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, 2016 and 2015 And Report of Independent Auditor
THE LAND TRUST ALLIANCE, INC. AND AFFILIATES TABLE OF CONTENTS
REPORT OF INDEPENDENT AUDITOR..................................................................................................1-2 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 SCHEDULES Combining Schedule of Financial Position ........................................................................................................ 21 Combining Schedule of Activities and Changes in Net Assets ......................................................................... 22 Combined Schedule of Functional Expenses .................................................................................................... 23
Report of Independent Auditor
The Board of Directors The Land Trust Alliance, Inc. and Affiliates Washington, DC
We have audited the accompanying combined financial statements of The Land Trust Alliance (a nonprofit organization) and affiliates, which comprise the combined statements of financial position as of December 31, 2016 and 2015, and the related combined statements of activities and changes in net assets and cash flows for the years then ended, and the related notes to the combined financial statements.
Management’s Responsibility for the Combined 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.
Auditor’s Responsibility Our responsibility is to express an opinion on these combined 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 audits 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 auditor’s 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 financial position of The Land Trust Alliance, Inc. and affiliates as of December 31, 2016 and 2015, and the changes in their net assets and their cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America.
Report on Supplementary Information Our audit was conducted for the purpose of forming an opinion on the financial statements as a whole. The combining schedule of financial position, combining schedule of activities and changes in net assets, and combined schedule of functional expenses on pages 21-23 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.
Bethesda, Maryland April 4, 2017
2
THE LAND TRUST ALLIANCE, INC. AND AFFILIATES COMBINED STATEMENTS OF FINANCIAL POSITION DECEMBER 31, 2016 AND 2015
2016
2015
ASSETS Current Assets: Cash and cash equivalents Receivables Promises to give Investments Prepaid expenses Inventories
$
Total Current Assets
3,465,616 31,955 5,772,521 5,108,097 366,152 35,734
$
3,274,602 60,282 5,170,729 4,520,349 320,977 39,583
14,780,075
13,386,522
97,556
143,869
Other Assets: Promises to give, long-term Investments Deposits
18,171 4,117,487 83,703
1,710,349 4,130,250 10,661
Total Other Assets
4,219,361
5,851,260
$ 19,096,992
$ 19,381,651
$
$
Property and Equipment, Net of Accumulated Depreciation
Total Assets
LIABILITIES Current Liabilities: Accounts payable and accrued expenses Grants payable Deferred compensation Deferred rent Deferred revenue Capital lease obligations Conditional contribution Total Current Liabilities
447,497 450,035 304,568 30,186 3,880 1,220 -
500,675 509,888 86,939 5,866 18,081
1,237,386
1,121,449
Other Liabilities: Deferred rent Deferred compensation Capital lease obligations
3,617
30,186 355,102 3,635
Total Other Liabilities
3,617
388,923
2,639,855 12,090,623 3,125,511
2,607,481 12,149,067 3,114,731
17,855,989
17,871,279
$ 19,096,992
$ 19,381,651
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, 2016
Unrestricted Support and Revenue: Grants Contributions: Individual memberships and donations Organizational memberships Other donations Conference fees Investment income Accreditation fees Donated services
$
1,241,089 1,165,485 21,514 922,173 45,566 457,936 14,490
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
884,591
$
9,838,586
Permanently Restricted $
2,458 300,934 -
Total
10,780
$ 10,733,957
-
1,243,547 1,165,485 21,514 922,173 346,500 457,936 14,490
19,099 252,680 10,200,422
(10,200,422)
-
19,099 252,680 -
15,225,045
(58,444)
10,780
15,177,381
12,164,430 869,926 2,158,315
-
-
12,164,430 869,926 2,158,315
15,192,671
-
-
15,192,671
32,374 2,607,481 $
Temporarily Restricted
2,639,855
(58,444) 12,149,067 $ 12,090,623
10,780 3,114,731 $
3,125,511
(15,290) 17,871,279 $ 17,855,989
The accompanying notes to the combined financial statements are an integral part of these statements.
4
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 $
940
290,935 (43,532) -
-
(10,343,055)
-
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.
5
THE LAND TRUST ALLIANCE, INC. AND AFFILIATES COMBINED STATEMENTS OF CASH FLOWS YEARS ENDED DECEMBER 31, 2016 AND 2015
2016
2015
Cash flows from operating activities: Change in net assets Adjustments to reconcile change in net assets to net cash flows used in operating activities: Depreciation and amortization Donated securities Deferred rent Increase in discount on promises to give Deferred compensation Realized and unrealized loss (gain) on investments Contributions, restricted for long-term purposes - endowment Loss on disposal of property and equipment Decrease (increase) in operating assets: Receivables Promises to give Prepaid expenses Inventories Deposits (Decrease) increase in operating liabilities: Accounts payable and accrued expenses Grants payable Deferred revenue Other liabilities
$
Net cash used in operating activities
(15,290)
$
(101,500)
99,054 (1,006,974) (86,939) (38,484) 304,568 (193,777) (10,780) 773
112,588 (503,230) (76,170) 149,089 (940) -
28,327 1,128,870 (45,175) 3,849 (73,042)
(29,709) (1,224,310) 86,038 12,858 1,450
(53,178) (59,853) 3,880 (373,183)
57,219 111,844 (25,044)
(387,354)
(1,429,817)
(53,515) (7,519,497) 8,145,264
464 (45,146) (1,999,884) 3,926,669
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
572,252
1,882,103
Cash flows from financing activities: Contributions, restricted for long-term purposes - endowment Payments of capitalized lease obligations Net cash provided by (used in) financing activities Net increase in cash and cash equivalents Cash and cash equivalents, beginning of year Cash and cash equivalents, end of year
10,780 (4,664)
940 (5,332)
6,116
(4,392)
191,014 3,274,602 $
3,465,616
447,894 2,826,708 $
3,274,602
The accompanying notes to the combined financial statements are an integral part of these statements.
6
THE LAND TRUST ALLIANCE, INC. AND AFFILIATES NOTES TO THE COMBINED FINANCIAL STATEMENTS DECEMBER 31, 2016 AND 2015
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.
7
THE LAND TRUST ALLIANCE, INC. AND AFFILIATES NOTES TO THE COMBINED FINANCIAL STATEMENTS DECEMBER 31, 2016 AND 2015
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, 2016, the Alliance’s net assets consisted of temporarily restricted net assets of $12,090,623, permanently restricted net assets of $3,125,511, and unrestricted net assets of $2,239,630. The Commission’s net assets consisted of unrestricted net assets of $327,613. The net assets of ARMS consisted of unrestricted net assets of $72,612. 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. 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, 2016 AND 2015
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 money market funds, and unrestricted securities listed in active markets. 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. 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, 2016 or 2015. 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, 2016 or 2015. 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, 2016 or 2015.
9
THE LAND TRUST ALLIANCE, INC. AND AFFILIATES NOTES TO THE COMBINED FINANCIAL STATEMENTS DECEMBER 31, 2016 AND 2015
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 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, the Commission nor ARMS had any net unrelated business income for the years ended December 31, 2016 or 2015. 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, 2016 AND 2015
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. The Alliance recognizes contribution revenue when gifts or grants are awarded and unconditional. Membership dues revenue is recognized when received. Conference fees are recognized during the period the conference is held. Accreditation fees are recognized in period in which the revenue is earned. Conditional Contributions – During 2016, the Alliance received a $1 million grant from the Doris Duke Charitable Foundation. The grant included an initial payment of $650,000 and a $350,000 receivable due upon the condition that the Alliance raises $1 million in matching funds by January 2, 2019. 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 4, 2017, which is the date the combined financial statements were available to be issued. No events occurred that require recognition or disclosure in the combined 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.
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, 2016 and 2015. 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
2016
2015
$ 5,772,521 18,500 5,791,021 329
$ 5,170,729 1,749,162 6,919,891 38,813
$ 5,790,692
$ 6,881,078
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THE LAND TRUST ALLIANCE, INC. AND AFFILIATES NOTES TO THE COMBINED FINANCIAL STATEMENTS DECEMBER 31, 2016 AND 2015
Note 3—Property and equipment Property and equipment consisted of the following at December 31:
2016 Cost: Furniture and office equipment Leasehold improvements Total Cost Accumulated depreciation and amortization Net Property and Equipment
2015
$ 1,040,586 410,919 1,451,505 1,353,949
$
999,235 410,919 1,410,154 1,266,285
$
$
143,869
97,556
Depreciation and amortization expense was $99,054 and $112,588 for the years ended December 31, 2016 and 2015, respectively.
Note 4—Investments Investments at fair value consisted of the following at December 31:
Certificates of deposit Equity mutual funds Money market mutual funds Bond mutual funds
2016
2015
$ 2,663,893 2,602,266 2,539,657 1,419,768
$ 3,893,261 2,518,174 845,036 1,394,128
$ 9,225,584
$ 8,650,599
2016
2015
Investment income consisted of the following at December 31:
Interest and dividends from investments Realized and unrealized (loss) gain on investments
$
143,661 193,777 337,438 9,062
$
139,216 (149,089) (9,873) 6,860
$
346,500
$
(3,013)
Interest and dividends from cash accounts
12
THE LAND TRUST ALLIANCE, INC. AND AFFILIATES NOTES TO THE COMBINED FINANCIAL STATEMENTS DECEMBER 31, 2016 AND 2015
Note 5—Fair value measurements The following tables set forth by level, within the fair value hierarchy, the Organization’s assets at fair value:
Fair Value as of December 31, 2016 Level 2 Level 3
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
$
491,989 395,810 1,337,131 81,384 145,599 150,353
$
-
$
-
Total
$
491,989 395,810 1,337,131 81,384 145,599 150,353
2,602,266
-
-
2,602,266
422,693 882,667 114,408
-
-
422,693 882,667 114,408
Total Bond Funds
1,419,768
-
-
1,419,768
Money Funds: Prime Reserve Mutual Fund Money Market
2,539,657
-
-
2,539,657
Total Money Funds
2,539,657
-
-
2,539,657
-
2,663,893 2,663,893
5,790,692 5,790,692
5,790,692 2,663,893 8,454,585
$ 6,561,691
$ 2,663,893
$ 5,790,692
$ 15,016,276
Bond Funds: High Yield Bond Intermediate Term Bond Short-term Bond
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, 2016 AND 2015
Note 5—Fair value measurements (continued) Fair Value as of December 31, 2015 Level 2 Level 3
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
$
-
$
-
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
6,881,078 6,881,078
6,881,078 3,893,261 10,774,339
$ 4,757,338
$ 3,893,261
$ 6,881,078
$ 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
The following presents a summary of changes in the fair value of Level 3 investments:
2016
2015
Balance, beginning of year New promises Collections
$ 6,881,078 5,593,656 (6,684,042)
$ 5,656,768 5,587,282 (4,362,972)
Balance, end of year
$ 5,790,692
$ 6,881,078
14
THE LAND TRUST ALLIANCE, INC. AND AFFILIATES NOTES TO THE COMBINED FINANCIAL STATEMENTS DECEMBER 31, 2016 AND 2015
Note 6—Temporarily restricted net assets Temporarily restricted net assets during the years ended December 31, 2016 and 2015, 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
2016
2015
$ 8,450,687 1,513,769 1,002,968 953,719
$ 6,642,916 2,737,737 1,405,304 932,588
169,480
430,522
$ 12,090,623
$ 12,149,067
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 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 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, 2016 AND 2015
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. Temporarily Restricted
Unrestricted Endowment Net Assets, December 31, 2014 $
-
$
Permanently Restricted
1,050,652
$
3,113,791
Total $
4,164,443
Investment Return: Investment income
-
104,867
-
104,867
Net realized and unrealized gains
-
(148,399)
-
(148,399)
-
(43,532)
-
(43,532)
Total Investment Return Contributions
-
-
940
940
Appropriation of endowment assets for expenditure
-
(158,000)
-
849,120
3,114,731
3,963,851
Investment income
-
110,162
-
110,162
Net realized and unrealized gains
-
190,772
-
190,772
-
300,934
-
300,934
-
-
10,780
10,780
Endowment Net Assets, December 31, 2015
-
(158,000)
Investment Return:
Total Investment Return Contributions Appropriation of endowment assets for expenditure Endowment Net Assets, December 31, 2016 $
-
(173,400) $
976,654
$
3,125,511
(173,400) $
4,102,165
16
THE LAND TRUST ALLIANCE, INC. AND AFFILIATES NOTES TO THE COMBINED FINANCIAL STATEMENTS DECEMBER 31, 2016 AND 2015
Note 7—Permanently restricted net assets (continued) Permanently restricted net assets were comprised as follows at December 31:
Berkley Endowment Kingsbury Browne Award Endowment Total Permanently Restricted Net Assets
2016
2015
$ 3,023,795 101,716
$ 3,013,015 101,716
$ 3,125,511
$ 3,114,731
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 2016, this percentage ranged from 6.5% to 13.65% (percentage ranged from 13.65% to 16.62% in 2015). Total retirement expense for the years ended December 31, 2016 and 2015, was $375,459 and $418,700, respectively. The Alliance may make non-elective, discretionary employer contributions under a 457(b) plan. For the years ended December 31, 2016 and 2015, discretionary contributions totaled $5,958 and $33,000, 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 which commenced on January 1, 2014. Total deferred compensation expense for the years ended December 31, 2016 and 2015, was $122,562 and $91,292, respectively (see Note 19). The Alliance had an agreement with an employee which required payment of an incentive bonus of $50,000 based on that employee’s continued employment through February 10, 2017. The qualifications for the bonus were met and the incentive bonus payment was made in February 2017.
Note 9—Operating leases The Alliance leases multiple office locations under operating leases expiring on various dates through 2028. The lease agreement for their headquarters in the District of Columbia 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 Oregon. 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. During 2016, the Alliance negotiated a lease agreement for their headquarters at a new location in the District of Columbia that will commence on May 1, 2017. The new lease expires in 2028 and requires a monthly rental payment of $32,885.
17
THE LAND TRUST ALLIANCE, INC. AND AFFILIATES NOTES TO THE COMBINED FINANCIAL STATEMENTS DECEMBER 31, 2016 AND 2015
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, 2017 2018 2019 2020 2021 Thereafter
$
184,400 321,600 478,400 466,200 477,900 3,155,597
$ 5,084,097
Total rent expense for 2016 was $448,203 net of sublease revenue of $2,478 received in 2016. Total rent expense for 2015 was $447,010, net of sublease revenue of $4,377 received in 2015.
Note 10—Capital leases The Alliance has recorded obligations totaling $4,837 and $9,501 at December 31, 2016 and 2015, 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, 2016 are as follows:
Year Ending December 31, 2017 2018 2019 2020
$
2,004 2,004 2,004 334 6,346 (1,509)
$
4,837
Less amounts representing imputed interest
Note 11—Commitments The Organization has entered into several contracts for hotel rooms relating to various events through November 2020. 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.
18
THE LAND TRUST ALLIANCE, INC. AND AFFILIATES NOTES TO THE COMBINED FINANCIAL STATEMENTS DECEMBER 31, 2016 AND 2015
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, 2016 and 2015, the Organization had no borrowings on the line of credit.
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”). As of December 31, 2016, cash balances exceeded FDIC limits by $3,567,156. 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 market 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, 2016, approximately 55% of the Organization’s promises to give were provided by one foundation and one state agency. As of December 31, 2015, three foundations made up approximately 57% of the Organization’s promises to give. As of December 31, 2016, approximately 51% of the Organization’s support from individual and foundation donor contributions was provided from one individual and one state agency. As of December 31, 2015, 46% of the Organization’s support from individual and foundation donor contributions was provided from two foundations.
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 for the years ended December 31, 2016 and 2015. 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, 2016 AND 2015
Note 16—Program expenses For the years ended December 31 program services included the following:
Education and Capacity Building Policy and Outreach Conservation Permanence Accreditation Total Program
2016
2015
$ 8,603,696 2,059,583 783,188 717,963
$ 8,027,718 2,539,511 761,457 630,674
$ 12,164,430
$ 11,959,360
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 about significant noncash investing and financing activities are required to be disclosed. Noncash is defined as transactions during a period that do not result in cash receipts or cash payments in the period. During 2015, the Alliance acquired new equipment costing $6,480 through a capital lease agreement. The Organization paid $1,235 and $1,481 in interest for the years ended December 31, 2016 and 2015, respectively.
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 continued 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 the 457(f) deferred compensation plan agreement that calls for $375,000 in total contributions. Subject to the President’s retirement agreement and effective 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 was also entitled to a departure bonus of $75,000, conditioned upon completion of his employment through May 30, 2016. The deferred compensation plan agreement was paid out in February 2017.
20
SUPPLEMENTAL SCHEDULES
THE LAND TRUST ALLIANCE, INC. AND AFFILIATES COMBINING SCHEDULE OF FINANCIAL POSITION DECEMBER 31, 2016 (WITH COMPARATIVE TOTALS FOR DECEMBER 31, 2015) The Alliance
The Commission
ARMS
Total 2016
Elimination
Total 2015
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
3,144,292 30,938 5,772,521 5,108,097 344,436 35,734
$
321,324 10,261 21,716 -
$
72,612 -
14,436,018
353,301
72,612
91,111
6,445
-
18,171 4,117,487 80,203
3,500
-
4,215,861
3,500
$
(81,856) -
$
(81,856)
-
3,465,616 31,955 5,772,521 5,108,097 366,152 35,734
$
3,274,602 60,282 5,170,729 4,520,349 320,977 39,583
14,780,075
13,386,522
-
97,556
143,869
-
18,171 4,117,487 83,703
1,710,349 4,130,250 10,661
-
4,219,361
5,851,260
$
18,742,990
$
363,246
$
72,612
$
(81,856)
$
19,096,992
$
19,381,651
$
493,720 450,035 304,568 30,186 3,880 1,220 -
$
35,633 -
$
-
$
(81,856) -
$
447,497 450,035 304,568 30,186 3,880 1,220 -
$
500,675 509,888 86,939 5,866 18,081
LIABILITIES AND NET ASSETS Current Liabilities: Accounts payable and accrued expenses Grants payable Deferred compensation Deferred rent Deferred revenue 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
-
-
1,283,609
35,633
-
3,617
-
-
3,617
-
2,239,630 12,090,623 3,125,511
327,613 -
17,455,764 $
See accompanying report of independent auditor.
18,742,990
327,613 $
363,246
(81,856)
1,237,386
1,121,449
-
3,617
30,186 355,102 3,635
-
-
3,617
388,923
72,612 -
-
2,639,855 12,090,623 3,125,511
2,607,481 12,149,067 3,114,731
72,612 $
72,612
$
(81,856)
17,855,989 $
19,096,992
17,871,279 $
19,381,651
21
THE LAND TRUST ALLIANCE, INC. AND AFFILIATES COMBINING SCHEDULE OF ACTIVITIES AND CHANGES IN NET ASSETS YEAR ENDED DECEMBER 31, 2016 (WITH COMPARATIVE TOTALS FOR DECEMBER 31, 2015) 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
$
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
$
See accompanying report of independent auditor.
10,733,707
The Commission $
292,150
ARMS $
Total 2016
Elimination -
$
(291,900)
$
10,733,957
Total 2015 $
10,496,126
1,243,547 1,165,485 21,514 922,173 346,332 14,490 19,099 106,232
168 457,936 -
187,000
(40,552)
1,243,547 1,165,485 21,514 922,173 346,500 457,936 14,490 19,099 252,680
14,572,579
750,254
187,000
(332,452)
15,177,381
15,557,567
11,513,103 869,926 2,158,315
818,468 -
165,311 -
(332,452) -
12,164,430 869,926 2,158,315
11,959,360 994,015 2,705,692
14,541,344
818,468
165,311
(332,452)
15,192,671
15,659,067
31,235 17,424,529
(68,214) 395,827
21,689 50,923
(15,290) 17,871,279
(101,500) 17,972,779
17,455,764
$
327,613
$
72,612
$
-
$
17,855,989
2,146,481 1,046,669 17,134 1,007,121 (3,013) 557,274 5,921 12,969 270,885
$
17,871,279
22
THE LAND TRUST ALLIANCE, INC. AND AFFILIATES COMBINED SCHEDULE OF FUNCTIONAL EXPENSES YEAR ENDED DECEMBER 31, 2016 (WITH COMPARATIVE TOTALS FOR DECEMBER 31, 2015) Education and Capacity Building Personnel Expenses: Salaries and benefits Contractors/consultants
$
Total Personnel Expenses Nonpersonnel Expenses: Grants, Scholarships, Awards Staff and project travel and expenses Information technology Rent Printing, design, and copying Facility, exhibiting, meals, and a/v fees Meetings/receptions Staff training and recruitment Professional fees Telecommunications Depreciation and amortization Postage and delivery Board and committee meetings Bank service charges Supplies Dues/subscriptions/library Equipment lease and maintenance Commercial insurance Advertising Miscellaneous Royalties Small equipment Other Total Nonpersonnel Expenses Total Expenses
$
2,503,218 795,237
Policy and Outreach $
1,208,318 289,878
Conservation Permanence Accreditation $
464,090 88,931
$
565,667 19,718
Total Program $
4,741,293 1,193,764
Management and General Fundraising $
618,314 31,700
$ 1,623,012 41,259
Total 2016 $
6,982,619 1,266,723
Total 2015 $
7,036,805 1,543,154
3,298,455
1,498,196
553,021
585,385
5,935,057
650,014
1,664,271
8,249,342
8,579,959
3,720,004 363,119 222,648 234,655 110,172 337,346 53,254 5,304 15,723 58,343 43,242 27,977 43,225 21,933 17,472 22,320 3,180 5,254 70 -
329 93,840 95,532 65,700 134,175 6,292 38,998 5,362 6,317 19,411 17,374 23,718 1,664 9,850 40,490 1,763 572 -
27,148 48,642 56,175 28,524 9,668 1,350 15,406 652 17,263 10,302 7,543 689 636 1,564 1,080 766 2,476 283 -
32,373 4,279 20,924 3,169 1,892 13,531 5,390 6,532 28,800 6,202 9,002 454 30 -
3,747,481 537,974 378,634 349,803 257,184 344,988 107,658 13,210 39,303 101,587 73,549 58,916 28,800 51,727 42,349 59,042 25,303 5,656 6,139 70 -
9,097 16,150 23,213 6,536 8,625 13,201 29,874 7,461 5,622 4,939 57,830 652 6,364 271 523 29,237 317 -
84,780 63,068 75,187 35,184 99,368 12,568 7,229 15,680 19,883 20,763 16,474 8,970 23,958 2,020 8,912 -
3,747,481 631,851 457,852 448,203 298,904 344,988 215,651 38,979 76,406 124,728 99,054 84,618 86,630 68,853 57,683 83,271 27,846 34,893 15,368 70 -
3,553,962 685,148 501,299 447,010 345,224 283,444 263,305 165,482 120,745 116,560 112,588 99,425 85,794 71,193 64,183 50,322 35,524 31,330 28,800 16,820 500 450 -
5,305,241
561,387
230,167
132,578
6,229,373
219,912
494,044
6,943,329
7,079,108
717,963
$ 12,164,430
869,926
$ 2,158,315
$ 15,192,671
$ 15,659,067
8,603,696
$
See accompanying report of independent auditor.
2,059,583
$
783,188
$
$
23
