THE LAND TRUST ALLIANCE, INC. AND AFFILIATES
THE LAND TRUST ALLIANCE, INC. AND AFFILIATES
COMBINED FINANCIAL STATEMENTS AND SUPPLEMENTAL SCHEDULES As of and for the Years Ended December 31, 2015 and 2014 And Report of Independent Auditor
THE LAND TRUST ALLIANCE, INC. AND AFFILIATES TABLE OF CONTENTS
REPORT OF INDEPENDENT AUDITOR..................................................................................................... 1 COMBINED FINANCIAL STATEMENTS Combined Statements of Financial Position ........................................................................................................ 3 Combined Statements of Activities and Changes in Net Assets ......................................................................4-5 Combined Statements of Cash Flows ................................................................................................................. 6 Notes to the Combined Financial Statements ................................................................................................7-20
SUPPLEMENTAL INFORMATION Report of Independent Auditor on Supplemental Schedules............................................................................. 21 Combining Schedules of Financial Position....................................................................................................... 22 Combining Schedule of Activities and Changes in Net Assets.......................................................................... 23 Combining Schedules of Functional Expenses ................................................................................................. 24
Report of Independent Auditor To the Board of Directors The Land Trust Alliance, Inc. and Affiliates Washington, DC
Report on Combined Financial Statements We have audited the accompanying combined financial statements of The Land Trust Alliance, Inc. and Affiliates, which comprise the combined statement of financial position as of December 31, 2015, and the related combined statements of activities and changes in net assets and cash flows for the year then ended, and the related notes to the combined financial statements.
Management’s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these combined 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 the combined financial statements that are free from material misstatement, whether due to fraud or error.
Auditors’ Responsibility Our responsibility is to express an opinion on these combined financial statements based on our audit. We conducted our audit 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 combined financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the combined financial statements. The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material misstatement of the combined 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 combined 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 combined financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion In our opinion, the combined financial statements referred to above present fairly, in all material respects, the combined financial position of The Land Trust Alliance, Inc. and Affiliates as of December 31, 2015, and the changes in its net assets and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.
Other Matter The combined financial statements of The Land Trust Alliance, Inc. and Affiliates for the year ended December 31, 2014, were audited by another auditor who expressed an unmodified opinion on those statements on March 31, 2015.
Bethesda, MD April 1, 2016
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THE LAND TRUST ALLIANCE, INC. AND AFFILIATES COMBINED STATEMENTS OF FINANCIAL POSITION DECEMBER 31, 2015 AND 2014
2015
2014
ASSETS Current Assets: Cash and cash equivalents Receivables Promises to give Investments Prepaid expenses Inventories
$
Total Current Assets
3,274,602 60,282 5,170,729 4,520,349 320,977 39,583
$
2,826,708 30,573 4,194,589 5,960,458 407,015 52,441
13,386,522
13,471,784
143,869
205,296
Other Assets: Promises to give, long-term Investments Deposits
1,710,349 4,130,250 10,661
1,462,179 4,262,785 12,111
Total Other Assets
5,851,260
5,737,075
$ 19,381,651
$ 19,414,155
$
$
Property and equipment, net of accumulated depreciation
Total Assets
LIABILITIES Current Liabilities: Accounts payable and accrued expenses Grants payable Deferred rent Capital lease obligations Conditional contribution Total Current Liabilities
500,675 509,888 86,939 5,866 18,081
443,456 398,044 76,170 4,624 167,144
1,121,449
1,089,438
Other Liabilities: Deferred rent Deferred compensation Capital lease obligations
30,186 355,102 3,635
117,125 231,083 3,730
Total Other Liabilities
388,923
351,938
2,607,481 12,149,067 3,114,731
2,906,453 11,952,535 3,113,791
17,871,279
17,972,779
$ 19,381,651
$ 19,414,155
NET ASSETS Unrestricted Temporarily restricted Permanently restricted Total Net Assets Total Liabilities and Net Assets
The accompanying notes to the combined financial statements are an integral part of these statements.
3
THE LAND TRUST ALLIANCE, INC. AND AFFILIATES COMBINED STATEMENT OF ACTIVITIES AND CHANGES IN NET ASSETS YEAR ENDED DECEMBER 31, 2015
Unrestricted Support and Revenue: Grants Contributions: Individual memberships and donations Organizational memberships Other donations Conference fees Investment income Accreditation fees Donated services Publication sales Other programs Net assets released from restrictions
$
1,855,546 1,046,669 17,134 1,007,121 40,519 557,274 5,921 12,969 270,885 10,343,055
Total Support and Revenue Expenses: Program services Management and general Fundraising Total Expenses Changes in net assets Net assets, beginning of year Net assets, end of year
203,002
$ 10,292,184
Permanently Restricted $
290,935 (43,532) (10,343,055)
940 -
Total $ 10,496,126 2,146,481 1,046,669 17,134 1,007,121 (3,013) 557,274 5,921 12,969 270,885 -
15,360,095
196,532
940
15,557,567
11,959,360 994,015 2,705,692
-
-
11,959,360 994,015 2,705,692
15,659,067
-
-
15,659,067
196,532 11,952,535
940 3,113,791
(298,972) 2,906,453 $
Temporarily Restricted
2,607,481
$ 12,149,067
$
3,114,731
(101,500) 17,972,779 $ 17,871,279
The accompanying notes to the combined financial statements are an integral part of these statements.
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THE LAND TRUST ALLIANCE, INC. AND AFFILIATES COMBINED STATEMENT OF ACTIVITIES AND CHANGES IN NET ASSETS YEAR ENDED DECEMBER 31, 2014
Unrestricted Support and Revenue: Grants Contributions: Individual memberships and donations Organizational memberships Other donations Conference fees Investment income Accreditation fees Publication sales Other programs Net assets released from restrictions
$
Total Support and Revenue Expenses: Program services Management and general Fundraising Total Expenses Changes in net assets Net assets, beginning of year Net assets, end of year
249,000
$
8,296,017
Permanently Restricted $
16,886
Total $
8,561,903
2,183,095 1,064,408 37,483 1,037,072 38,249 506,589 16,227 204,083 9,121,009
231,044 265,961 (9,121,009)
-
2,414,139 1,064,408 37,483 1,037,072 304,210 506,589 16,227 204,083 -
14,457,215
(327,987)
16,886
14,146,114
11,053,249 602,942 2,488,878
-
-
11,053,249 602,942 2,488,878
14,145,069
-
-
14,145,069
16,886 3,096,905
1,045 17,971,734
3,113,791
$ 17,972,779
312,146 2,594,307 $
Temporarily Restricted
2,906,453
(327,987) 12,280,522 $ 11,952,535
$
The accompanying notes to the combined financial statements are an integral part of these statements.
5
THE LAND TRUST ALLIANCE, INC. AND AFFILIATES COMBINED STATEMENTS OF CASH FLOWS YEARS ENDED DECEMBER 31, 2015 AND 2014
2015
2014
Cash flows from operating activities: Change in net assets Adjustments to reconcile change in net assets to net cash flows from used in operating activities: Depreciation and amortization Donated securities Deferred rent Increase in discount on promises to give Realized and unrealized loss (gain) on investments Contributions, restricted for long-term purposes - endowment Increase (decrease) in operating assets: Receivables Promises to give Prepaid expenses Inventories Deposits (Decrease) increase in operating liabilities: Accounts payable an accrued expenses Grants payable Deferred revenue Other liabilities
$
Net cash used in operating activities
(101,500)
$
1,045
112,588 (503,230) (76,170) 149,089 (940)
133,931 (677,487) (65,664) 21,864 (160,858) (16,886)
(29,709) (1,224,310) 86,038 12,858 1,450
(16,245) (437,858) (192,541) 2,027 (2,092)
57,219 111,844 (25,044)
(32,924) 149,691 (22,237) 136,800
(1,429,817)
(1,179,434)
464 (45,146) (1,999,884) 3,926,669
(49,127) (4,145,241) 4,441,327
Cash flows from investing activities: Proceeds from sale of property and equipment Purchase of property and equipment Purchase of investments Proceeds from sale of investments Net cash provided by investing activities
1,882,103
246,959
Cash flows from financing activities: Contributions, restricted for long-term purposes - endowment Payments of capitalized lease obligations
940 (5,332)
16,886 (3,914)
Net cash (used in) provided by financing activities
(4,392)
12,972
Net increase (decrease) in cash and cash equivalents Cash and cash equivalents, beginning of year Cash and cash equivalents, end of year
447,894 2,826,708 $
3,274,602
(919,503) 3,746,211 $
2,826,708
THE LAND TRUST ALLIANCE, INC. AND AFFILIATES NOTES TO THE COMBINED FINANCIAL STATEMENTS DECEMBER 31, 2015 AND 2014
Note 1—Summary of significant accounting policies Nature of Operations – The Land Trust Alliance, Inc. and Affiliates (the “Organization”) is comprised of three entities: The Land Trust Alliance, Inc. (the “Alliance”), The Land Trust Accreditation Commission (the “Commission”), and Alliance Risk Management Services (“ARMS”). The Alliance is a not-for-profit corporation organized under the laws of Massachusetts. The Alliance was formed in 1982 to advance the mission of land trusts. Since then, it has trained thousands of conservation leaders, won new federal incentives for conservation of private land, and developed standards and practices to professionalize and safeguard land trust work. The Alliance has championed the use of conservation easements, a legal device that restricts certain types of development but keeps the land in the hands of the current owners or their families. Farms, forests, ranches, waterways, and scenic vistas have all been protected through the efforts of land trusts nationwide. Through its programs and services, the Alliance leads the movement by facilitating state-of-the-art information collection and exchange; national and regional training, including providing tools and training on how to plan and prioritize their conservation work; ensuring the continued protection, in perpetuity, of land already set aside for conservation; and advancing public policies to accelerate the pace of private voluntary conservation. More than 1,100 land trusts are members of the Alliance, which operates through a national office in Washington, D.C. and regional programs around the country. In 2006, the Commission, an independent program of the Alliance, was created to support the mission of the Alliance by operating a land trust accreditation program to ensure public confidence in land conservation and to build strong land conservation organizations by verifying land trust implementation of specific indicator practices from the Land Trust Standards and Practices, as established by the Alliance. The Commission is headquartered in Saratoga Springs, New York. In 2011, ARMS, a not-for-profit, member managed limited liability company, was organized under the laws of Vermont and its sole member is The Land Trust Alliance, Inc. Its exclusive purpose is to act as Manager for Terrafirma Risk Retention Group LLC (“Terrafirma”) pursuant to the Limited Liability Operating Agreement for Terrafirma. Terrafirma is an independent not-for-profit manager managed limited liability company organized under the laws of Vermont. Terrafirma’s exclusive purpose is to act as a charitable risk pool, organized and operated to pool and insure the insurable risks of members and to provide information to members with respect to loss control and risk management. Terrafirma is solely responsible for meeting its obligations to its insured members and others and the Alliance, ARMS, or any member of Terrafirma is not liable for the claims, debts, or other liabilities of Terrafirma. Principles of Combination – The accounts of the Alliance, the Commission, and ARMS, which are under common control of the Alliance’s Board of Directors, are included in the combined financial statements. All interorganizational balances and significant transactions have been eliminated.
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THE LAND TRUST ALLIANCE, INC. AND AFFILIATES NOTES TO THE COMBINED FINANCIAL STATEMENTS DECEMBER 31, 2015 AND 2014
Note 1—Summary of significant accounting policies (continued) Basis of Presentation – The financial statements of the Organization have been prepared on the accrual basis of accounting in accordance with U.S. generally accepted accounting principles (“GAAP”). The Organization presents information regarding its financial position and activities according to three classes of net assets described as follows: Unrestricted – All resources over which the governing board has discretionary control. The governing board of the Organization may elect to designate such resources for specific purposes. This designation may be removed at the Board’s discretion. Temporarily Restricted Net Assets – Resources accumulated through donations or grants for specific operating or capital purposes. Such resources will become unrestricted when the requirements of the donor or grantee have been satisfied through expenditure for the specified purpose or program or through the passage of time. Permanently Restricted Net Assets – Resources accumulated through donations or grants that are subject to a permanent restriction. These net assets include the original value of the gift, plus any permanently restricted subsequent additions. Classifications of Net Assets – As of December 31, 2015, the Alliance’s net assets consisted of temporarily restricted net assets of $12,149,067, permanently restricted net assets of $3,114,731, and unrestricted net assets of $2,160,731. The Commission’s net assets consisted of unrestricted net assets of $395,827. The net assets of ARMS consisted of unrestricted net assets of $50,923. As of December 31, 2014, the Alliance’s net assets consisted of temporarily restricted net assets of $11,952,535, permanently restricted net assets of $3,113,791, and unrestricted net assets of $2,521,586. The Commission’s net assets consisted of unrestricted net assets of $358,297. The net assets of ARMS consisted of unrestricted net assets of $26,570. Cash and Cash Equivalents – The Organization considers all highly liquid money market funds and certificates of deposit with original maturities of less than ninety days to be cash equivalents. Money funds and certificates of deposit held by investment custodians are considered investments. Investments – Investments with readily determinable fair values are reflected at fair market value. To adjust the carrying value of these investments, the change in fair market value is recorded as a component of investment income in the combined statements of activities and changes in net assets. Fair Value – For cash and short-term investments, receivables, and payables, the carrying amount is a reasonable estimate of fair value. Marketable equity securities and fixed maturity investments held for investment purposes are carried at market value, which approximates fair value. Market values for these investments are based on quoted prices in an active market or dealer quotes for identical assets or liabilities (Level 1 inputs).
8
THE LAND TRUST ALLIANCE, INC. AND AFFILIATES NOTES TO THE COMBINED FINANCIAL STATEMENTS DECEMBER 31, 2015 AND 2014
Note 1—Summary of significant accounting policies (continued) Fair value standards establish a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are described below. Level 1 – Inputs to the valuation methodology are quoted prices available in active markets for identical investments as of the reporting date. The type of investments included in Level 1 includes certificates of deposit, money market funds, and unrestricted securities listed in active markets. The Organization does not adjust the quoted price for these investments, even in situations where the Organization holds a large position. Level 2 – Inputs to the valuation methodology are other than quoted prices in active markets, which are either directly or indirectly observable as of the reporting date. At this time, the Organization does not hold any investments which would be included in this category. Level 3 – Inputs to the valuation methodology are unobservable and significant to the overall fair value measurement. The inputs into the determination of fair value require significant management judgment or estimation. A financial instrument's level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Investments are classified as current or long-term based on donor intent and the Organization’s investment policy guidelines. Receivables – Receivables are carried at original invoice amount less an estimate made for doubtful accounts based on a review of all outstanding amounts on a monthly basis. Management determines the allowance for doubtful accounts by identifying troubled accounts and by using historical experience applied to an aging of accounts. Receivables are written-off when deemed uncollectible. Recoveries of receivables previously writtenoff are recorded when received. There was no provision for doubtful accounts at December 31, 2015 or 2014. Promises to Give – Unconditional promises to give are recognized as revenue or gains in the period in which a written promise is received. Conditional promises to give are recognized when the conditions on which they depend are substantially met. Promises to give are carried at fair value. Management reviews all outstanding promises on a monthly basis. Management determines the allowance for doubtful promises by regularly evaluating individual promises to give and considering the prior history of the donor and proven collectability of past donations. Promises to give are written-off when deemed uncollectible. Recoveries of promises to give previously written-off are recorded when received. There was no allowance for doubtful promises at December 31, 2015 or 2014. Inventory – Inventories, which consist of publications for re-sale, are stated at the lower of cost or market value. Cost has been determined on the first-in, first-out (FIFO) basis. Management establishes an allowance for obsolescence by identifying nonmarketable items and by using historical experience applied to recent sales. Items are written-off when deemed unmarketable. There was no allowance for obsolescence, based on management's evaluation of the salability of inventory at December 31, 2015 or 2014.
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THE LAND TRUST ALLIANCE, INC. AND AFFILIATES NOTES TO THE COMBINED FINANCIAL STATEMENTS DECEMBER 31, 2015 AND 2014
Note 1—Summary of significant accounting policies (continued) Property and Equipment – Property and equipment (including software) is recorded at cost. Donated equipment is stated at the estimated fair market value at the time of donation. The Organization capitalizes all property and equipment purchased with a cost of $500 or more. Depreciation and amortization are computed on the straightline method over the following estimated useful lives:
Assets Office equipment Furniture and fixtures Leasehold improvements
Useful Lives 3 - 5 years 7 years 10 years
Leases – Leases which meet the criteria are classified as capitalized leases. Capitalized leased assets and the related obligations are recorded at amounts equal to the lesser of the present value of the minimum lease payments or the fair value of the leased asset at the beginning of the lease. Interest expense relating to the lease obligations is recorded to effect constant rates of interest over the term of the lease. Leases which do not meet the aforementioned criteria are classified as operating leases and the related rentals are charged to expense as incurred. Deferred Rent – Rent expense is being recognized on a straight-line basis over the life of the lease. The difference between rent expense recognized and rental payments, as stipulated in the lease, is reflected as deferred rent in the combined statements of financial position. In addition, deferred rent also includes the landlord incentive on a portion of the leasehold improvement cost, which is being amortized over the life of the lease. Income Taxes – The Alliance, the Commission and ARMS are generally exempt from federal income taxes under the provisions of Section 501(c)(3) of the Internal Revenue Code (IRC). In addition, the Alliance and the Commission qualify for charitable contributions deductions and have been classified as organizations that are not private foundations. Income which is not related to exempt purposes, less applicable deductions, is subject to federal and state income taxes. Neither the Alliance nor the Commission had any net unrelated business income for the years ended December 31, 2015 or 2014. Accounting for uncertainty in income taxes – The Organization accounts for the effect of any uncertain tax positions based on a “more likely than not” threshold to the recognition of the tax positions being sustained based on the technical merits of the position under scrutiny by the applicable taxing authority. If a tax position or positions are deemed to result in uncertainties of those positions, the unrecognized tax benefit is estimated based on a “cumulative probability assessment” that aggregates the estimated tax liability for all uncertain tax positions. The Organization has identified its tax status as a tax-exempt entity as its only significant tax position; however, the Organization has determined that such tax position does not result in an uncertainty requiring recognition. The Organization is not currently under examination by any taxing jurisdiction. The Organization’s federal and state tax returns are generally open for examination for three years following the date filed. Support and Revenue Recognition – Contributions received, including grants, are recorded as unrestricted, temporarily restricted, or permanently restricted support, depending on the existence and/or nature of any donor restrictions.
10
THE LAND TRUST ALLIANCE, INC. AND AFFILIATES NOTES TO THE COMBINED FINANCIAL STATEMENTS DECEMBER 31, 2015 AND 2014
Note 1—Summary of significant accounting policies (continued) All donor-restricted support is reported as an increase in temporarily or permanently restricted net assets, depending on the nature of the restriction. When a restriction expires (that is, when a stipulated time restriction ends or purpose restriction is accomplished), temporarily restricted net assets are reclassified to unrestricted net assets and reported in the combined statements of activities and changes in net assets as net assets released from restrictions. Membership dues revenue is recognized when received. Conference fees are recognized during the period the conference is held. Conditional Contributions – During 2014 the Alliance received payment on awards totaling $18,081 conditioned on raising matching funds. These conditions had not been met at December 31, 2015 ($167,144 in 2014). In accordance with GAAP, these amounts were recorded as a liability and no revenue was recorded. Also, during 2014, the Alliance was awarded a $1 million grant to support its fundraising campaign. The grant includes $250,000 payable in 2016 upon the condition that the Alliance raises an equal amount for the campaign through its regional committees. In accordance with GAAP, the conditional portion of the grant has not been recorded as revenue. Donated Services – Donated services using specialized skills that would have been required to be purchased if not provided by donation are recognized under GAAP. Expenses – Direct costs associated with specific programs are recorded as program expenses. Administrative overhead expenses are allocated to the various programs based on personnel time spent on these activities. Fringe benefits are allocated based on labor dollars spent on these activities. Subsequent Events – The Organization has evaluated subsequent events through April 1, 2016, which is the date the combined financial statements were available to be issued. No events occurred requiring recognition or disclosure in the financial statements. 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 revenues and expenses during the reporting period. Actual results could differ from those estimates. Reclassification – Certain 2014 financial information has been reclassified to conform to the 2015 presentation. The reclassifications have no impact on the previously reported change in net assets.
11
THE LAND TRUST ALLIANCE, INC. AND AFFILIATES NOTES TO THE COMBINED FINANCIAL STATEMENTS DECEMBER 31, 2015 AND 2014
Note 2—Promises to give Promises to give in one year or more are measured using the present value of future cash flows based on a discount rate of 3% at December 31, 2015 and 2014. Promises to give consisted of the following:
Promises to give in less than one year Promises to give in one to two years Total unconditional promises to give Less discount to net present value
2015
2014
$ 5,170,729 1,749,162 6,919,891 38,813
$ 4,194,589 1,494,291 5,688,880 32,112
$ 6,881,078
$ 5,656,768
Note 3—Property and equipment Property and equipment consisted of the following at December 31, 2015 and 2014:
2015 Cost: Furniture and office equipment Leasehold improvements Total cost Accumulated depreciation and amortization Net property and equipment
2014
$
999,235 410,919 1,410,154 1,266,285
$
952,258 410,919 1,363,177 1,157,881
$
143,869
$
205,296
Depreciation and amortization expense was $112,588 and $133,931 for the years ended December 31, 2015 and 2014, respectively.
Note 4—Investments Investments at fair value consisted of the following at December 31, 2015 and 2014:
Certificates of deposit Equity mutual funds Money mutual funds Bond mutual funds
2015
2014
$ 3,893,261 2,518,174 845,036 1,394,128
$ 4,793,200 2,650,083 1,447,499 1,332,461
$ 8,650,599
$ 10,223,243
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THE LAND TRUST ALLIANCE, INC. AND AFFILIATES NOTES TO THE COMBINED FINANCIAL STATEMENTS DECEMBER 31, 2015 AND 2014
Note 4—Investments (continued) Investment income consisted of the following at December 31, 2015 and 2014:
2015 Interest and dividends from investments Realized and unrealized (loss) gain on investments
2014
$
139,216 (149,089) (9,873) 6,860
$
139,407 160,858 300,265 3,945
$
(3,013)
$
304,210
Interest and dividends from cash accounts
Note 5—Fair value measurements The following tables set forth by level, within the fair value hierarchy, the Organization’s assets at fair value:
Level 1 Mutual Funds: Equity Funds: Foreign Large Blend Diversified Emerging Markets Large Growth Large Blend Mid-Cap Blend Mid-Cap Value Small Blend Total Equity Funds
$
480,215 354,252 1,308,780 96,113 130,908 12,413 135,493
Fair Value as of December 31, 2015 Level 2 Level 3
$
-
$
-
Total
$
480,215 354,252 1,308,780 96,113 130,908 12,413 135,493
2,518,174
-
-
2,518,174
379,769 853,386 160,973
-
-
379,769 853,386 160,973
1,394,128
-
-
1,394,128
Money Funds: Prime Reserve Mutual Fund Money Market
120,291 724,745
-
-
120,291 724,745
Total Money Funds
845,036
-
-
845,036
3,893,261 3,893,261 $ 8,650,599
-
6,881,078 6,881,078 $ 6,881,078
6,881,078 3,893,261 10,774,339 $ 15,531,677
Bond Funds: High Yield Bond Intermediate Term Bond Short-term Bond Total Bond Funds
Promises to Give Certificates of Deposit Total Investments at Fair Value
$
13
THE LAND TRUST ALLIANCE, INC. AND AFFILIATES NOTES TO THE COMBINED FINANCIAL STATEMENTS DECEMBER 31, 2015 AND 2014
Note 5—Fair value measurements (continued) Level 1 Mutual Funds: Equity Funds: Foreign Large Blend Diversified Emerging Markets Large Growth Large Blend Mid-Cap Blend Mid-Cap Value Small Blend Total Equity Funds Bond Funds: High Yield Bond Intermediate Term Bond Short-term Bond Total Bond Funds Money Funds: Prime Reserve Mutual Fund Money Market Total Money Funds Promises to Give Certificates of Deposit Total Investments at Fair Value
$
Fair Value as of December 31, 2014 Level 2 Level 3
Total
481,093 417,012 1,371,256 87,373 146,633 8,541 138,175
-
-
481,093 417,012 1,371,256 87,373 146,633 8,541 138,175
2,650,083
-
-
2,650,083
376,642 823,702 132,117
-
-
376,642 823,702 132,117
1,332,461
-
-
1,332,461
103,779 1,343,720
-
-
103,779 1,343,720
1,447,499
-
-
1,447,499
4,793,200 4,793,200 $ 10,223,243
-
5,656,768 5,656,768 $ 5,656,768
5,656,768 4,793,200 10,449,968 $ 15,880,011
$
The following presents a summary of changes in the fair value of Level 3 investments:
2015
2014
Balance, beginning of year New promises Collections
$ 5,656,768 5,587,282 (4,362,972)
$ 5,240,774 5,689,140 (5,273,146)
Balance, end of year
$ 6,881,078
$ 5,656,768
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THE LAND TRUST ALLIANCE, INC. AND AFFILIATES NOTES TO THE COMBINED FINANCIAL STATEMENTS DECEMBER 31, 2015 AND 2014
Note 6—Temporarily restricted net assets Temporarily restricted net assets during the years ended December 31, 2015 and 2014 were released from restrictions by incurring expenses satisfying the restricted purpose. Temporarily restricted net assets were available for the following programs:
Program: Education and Capacity Building Policy and Outreach Conservation Permanence Accreditation Time Restricted: National Office Total Temporarily Restricted Net Assets
2015
2014
$ 6,642,916 2,737,737 1,405,304 932,588
$ 6,610,502 2,693,023 1,338,617 994,804
430,522
315,589
$ 12,149,067
$ 11,952,535
Note 7—Permanently restricted net assets Interpretation of Relevant Law – The Board of Directors of the Alliance has interpreted the District of Columbia enacted version of 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 Alliance 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 Alliance in a manner consistent with the standard of prudence prescribed by UPMIFA. In accordance with UPMIFA, the Alliance considers the following factors in making a determination to appropriate or accumulate donor-restricted endowment funds: a. b. c. d. e. f. g.
The duration and preservation of the fund The purposes of the organization and the donor-restricted endowment fund General economic conditions The possible effects of inflation and deflation The expected total return from income and the appreciation of investments Other resources of the organization The investment policies of the organization
Return Objective and Risk Parameters – The Alliance's objective is to earn a respectable, long-term, riskadjusted total rate of return to support the designated programs. The Alliance recognizes and accepts that pursuing a respectable rate of return involves risk and potential volatility. The generation of current income will be a secondary consideration. The Alliance targets a diversified asset allocation that places a greater emphasis on equity-based investments to achieve its long-term return objectives within prudent risk constraints. The Alliance has established a policy portfolio, or normal asset allocation. While the policy portfolio can be adjusted from time to time, it is designed to serve for long-time horizons based upon long-term expected returns. The Alliance has a preference for simple investment structures which will have lower cost, easier oversight, and less complexity for internal financial management and auditing.
15
THE LAND TRUST ALLIANCE, INC. AND AFFILIATES NOTES TO THE COMBINED FINANCIAL STATEMENTS DECEMBER 31, 2015 AND 2014
Note 7—Permanently restricted net assets (continued) Spending Policy – The Alliance recognizes in its annual budget, a spending amount calculated by 1) multiplying the prior year’s maximum spending amount times one plus the change in the Consumer Price Index and then by 70% and 2) adding to this amount a second amount calculated as the average quarter end market value of the previous fiscal year multiplied by a rate selected by the Finance and Investment Committee and then times 30%. In each case, the base will be adjusted for new capital contributions to the endowment. The maximum spending rate will have a collar and fluctuate between no less than 4% and no more than 6% of the prior three year quarterly average market value of the endowment. There may be times when the Alliance may opt not to take the maximum spending rate but rather to reinvest some of the annual return. Distributions will be determined using the above methodology and approved as part of the annual budgeting process. 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 Alliance to retain as a fund of perpetual duration. In accordance with GAAP, there were no deficiencies of this nature reported in unrestricted net assets as of December 31, 2015 and 2014. Temporarily Restricted
Unrestricted Endowment Net Assets, December 31, 2013
$
Investment Return: Investment income Net realized and unrealized gains Total Investment Return Contributions Appropriation of endowment assets for expenditure
$
Total $
3,995,096 106,963 158,998
-
1,164,152
3,096,905
4,261,057
-
-
16,886
16,886
(113,500)
-
1,050,652
(113,500)
3,113,791
104,867 (148,399)
4,164,443
-
104,867 (148,399)
-
1,007,120
3,113,791
4,120,911
-
-
940
940
$
3,096,905 -
-
Contributions Appropriation of endowment assets for expenditure
$
106,963 158,998
-
Total Investment Return
898,191
-
-
Endowment Net Assets, December 31, 2014 Investment Return: Investment income Net realized and unrealized gains
Endowment Net Assets, December 31, 2015
-
Permanently Restricted
-
(158,000) $
849,120
$
3,114,731
(158,000) $
3,963,851
16
THE LAND TRUST ALLIANCE, INC. AND AFFILIATES NOTES TO THE COMBINED FINANCIAL STATEMENTS DECEMBER 31, 2015 AND 2014
Note 7—Permanently restricted net assets (continued) Permanently restricted net assets were comprised as follows at December 31, 2015 and 2014:
Berkley Endowment Kingsbury Browne Award Endowment Total Permanently Restricted Net Assets
2015
2014
$ 3,013,015 101,716
$ 3,012,075 101,716
$ 3,114,731
$ 3,113,791
Note 8—Retirement and deferred compensation plans The Organization maintains a 403(b) defined contribution retirement plan that covers all eligible employees. Effective January 1, 2010, the Organization contributes 8% for employees starting in the 37th month of employment and 6.5% of salary between the 7th and 36th months of service. Certain staff elected to reduce compensation and increase the contribution percentage. For 2015, this percentage ranges from 13.65% to 16.62% (13.74% to 17.18% in 2014). Total retirement expense for the years ended December 31, 2015 and 2014 was $418,700 and $372,384, respectively. The Alliance may make non-elective, discretionary employer contributions under a 457(b) plan. For the years ended December 31, 2015 and 2014, discretionary contributions totaled $33,000 and $37,813, respectively. The Alliance has a 457(f) deferred compensation plan agreement that calls for $375,000 in total contributions by January 1, 2017, with a vesting schedule commencing on January 1, 2014. Total deferred compensation expense for the years ended December 31, 2015 and 2014 was $91,292 and $90,714, respectively (see Note 19). The Alliance has an agreement with an employee which requires payment of an incentive bonus of $50,000 based on that employee’s continued employment through February 10, 2017.
Note 9—Operating leases The Alliance leases multiple office locations under operating leases expiring in 2019. This lease agreement provides for the Alliance to pay a stated minimum annual rent and a proportionate percentage of increases in operating expenses. Also, the Alliance has leases on offices in the states of Colorado, New York, Michigan, North Carolina, Connecticut, Montana and Washington. In addition, a landlord improvements allowance was provided to be applied toward reimbursement of the costs incurred by the Alliance for the preparation of its headquarters. Deferred rent was recognized to allocate the benefit of these improvements throughout the remaining term of the lease.
17
THE LAND TRUST ALLIANCE, INC. AND AFFILIATES NOTES TO THE COMBINED FINANCIAL STATEMENTS DECEMBER 31, 2015 AND 2014
Note 9—Operating leases (continued) The future minimum rental payments required under operating leases that have initial or remaining noncancellable lease terms in excess of one year are as follows: Year Ending December 31, 2016 2017 2018 2019
$
505,010 184,391 23,280 23,520
$
736,201
Total rent expense for 2015 was $447,010, net of sublease revenue of $4,377 received in 2015. Total rent expense for 2014 was $443,929, net of sublease revenue of $2,500 received in 2014
Note 10—Capital leases The Alliance has recorded obligations totaling $9,501 and $8,354 at December 31, 2015 and 2014, respectively, for leased office equipment under capital leases. Under the agreements the Alliance has monthly payments totaling $596 which include imputed interest at rates ranging from 8% to 19%. Amortization of assets held under capital leases is included with depreciation expense. The future minimum lease payments at December 31, 2015 are as follows:
Year Ending December 31, 2016 2017 2018 2019 2020
$
5,866 2,005 2,005 2,005 334 12,215 (2,714)
$
9,501
Less amounts representing imputed interest
Note 11—Commitments The Organization has entered into several contracts for hotel rooms relating to various events through November 2019. In the event of cancellation, the Organization is required to pay various costs of the hotel rooms as stipulated in the contracts, the amounts of which are dependent upon the date of cancellation.
Note 12—Line of credit The Organization has an unsecured line of credit agreement with a bank in the amount of $500,000. Borrowings on the line accrue interest at an annual rate of 1.75% plus the London Inter Bank Offered Rate (LIBOR) with a floor of 3%. At December 31, 2015 and 2014, the Organization had no borrowings on the line of credit. 18
THE LAND TRUST ALLIANCE, INC. AND AFFILIATES NOTES TO THE COMBINED FINANCIAL STATEMENTS DECEMBER 31, 2015 AND 2014
Note 13—Letter of credit The Organization has a letter of credit for the deposit on its office in the amount of $29,077. The letter is secured by a certificate of deposit in the amount of $29,259 included in investments on the combined statements of financial position.
Note 14—Concentrations Financial instruments which potentially subject the Organization to concentrations of credit risk consist principally of cash balances maintained at creditworthy financial institutions. The Organization maintained cash balances in bank accounts including certificates of deposit and money funds which, at times, may exceed insured limits set by the Federal Deposit Insurance Corporation (FDIC). At least annually, the chairman of the Finance & Investments Committee will review the annual report and credit ratings of any bank in which uninsured operating accounts are maintained to ensure that maintaining the accounts does not pose a significant risk to the organization. Any findings are communicated to the Committee. The Organization has not experienced any losses in such accounts and believes it is not exposed to any significant credit risk on its cash and cash equivalents. The Organization invests in certificates of deposit, money funds, bond funds, and equities. Such investments are exposed to various risks such as market and credit. Due to the level of risk associated with such investments and the level of uncertainty related to changes in the value of such investments, it is at least reasonably possible that changes in risks in the near term could materially affect investment balances and the amounts reported in the combined financial statements. As of December 31, 2015, approximately 57% of the Organization’s promises to give were provided by three foundations. As of December 31, 2014, two sources made up approximately 68% of the Organization’s promises to give (one state agency and one foundation). As of December 31, 2015, approximately 46% of the Organization’s support from individual and foundation donor contributions was provided from two foundations. As of December 31, 2014, 33% of the Organization’s support from individual and foundation donor contributions was provided from one state agency. A substantial portion of the support from the state agency will be used for passthrough and not ongoing operations.
Note 15—Related party transactions The Land Trust Accreditation Commission is a supporting organization of The Land Trust Alliance, Inc. There is an agreement between the Alliance and the Commission for the Alliance to manage the Commission’s finances and provide human resources, fundraising, and information technology support. Fees for these services totaled $13,000 and $17,000 for the years ended December 31, 2015 and 2014, respectively. In keeping with the principles of combination in Note 1, the resulting revenue and expense have been eliminated in the combined financial statements.
19
THE LAND TRUST ALLIANCE, INC. AND AFFILIATES NOTES TO THE COMBINED FINANCIAL STATEMENTS DECEMBER 31, 2015 AND 2014
Note 16—Program expenses For the years ended December 31, 2015 and 2014, program services included the following:
Education and Capacity Building Policy and Outreach Conservation Permanence Accreditation Total Program
2015
2014
$ 8,027,718 2,539,511 761,457 630,674
$ 7,388,111 2,366,836 608,278 690,024
$ 11,959,360
$ 11,053,249
Note 17—Fair value of financial instruments The Alliance and the Commission have adopted fair value measurements for the purpose of valuing promises to give. This gives entities the option, at specific election dates, to measure certain financial assets and liabilities at fair value. The election may be applied to financial assets and liabilities on an instrument by instrument basis, is irrevocable, and may only be applied to entire instruments. Unrealized gains and losses on instruments for which the fair value option has been elected are reported in changes in net assets at each subsequent reporting date. The Alliance and the Commission did not elect fair value accounting for any other assets or liabilities that are not currently required to be measured at fair value, with the exception of promises to give.
Note 18—Cash flow disclosures Additional information to the combined statements of cash flows with regard to certain non-cash investing and financing activities is as follows. The Organization paid $1,481 and $805 in interest for the years ended December 31, 2015 and 2014, respectively. During 2015, the Alliance acquired new equipment costing $6,480 through a capital lease agreement.
Note 19—Employment agreement/retirement The President announced his retirement, effective on February 10, 2016, during the year ended December 31, 2015. Under the terms of his retirement and the Alliance’s transition plan, the President continues to work for the Alliance as compensated President Emeritus through May 10, 2016. After that, he will serve as President Emeritus, which will be an honorary non-compensated position for at least three years. As discussed in Note 8, the President was a party to 457(f) deferred compensation plan agreement that calls for $375,000 in total contributions. Subject to the President’s retirement agreement and effective after May 10, 2016, the President is entitled to receive a payment equal to 80% of the plan balance or $300,000 with adjustments for earnings or losses, and is payable on the 60th day after January 1, 2017. The President is also entitled to a departure bonus of $75,000, conditioned upon completion of his employment through May 30, 2016.
20
SUPPLEMENTAL INFORMATION
21
Report of Independent Auditor on Supplemental Schedules To the Board of Directors The Land Trust Alliance, Inc. and Affiliates Washington, DC
We have audited the combined financial statements of The Land Trust Alliance, Inc. and Affiliates as of and for the year ended December 31, 2015, and our report thereon dated April 1, 2016, which expressed an unmodified opinion on those combined financial statements, appears on page 1. Our audit was conducted for the purpose of forming an opinion on the combined financial statements as a whole. The combining schedules of financial position, combining schedules of activities and changes in net assets, and combining schedules of functional expenses for the year ended December 31, 2015, which follow, are presented for purposes of additional analysis and are not a required part of the combined financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the combined financial statements. The information has been subjected to the auditing procedures applied in the audit of the combined financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the combined financial statements or to the combined financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated in all material respects in relation to the combined financial statements as a whole. The combined financial statements of The Land Trust Alliance, Inc. and Affiliates as of and for the year ended December 31, 2014, were audited by another auditor who expressed an unmodified opinion on those combined financial statements in their report dated March 31, 2015. The 2014 supplementary information is consistent, in all material respects, with the audited combined financial statements from which they have been derived.
Bethesda, Maryland April 1, 2016
21
THE LAND TRUST ALLIANCE, INC. AND AFFILIATES COMBINING SCHEDULES OF FINANCIAL POSITION DECEMBER 31, 2015 (WITH COMPARATIVE TOTALS FOR DECEMBER 31, 2014) The Alliance
The Commission
ARMS
Total 2015
Elimination
Total 2014
ASSETS Current Assets: Cash and cash equivalents Receivables Promises to give Investments Prepaid expenses Inventories
$
Total Current Assets Property and equipment, net of accumulated depreciation Other Assets: Promises to give, long-term Investments Deposits Total Other Assets Total Assets
$
2,863,596 77,689 5,170,729 4,520,349 306,430 39,583
$
411,006 14,781 14,547 -
$
50,929 -
12,978,376
440,334
135,433
8,436
-
1,710,349 4,130,250 7,161
3,500
-
5,847,760 18,961,569
$
3,500 452,270
$
50,929
$
(83,117) -
$
(83,117)
50,929
$
6
$
3,274,602 60,282 5,170,729 4,520,349 320,977 39,583
$
2,826,708 30,573 4,194,589 5,960,458 407,015 52,441
13,386,522
13,471,784
-
143,869
205,296
-
1,710,349 4,130,250 10,661
1,462,179 4,262,785 12,111
(83,117)
$
5,851,260 19,381,651
$
5,737,075 19,414,155
LIABILITIES AND NET ASSETS Current Liabilities: Accounts payable and accrued expenses Grants payable Deferred rent Capital lease obligations Conditional contribution
$
Total Current Liabilities Other Liabilities: Deferred rent Deferred compensation Capital lease obligations Total Other Liabilities Net Assets: Unrestricted Temporarily restricted Permanently restricted Total Net Assets Total Liabilities and Net Assets
$
See accompanying report of independent auditor
527,343 509,888 86,939 5,866 18,081
$
56,443 -
$ -
1,148,117
56,443
6
30,186 355,102 3,635
-
-
388,923
-
2,160,731 12,149,067 3,114,731
395,827 -
17,424,529 18,961,569
$
395,827 452,270
$
(83,117) -
$
$
443,456 398,044 76,170 4,624 167,144
1,121,449
1,089,438
-
30,186 355,102 3,635
117,125 231,083 3,730
-
-
388,923
351,938
50,923 -
-
2,607,481 12,149,067 3,114,731
2,906,453 11,952,535 3,113,791
50,923 50,929
(83,117)
500,675 509,888 86,939 5,866 18,081
$
(83,117)
$
17,871,279 19,381,651
$
17,972,779 19,414,155
22
THE LAND TRUST ALLIANCE, INC. AND AFFILIATES COMBINING SCHEDULES OF ACTIVITIES AND CHANGES IN NET ASSETS YEAR ENDED DECEMBER 31, 2015 (WITH COMPARATIVE TOTALS FOR DECEMBER 31, 2014) The Alliance Support and Revenue: Grants Contributions: Individual memberships and donations Organization memberships Other donations Conference fees Investment income Accreditation fees Donated services Publication sales Other programs
$
$
2,146,481 1,046,669 17,134 1,007,121 (3,268) 5,921 12,969 129,378
Total Support and Revenue Expenses: Program services Management and general Fundraising Total Expenses Change in net assets Net assets, beginning of year Net assets, end of year
10,496,126
The Commission
$
See accompanying report of independent auditor
262,500
ARMS $
Total 2015
Elimination -
$
(262,500)
$
10,496,126
Total 2014 $
255 557,274 -
180,584
(39,077)
14,858,531
820,029
180,584
(301,577)
15,557,567
14,146,114
11,322,207 994,015 2,705,692
782,499 -
156,231 -
(301,577) -
11,959,360 994,015 2,705,692
11,053,249 602,942 2,488,878
15,021,914
782,499
156,231
(301,577)
15,659,067
14,145,069
(163,383) 17,587,912 17,424,529
37,530 358,297 395,827
24,353 26,570 50,923
(101,500) 17,972,779 17,871,279
1,045 17,971,734 17,972,779
$
$
$
-
2,146,481 1,046,669 17,134 1,007,121 (3,013) 557,274 5,921 12,969 270,885
8,561,903
$
2,414,139 1,064,408 37,483 1,037,072 304,210 506,589 16,227 204,083
$
23
THE LAND TRUST ALLIANCE, INC. AND AFFILIATES COMBINING SCHEDULES OF FUNCTIONAL EXPENSES YEAR ENDED DECEMBER 31, 2015 (WITH COMPARATIVE TOTALS FOR DECEMBER 31, 2014) Education and Capacity Building Personnel Expenses: Salaries and benefits Contractors/consultants
$
Total Personnel Expenses Nonpersonnel Expenses: Grants, scholarships, and awards Rent Information technology Staff and project travel and expenses Facility, exhibiting, meals, and A/V fees Advertising Printing, design, and copying Staff training and recruitment Depreciation and amortization Postage and delivery Equipment lease and maintenance Telecommunications Meetings/receipts Supplies Board and committee meetings Bank service charges Professional fees Dues/subscriptions/library Commercial insurance Small equipment Royalties Interest expense Other Total Nonpersonnel Expenses Total Expenses
$
2,279,619 901,486
Policy and Outreach $
1,356,168 419,170
Conservation Permanence $
427,523 100,052
Total Program
Accreditation $
527,682 4,821
$
4,590,992 1,425,529
Management and General $
520,704 69,980
Total 2015
Fundraising $
1,925,109 47,645
$
7,036,805 1,543,154
Total 2014 $
6,384,845 1,283,989
3,181,105
1,775,338
527,575
532,503
6,016,521
590,684
1,972,754
8,579,959
7,668,834
3,506,362 214,099 173,520 317,615 267,656 82,164 11,967 40,180 20,310 28,864 53,910 37,533 29,012 44,965 3,154 6,038 4,056 500 4,708
37,500 75,983 159,945 100,785 4,723 28,800 199,910 2,526 19,776 34,763 2,243 17,776 48,009 8,895 1,468 1,233 18,869 969
10,100 17,768 62,854 33,651 11,065 10,868 769 4,625 678 525 9,880 4,495 2,348 301 61,058 1,991 750 156
11,714 21,935 1,598 1,788 6,609 440 11,258 1,102 9,289 26,705 5,538 60 135
3,553,962 307,850 408,033 473,986 283,444 28,800 294,540 17,050 64,581 62,360 32,072 92,824 91,139 49,544 26,705 52,272 65,445 26,958 4,806 500 5,968
39,671 13,384 18,686 5,310 137,251 22,114 4,349 513 8,916 13,172 2,513 56,389 294 53,686 21 26,524 538
99,489 79,882 192,476 45,374 11,181 25,893 32,716 2,939 14,820 158,994 12,126 2,700 18,627 1,614 23,343 450 10,314
3,553,962 447,010 501,299 685,148 283,444 28,800 345,224 165,482 112,588 99,425 35,524 116,560 263,305 64,183 85,794 71,193 120,745 50,322 31,330 450 500 16,820
3,126,734 443,929 520,080 627,871 350,988 325,813 164,699 133,931 122,405 27,507 126,215 174,944 55,848 68,220 59,476 49,644 48,150 28,893 684 805 19,399
4,846,613 8,027,718
$
See accompanying report of independent auditor
764,173 2,539,511
$
233,882 761,457
$
98,171 630,674
$
5,942,839 11,959,360
$
403,331 994,015
$
732,938 2,705,692
$
7,079,108 15,659,067
$
6,476,235 14,145,069
24
