of $2,484,694 at maturity. The loan is collateralized by the investment portfolio of the Council. The outstanding loan balances at, are $2,599,088 and $2,708,492, respectively. In addition, the Council held three equipment notes at the years ended totaling $34,785 and $52,444 as of, respectively. Maturities range from 2013 to 2016 and interest rates range from 0% to 4.54%. Aggregate maturities required on notes payable at September 30, 2014, are due as follows: Year ending September 30, Long-term Debt 2015 $ 131, ,493, , ,286 $ 2,633,873 The Harris debt agreement contains various covenants. Management has an ongoing evaluation of covenant compliance subsequent to year end and believes that the Council is in compliance with such covenants. 14.
17 NOTE 8 - REVOLVING LINE OF CREDIT The Council has an available $3,300,000 secured revolving line of credit with the Bank which is subject to a monthly borrowing base limited to a 75% advance rate against the fair value of the investment portfolio. Availability under the line of credit will be reduced if the balance of the investment portfolio declines below $7,000,000. Interest rates on the borrowings are the Bank s base rate of 3.25% and of.75% plus 1.25% as of, respectively. Interest is payable monthly. The interest rate as of, was 4.0% and 4.75%, respectively. The borrowings against the line of credit as of, were $0 and $500,000, respectively. The line of credit expires on June 30, 2015, and is renewable annually at the discretion of the bank. Subsequent to year end, the Council drew on their existing line of credit in the amount of $3,150,000. NOTE 9 - RETIREMENT PLANS The Council currently participates in the Retirement Plan of the Girl Scouts of the USA, a noncontributory defined benefit multi-employer pension plan (Plan) sponsored by Girl Scouts of the USA. The risks of participating in this multi-employer plan are different from single-employer plans in the following respects: a) Assets contributed to the Plan by one employer may be used to provide benefits to employees of other participating employers. b) If a participating employer stops contributing to the Plan, the unfunded obligations of the plan may be borne by the remaining participating employers. c) If the Council chooses to stop participating in the Plan, the Council may be required to pay those plans an amount based on the Council s proportionate share of unfunded vested plan benefits, referred to as a withdrawal liability. The National Board of the Girl Scouts of the USA voted to freeze the plan to new entrants and to freeze future benefit accruals for all current participants under the plan effective July 31, The plan covers substantially all of the employees of various Girl Scout councils who were eligible to participate in the plan prior to the plan freeze. Accrued and vested benefits prior to July 31, 2010 are based on years of service and salary levels. The Council s participation in the plan is outlined in the table below. EIN/Pension Plan Number provides the Employee Identification Number (EIN) and the three-digit plan number. FIP/RP Status indicates plans for which a financial improvement plan (FIP) or a rehabilitation plan (RP) is either pending or has been implemented. There have been no significant changes that affect the comparability of 2014 and 2013 contributions. 15.
18 NOTE 9 - RETIREMENT PLANS Plan Pension Fund Retirement Plan of the Girl Scouts of the USA EIN/Pension Plan Number Council Contributions Fiscal 2014 $ 1,067,210 Fiscal 2013 $ 857,581 Plan Year-End of Most Recent Form 5500 Filing 12/31/2013 FIP/RP Status N/A Surcharge Imposed No Council Contributed more than 5% of Total Contributions No Due to the nature of the Plan, it is not practicable to determine the extent to which the assets of the Plan cover the actuarially computed value of vested benefits for the Council as a stand-alone operation. In addition, because the Plan is considered a multi-employer plan, it is only subject to certain minimum reporting requirements. As of December 31, 2013, the date for which the most current information is available, the Retirement Plan of the Girl Scouts of the USA had assets of $458,901,264 and liabilities of $582,656,083 for a net funded status of $(123,754,819). The Council expects to make contributions totaling $1,240,000 to the Plan during the year ending September 30, The Council maintains a 403(b) Thrift Plan covering substantially all employees. Employees may elect to defer wages subject to IRS limits. There were no discretionary employer contributions to the 403(b) Thrift Plan for the years ended, respectively. NOTE 10 - UNEMPLOYMENT COMPENSATION SELF-INSURANCE The Council has elected the reimbursement method of funding unemployment compensation claims. This method is essentially a self-insurance program. Under this program, the Council must reimburse various state unemployment agencies the full amount of regular benefits and one-half the extended benefits paid to claimants in the event an employee becomes unemployed. During fiscal year ended 2014 and 2013, the Council paid approximately $59,600 and $132,000, respectively, and has accrued $0 for claims as of. 16.
19 NOTE 11 - LEASE COMMITMENTS During fiscal year 2014, the Council occupied leased office space in Chicago and Lisle, Illinois and a program center in Chicago, Illinois. The Chicago office operating lease expires June 30, The operating lease in Lisle expired July, 31, 2012, and the Council extended the lease through October 31, The program center operating lease in Chicago expired on August 31, The Council also has entered into operating leases for various equipment. At September 30, 2014, the future minimum lease payments required under these operating leases are as follows: Year 2015 $ 598, , , , , and later years 712,947 $ 2,912,317 Rent expense approximated $997,400 and $972,600 for the years ended, respectively. As of, the Council s bank provided an irrevocable letter of credit totaling $175,000 and $200,000, respectively, as a deposit on the Council s leased office space in Chicago. The operating leases for office space provide for escalating lease payments over the term of the lease. The total amount of rental fees over the term of the lease is charged to rent expense on the straight-line method over the lease term. Rental expense in excess of lease payments is recorded as a deferred rent liability. Rental expense charged in excess of actual cash payments amounted to $28,710 and $10,057 for the year ended, respectively. NOTE 12 - DONATED SERVICES AND EQUIPMENT The Council receives significant contributions of volunteer hours on an annual basis. No amounts have been reflected in the accompanying financial statements for donated volunteer services. The Council also received donated professional services and equipment in the amount of $502,147 and $208,495 in 2014 and 2013, respectively. The receipt of these goods and services had no net effect on the change in net assets as equal amounts of revenue and expense were recognized. NOTE 13 - OPERATING RESERVES A criterion to keep a Girl Scout charter is for the Council to follow the GSUSA s recommendation of maintaining operating reserves. Its recommendation is that a council have a minimum of six months and a maximum of 12 months restricted operating reserve. At this time, GSUSA calculates operating reserve as unrestricted net assets (net assets without donor restrictions, less net property, plant and equipment), divided by the total actual unrestricted operating expenses, multiplied by 12 to calculate the number of months in the operating reserve. At, the Council s operating reserves were approximately 7.4 and 6.2 months, respectively. Management maintains open dialogue with GSUSA to mitigate any concerns over the ratio calculation. 17.
20 NOTE 14 - LITIGATION The Council is party to certain legal proceedings and allegations in the normal course of operations. In most cases, these matters are covered by commercial insurance. Management is of the opinion that these matters will not have a material effect on the Council s financial position or changes in net assets. NOTE 15 - SUBSEQUENT EVENTS Management has performed an analysis of the activities and transactions subsequent to September 30, 2014, to determine the need for any adjustments to and/or disclosures within the audited financial statements for the year ended September 30, Management has performed their analysis through February 19, 2015, the date the financial statements were available to be issued. 18.
Eagan, Minnesota FINANCIAL STATEMENTS Including Independent Auditors' Report As of and For the Years Ended December 31,2014 and 2013 TABLE OF CONTENTS Independent Auditors' Report Statements of Financial
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