|NAC Subgroup 1 Meeting

NFP Industry ReviewTeresa Gordon

Land conservancyPublic broadcasting

Advocacy

Land ConservancyNature Conservancy

Conservation FundTrust for Public Land

Connecticut Audubon Society?

Review of Land Conservancy EntitiesNature

ConservancyConservation

FundTrust for

Public LandContributions & Public Support as Percentage of Operating or Unrestricted Revenues 67% 52% 37%*Land Sales (generally to public entities for preservation) 16% 41% 53%*Transfers of land to public entities included as program expense Four-column format for Stmt of Activities Operating or other subtotal on Stmt of Activities PRNA includes revolving loan capital for financing land acquisitions (Is this different from true endowment?) ? True endowment (other than revolving capital fund) Quasi-endowment Split-interest agreements TRNA ?** TRNA

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

Land Conservation Operating

Income Change in

URNA Difference Nature Conservancy 190,188 216,938 26,750

Undistributed investment return on quasi-endowments 16,317

206,505 216,938 10,433

Nature Conservancy

.The $10K difference includes one items on SCNA:

Change in underwater endowment

Public BroadcastingOregon Public Broadcasting

National Public Radio

Northwest Public Radio (GASB)

Review of Public Broadcasting Entities

Oregon Public

Broadcasting NPRNWPR (GASB)

Contributions & Public Support as Percentage of Operating or Unrestricted Revenues 94% 33% 98%

Four-column format for Stmt of Activities Operating or other subtotal on Stmt of Activities True endowment Quasi-endowment Split-interest agreements All classes Trust Assets Held by Others in PRNA Underwater endowments (current or prior year) Mission related joint venture Equity Mtd Impairment of intangibles treated outside of functional expense categories n/a n/a

Net assets released from restrictions included capital expenditures n/a n/a

Oregon Public Broadcasting

The $1.7M difference includes three items on SCNA:Gain on charitable remainder trustChange in underwater endowmentMatured annuities and other transfers

Public Broadcasting Operating

Income Change in

URNA Difference Oregon Public Broadcasting 3,571,710 5,907,044 2,335,334

Contributions for equipment 1,075,425 Undistributed investment return on quasi-endowments 683,113

4,254,823 5,907,044 1,652,221

AdvocacyHard to find those with audited financial statements available!

American Humane Assn.Chicago Coalition for the Homeless

Friends of the EarthConnecticut Audubon Society

Review of Advocacy EntitiesAmerican

Humane Assn

Chicago Coalition for

the Homeless

Connecticut Audubon Society

Friends of the Earth

Contributions & Public Support as Percentage of Operating or Unrestricted Revenues

46% 99% 40% 95%

Advocacy programs as a percent of total expense

73% 83% 8% 56%

Four-column format for Stmt of Activities Operating or other subtotal on Stmt of Activities* True endowment ?**

Quasi-endowment ?**

Split-interest agreements URNA n/aURNA &

TRNAURNA

Trust Assets Held by Others in PRNA *** n/a ? ?**Underwater endowments (current or prior year) n/a ?**

Advocacy Agencies

The difference reported on SCNA for AHA was release of restrictions due to decrease in underwater endowments

The old and new methods produce essentially identical results of CCH since there were no endowment assets

Advocacy Operating

Income Change in

URNA Difference Chicago Coalition for Homeless 258,420 258,420 -

American Humane Assn. (5,611,479) (5,487,771) 123,708

Notice something?All of the entities I looked at were pretty

much as the “charity” end of the scale with most support from contributions and

investments

I went looking for hybrids probably not covered by other group membersMuseums with “live” exhibits

Monterey Bay Aquarium Admissions and program fees were about half of revenues

Arizona-Sonora Desert Museum Admission fees were about a third of revenues

Performing ArtsSeattle Repertory Theatre

Earned revenues were 55% of revenues, the rest coming from contributions and grants

Hybrid Missions

Seattle Repertory Theatre

Monterey Bay

Aquarium

Arizona Sonora Desert Musem

Contributions & Public Support as Percentage of Operating or Unrestricted Revenues

45% 11% 18%

Earned revenue percent 55% 50% 33%

Four-column format for Stmt of Activities* Operating or other subtotal on Stmt of Activities** True endowment Quasi-endowment

Split-interest agreements n/aPRNA &

other NAn/a

Trust Assets Held by Others in PRNA Underwater endowments (current or prior year) ***

Performing Arts Operating

Income Change in

URNA Difference Seattle Repertory Theatre (745,188) 505,590 1,250,778 Undistributed investment returns 1,250,778

505,590 505,590 -

Biological exhibits (zoos, aquariums)

Operating Income

Change in URNA Difference

Monterey Bay Aquarium 12,983 32,173 19,190 Undistributed investment return on quasi-endowments 19,190

32,173 32,173 -

Issues Raised by My AnalysisPRNA that is not “endowment”

Geography for quasi-endowmentsSplit Interest Agreements

Other

PRNA – it is more than endowments!Land held for conservation endowmentPerpetual trusts held by others – cannot be

managed as endowment by the beneficiary (no control)New “restricted” category makes more sense than new

“endowment” category

Quasi-Endowment GeographyShould the new “endowment” category include only

“true” donor-restricted endowments? Could it also include board-designated endowments

“Quasi-endowments”“Funds functioning as endowment”

Either method could work.Portion of investment return allocated to operations

would appear in revenue on the income statement

Pros & Cons: Quasi-endowmentsLeave them in “unrestricted”

Report undistributed investment returns in “non-operating” on income statement

FS users would be aware that additional resources are expendable

Reporting only in Stmt of Changes in NA less desirable because it is less transparent

Put them in “endowment”Separately report

undistributed investment returns the stmt of change in endowment net assets

Expendable nature of undistributed portion of returns would not be apparent to users that concentrate on the income statement

Split-interest AgreementsCharitable remainder trusts, gift annuities, life-

income funds, etc.Since balance sheets rarely have NA columns, it

was hard to determine whether the split-interest liabilities and related assets were reported in URNA, TRNA or PRNA .

Also hard because change in values might not be material and therefore not separately labelled on statement of activitiesI found them in PRNA, TRNA and URNA

Split-interest AgreementsUnder current GAAP, temporarily restricted “makes

sense” since the NFP generally has a “remainder interest” when the donor dies.

What about the new “restricted” NA class?To me, “restricted” makes better sense than

“endowment” even though one might manage the assets in a pool. In one case, I found some of the total gift annuity

liability and assets rolled into what was labeled the endowment fund.

Other issuesMission-related joint ventures and other

arrangementsFound one in revenue (equity method)Found another at historical cost with share of earnings

reported in revenueIf clearly and closely related to the entity’s mission,

would a “partial consolidation” make the most sense?% share of revenues reported as revenue% share of expenses reported as expense

Other issuesUnderwater endowments – I found lots!

At first, I thought about moving the underwater balances to “endowment” assuming there was TRNA investment returns sufficient to cover shortfalls.

However, I found more than one entity with ZERO in TRNA due to the “depth” of the water they were under!

Where to show the loss/recovery?Non-operating item on income statement?Statement of changes in unrestricted net assets only?

Other issues:Preserving functional expensesImpairment of intangibles was reported by one entity

as “non-operating” We are directed by ASU to exclude gain/loss related

to defined benefit plans from functional expense categories

What other issues should we consider that would identify “other” items that would distort the meaning of the functional expense categories?

“New format” FS and Audited FSAvailable at my website:http://www.cbe.uidaho.edu/tgordon and go to the

Presentations page. Alternatively, click this link: http://www.cbe.uidaho.edu/tgordon/presentations%20n%20comltrs.htm