| NAC Subgroup 1 Meeting NFP Industry Review

| NAC Subgroup 1 Meeting NFP Industry Review

| NAC Subgroup 1 Meeting NFP Industry Review Teresa Gordon Land conservancy Public broadcasting Advocacy Land Conservancy Nature Conservancy Conservation Fund Trust for Public Land Connecticut Audubon Society? Review of Land Conservancy Entities Contributions & Public Support as Percentage of Operating or Unrestricted Revenues Land Sales (generally to public entities for preservation) Transfers of land to public entities included as program expense Nature Conservation Conservancy Fund Trust for Public Land

67% 16% 52% 41% 37%* 53%* ?

TRNA ?** TRNA Some land holdings included in PRNA *** Trust Assets Held by Others in PRNA Underwater endowments (current or prior year) Mission related joint venture

HC Four-column format for Stmt of Activities Operating or other subtotal on Stmt of Activities PRNA includes revolving loan capital for financing land acquisitions (Is this different from true endowment?) True endowment (other than revolving capital fund) Quasi-endowment Split-interest agreements Nature Conservancy Land Conservation Nature Conservancy Undistributed investment return on quasi-endowments

Operating Income 190,188 16,317 206,505 Change in URNA Difference 216,938 26,750 216,938 The $10K difference includes one items on SCNA: . Change in underwater endowment 10,433 Public Broadcasting Oregon Public Broadcasting National Public Radio Northwest Public Radio (GASB) Oregon Public Broadcasting

NPR NWPR (GASB) 94% 33% 98% Four-column format for Stmt of Activities Operating or other subtotal on Stmt of Activities True endowment

Equity Mtd n/a n/a n/a n/a Review of Public Broadcasting Entities Contributions & Public Support as Percentage of Operating or Unrestricted Revenues Quasi-endowment

Split-interest agreements Trust Assets Held by Others in PRNA Underwater endowments (current or prior year) Mission related joint venture Impairment of intangibles treated outside of functional expense categories Net assets released from restrictions included capital expenditures All classes Oregon Public Broadcasting Public Broadcasting Oregon Public Broadcasting Contributions for equipment Undistributed investment return on quasi-endowments

Operating Income 3,571,710 1,075,425 683,113 4,254,823 Change in URNA 5,907,044 Difference 2,335,334 5,907,044 1,652,221 The $1.7M difference includes three items on SCNA: Gain on charitable remainder trust Change in underwater endowment Matured annuities and other transfers Advocacy Hard to find those with audited financial statements available! American Humane Assn. Chicago Coalition for the Homeless

Friends of the Earth Connecticut Audubon Society Review of Advocacy Entities Contributions & Public Support as Percentage of Operating or Unrestricted Revenues Advocacy programs as a percent of total expense Four-column format for Stmt of Activities Operating or other subtotal on Stmt of Activities* Chicago Connecticut American Coalition for Audubon Humane Assn the Homeless Society Friends of the Earth 46% 99%

40% 95% 73% 83% 8% 56%

True endowment ?** Quasi-endowment URNA n/a URNA & TRNA URNA Trust Assets Held by Others in PRNA ***

n/a ? ?** Underwater endowments (current or prior year) n/a ?** Split-interest agreements ?** Advocacy Agencies Advocacy Chicago Coalition for Homeless Operating Income 258,420

Change in URNA Difference 258,420 - American Humane Assn. (5,611,479) (5,487,771) 123,708 The difference reported on SCNA for AHA was release of restrictions due to decrease in underwater endowments The old and new methods produce essentially identical results of CCH since there were no endowment assets Notice something? All of the entities I looked at were pretty much as the charity end of the scale with most support from contributions and investments I went looking for hybrids probably not covered by other group members Museums with live exhibits

Monterey Bay Aquarium Admissions and program fees were about half of revenues Arizona-Sonora Desert Museum Admission fees were about a third of revenues Performing Arts Seattle Repertory Theatre Earned revenues were 55% of revenues, the rest coming from contributions and grants Seattle Repertory Theatre Monterey Bay Aquarium Arizona Sonora Desert Musem 45% 11%

18% 55% 50% 33% Four-column format for Stmt of Activities* Operating or other subtotal on Stmt of Activities** True endowment Quasi-endowment

Split-interest agreements n/a Trust Assets Held by Others in PRNA Hybrid Missions Contributions & Public Support as Percentage of Operating or Unrestricted Revenues Earned revenue percent Underwater endowments (current or prior year) *** PRNA & other NA n/a

Performing Arts Seattle Repertory Theatre Undistributed investment returns Biological exhibits (zoos, aquariums) Monterey Bay Aquarium Undistributed investment return on quasi-endowments Operating Income (745,188) 1,250,778 505,590 Change in URNA 505,590 Operating Income 12,983 Change in

URNA 32,173 19,190 32,173 32,173 505,590 Difference 1,250,778 - Difference 19,190 - Issues Raised by My Analysis PRNA that is not endowment Geography for quasi-endowments Split Interest Agreements Other PRNA it is more than endowments! Land held for conservation

endowment Perpetual trusts held by others cannot be managed as endowment by the beneficiary (no control) New restricted category makes more sense than new endowment category Quasi-Endowment Geography Should the new endowment category include only true donor-restricted endowments? Could it also include board-designated endowments Quasi-endowments Funds functioning as endowment Either method could work. Portion of investment return allocated to operations would appear in revenue on the income statement Pros & Cons: Quasi-endowments Leave them in unrestricted Put them in endowment Report undistributed

Separately report investment returns in nonoperating on income statement FS users would be aware that additional resources are expendable Reporting only in Stmt of Changes in NA less desirable because it is less transparent undistributed investment returns the stmt of change in endowment net assets Expendable nature of undistributed portion of returns would not be apparent to users that concentrate on the income statement Split-interest Agreements Charitable remainder trusts, gift annuities, life- income funds, etc. Since balance sheets rarely have NA columns, it was hard to determine whether the split-interest liabilities and related assets were reported in URNA,

TRNA or PRNA . Also hard because change in values might not be material and therefore not separately labelled on statement of activities I found them in PRNA, TRNA and URNA Split-interest Agreements Under current GAAP, temporarily restricted makes sense since the NFP generally has a remainder interest when the donor dies. What about the new restricted NA class? To me, restricted makes better sense than endowment even though one might manage the assets in a pool. In one case, I found some of the total gift annuity liability and assets rolled into what was labeled the endowment fund. Other issues Mission-related joint ventures and other arrangements Found one in revenue (equity method) Found another at historical cost with share of earnings reported in revenue

If clearly and closely related to the entitys mission, would a partial consolidation make the most sense? % share of revenues reported as revenue % share of expenses reported as expense Other issues Underwater endowments I found lots! At first, I thought about moving the underwater balances to endowment assuming there was TRNA investment returns sufficient to cover shortfalls. However, I found more than one entity with ZERO in TRNA due to the depth of the water they were under! Where to show the loss/recovery? Non-operating item on income statement? Statement of changes in unrestricted net assets only? Other issues: Preserving functional expenses Impairment of intangibles was reported by one entity as non-operating We are directed by ASU to exclude gain/loss related to defined benefit plans from functional expense categories What other issues should we consider that would identify other items that would distort the meaning of the functional expense categories?

New format FS and Audited FS Available at my website: http://www.cbe.uidaho.edu/tgordon and go to the Presentations page. Alternatively, click this link: http :// www.cbe.uidaho.edu/tgordon/presentations%20n%2 0comltrs.htm

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