AIGA Financial Statement FY2014

AMERICAN INSTITUTE OF GRAPHIC ARTS

FINANCIAL STATEMENTS

YEARS ENDED SEPTEMBER 30, 2014 AND 2013

AND

INDEPENDENT AUDITORS REPORT


TABLE OF CONTENTS Page Independent Auditors Report 1 Financial Statements

Statements of Financial Position 3 Statement of Activities for the Year Ended September 30, 2014 4 Statement of Activities for the Year Ended September 30, 2013 5 Statements of Cash Flows 6 Notes to Financial Statements 7

(Continued)

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INDEPENDENT AUDITORS REPORT To the Board of Directors American Institute of Graphic Arts We have audited the accompanying financial statements of the American Institute of Graphic Arts (AIGA) which comprise the statements of financial position as of September 30, 2014 and 2013, and the related statements of activities and cash flows for the years then ended, and the related notes to the financial statements. Managements Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditors Responsibility Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to AIGAs preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the AIGAs internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

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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 financial statements referred to above present fairly, in all material respects, the financial position of the American Institute of Graphic Arts. as of September 30, 2014 and 2013, and the related statements of activities and cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America.

February 5, 2015


STATEMENTS OF FINANCIAL POSITION

September 30,2014 2013

ASSETSCash and cash equivalents 58,831$ 364,571$ Accounts receivable 113,261 98,816 Prepaid expenses and deposits 418,840 313,376 Investments 21,788,869 2,497,137 Property and equipment, net 15,003 2,125,443 Mortgage financing cost, net - 38,290

22,394,804$ 5,437,633$

LIABILITIES AND NET ASSETSLiabilities

Line of credit payable -$ 249,900$ Accounts payable and accrued expenses 322,238 363,690 Deferred revenue 1,354,477 2,160,956 Loan payable - 48,228 Mortgage payable - 1,067,951

1,676,715 3,890,725

Net assetsUnrestricted

Undesignated 20,015,279 774,377 Board designated 242,865 341,195

20,258,144 1,115,572

Temporarily restricted 359,945 331,336 Permanently restricted 100,000 100,000

Total net assets 20,718,089 1,546,908 22,394,804$ 5,437,633$

See notes to financial statements.

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STATEMENT OF ACTIVITIES

YEAR ENDED SEPTEMBER 30, 2014

Temporarily PermanentlyUnrestricted Restricted Restricted Total

RevenuesMembership dues 2,833,423$ -$ -$ 2,833,423$ Programs 2,492,606 - - 2,492,606 Contributed rent 110,200 - - 110,200 Grants and contributions 22,182 48,369 - 70,551 Special events (net of direct donor benefits of $92,770) 412,077 - - 412,077 Investment return (208,003) 4,661 - (203,342) Miscellaneous 214,996 - - 214,996 Net assets released from restrictions 24,421 (24,421) - -

Total revenue 5,901,902 28,609 - 5,930,511

ExpensesProgram services 5,641,324 - - 5,641,324 Management and general 759,462 - - 759,462 Fund-raising 389,044 - - 389,044

Total expenses 6,789,830 - - 6,789,830

Change in net assets before gain on saleof building, net of associated costs (887,928) 28,609 - (859,319)

Gain on sale of building, net of associated costs 20,030,500 - - 20,030,500

Change in net assets 19,142,572 28,609 - 19,171,181 Net assets

Beginning of year 1,115,572 331,336 100,000 1,546,908 End of year 20,258,144$ 359,945$ 100,000$ 20,718,089$


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STATEMENT OF ACTIVITIES

YEAR ENDED SEPTEMBER 30, 2013

Temporarily PermanentlyUnrestricted Restricted Restricted Total

RevenuesMembership dues 2,896,749$ -$ -$ 2,896,749$ Programs 1,320,617 - - 1,320,617 Grants and contributions 62,469 67,210 - 129,679 Special events (net of direct donor benefits of $58,960) 113,589 - - 113,589 Investment return 188,568 1,257 - 189,825 Miscellaneous 172,332 - - 172,332 Net assets released from restrictions 5,500 (5,500) - -

Total revenue 4,759,824 62,967 - 4,822,791

ExpensesProgram services 4,457,268 - - 4,457,268 Management and general 638,495 - - 638,495 Fund-raising 165,764 - - 165,764

Total expenses 5,261,527 - - 5,261,527

Change in net assets (501,703) 62,967 - (438,736)

Net assetsBeginning of year 1,617,275 268,369 100,000 1,985,644 End of year 1,115,572$ 331,336$ 100,000$ 1,546,908$


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STATEMENTS OF CASH FLOWS

Year Ended September 30,2014 2013

Cash flows from operating activitiesChange in net assets 19,171,181$ (438,736)$ Adjustments to reconcile change in net assets to net cash

provided by (used in) operating activitiesDepreciation and amortization 112,223 140,750 Net realized and unrealized (gain) loss on investments 315,394 (104,379) Gain on sale of building (20,030,500) - Changes in operating assets and liabilities

Accounts receivable (14,445) (4,397) Prepaid expenses and deposits (105,464) (46,618) Accounts payable and accrued expenses (41,452) (24,544) Deferred revenue (806,479) 595,692

Net cash provided by (used in) operating activities (1,399,542) 117,768

Cash flows from investing activitiesProceeds from sale of investments 956,914 952,928 Purchase of investments (20,564,040) (688,377) Acquisition of property and equipment (4,669) (2,987) Proceeds from sale of building 22,071,676 -

Net cash provided by investing activities 2,459,881 261,564

Cash flows from financing activitiesPrincipal payments on line of credit (249,900) (24,751) Proceeds from loan payable 500,000 - Principal payments on loan payable (548,228) - Principal payments on mortgage (1,067,951) (124,980)

Net cash used in financing activities (1,366,079) (149,731)

Net increase (decrease) in cash and cash equivalents (305,740) 229,601

Cash and cash equivalents, beginning of year 364,571 134,970 Cash and cash equivalents, end of year 58,831$ 364,571$

Supplemental cash flow disclosureCash paid for interest 76,576$ 88,802$


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NOTES TO FINANCIAL STATEMENTS 1 - ORGANIZATION

American Institute of Graphic Arts (AIGA), the professional association for design, was founded in 1914. Its mission is to advance design as a professional craft, strategic advantage and vital cultural force. At the national level, we pursue our mission by connecting practitioners, enthusiasts and patrons through regional, national and global events, and by creating and curating content that:

Advocates for a greater understanding of the value of designers and design in government, business, media and the public

Enhances professional development Defines global standards and ethical practices Inspires designers and the public Establishes criteria for design education that meet the needs of the profession Makes powerful tools and resources available and accessible Celebrates and enhances the value of design Mobilizes a global design movement

As of October 1, 2014, AIGA had 25,875 members: 10 Trustees, 146 Design Leaders, 8,016 Sustaining Members, 4,368 Supporters and 13,335 Contributors. AIGA had 69 chapters as of October 1, 2014. The accompanying financial statements do not include the financial position or the change in net assets and cash flows of these chapters, each of which is an autonomous corporation organized under the laws of the state in which it is located. AIGAs revenues are primarily derived from membership dues and various programmatic activities it carries out. AIGA offered the following programs during its 2014 fiscal year:

Head, Heart, Hand: AIGA Design Conference, October 10-12, 2013, Minneapolis (1,776 attendees)

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NOTES TO FINANCIAL STATEMENTS 1 - ORGANIZATION (Continued)

Connecting Dots: Research, Education + Practice, March 14-15, 2013, Cincinnati (165

attendees)

Facilitation: by Design, April 1718, 2014, Phoenix (9 attendees) AIGA Centennial Gala, April 25, 2014, New York City (620 attendees) Facilitation: by Design, May 8-9, 2014, New Orleans (16 attendees) Elevate: AIGA Leadership Retreat, May 29-31, 2014, Denver (266 attendees) Elevate: AIGA Alumni Retreat, May 31-June 1, 2014, Denver (35 attendees) Facilitation: by Design, June 19-20, 2014, San Francisco (51 attendees) Business Perspectives for Creative Leaders, July 20-25, 2014, at Yale School of

Management, New Haven (34 attendees) Facilitation: by Design, July 24-25, 2014, New York City (46 attendees) New Ventures: Intersections in Design Education, September 11-13, 2014, Portland

(186 attendees) Deferred revenue and prepaid expenses were recorded for Gain: AIGA Design and Business Conference held in New York City on October 23-24, 2014. In 2014, Justified: AIGA Annual Design Competition received 724 entries: 20 were selected for publication on AIGA.org. AIGA offered several webinar series for members during 2013-2014, including:

How to write a book, October 17, 2013 Strategic design for non profits, October 31, 2013 Womens leadership, January 16, 2014 11 Tips for in-house designers, March 13, 2014

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NOTES TO FINANCIAL STATEMENTS 1 - ORGANIZATION (Continued)

Exhibitions in AIGAs gallery included:

Divine Details: A shop for the (extra)ordinary, November 2-December 28, 2013 Facing Forward: AIGA at 100, February 19-April 4, 2014 Century: 100 Years of Type in Design, May 1-July 31, 2014

National sponsors for the 2014 fiscal year were Adobe Systems, the official sponsor for design solutions; Aquent, the official sponsor for professional development; and Shutterstock, the official sponsor for creative inspiration.

2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Accounting and Presentation AIGAs net assets, revenues, expenses, gains and losses are classified, based on the existence or absence of donor-imposed restrictions, into the following three categories:

Unrestricted net assets - Unrestricted net assets represent the portion of expendable funds available for the support of all AIGAs operations. Temporarily restricted net assets - Net assets subject to donor-imposed stipulations that may or will be met, either by action of AIGA and/or the passage of time. 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 statement of activities as net assets released from restrictions. Permanently restricted net assets - Net assets subject to donor-imposed stipulations that must be maintained permanently by AIGA. Generally, the donors of these assets would permit AIGA to use all or part of the income earned on any related investments for general or specific purposes.

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NOTES TO FINANCIAL STATEMENTS 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (GAAP) requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates. Cash and Cash Equivalents Cash balances in banks are insured by the Federal Deposit Insurance Corporation subject to certain limitations. For purposes of the statement of cash flows, AIGA considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents, except such investments held as part of AIGAs investment portfolio which is deemed to be for long-term purposes. Investments Investments are stated at fair value. GAAP establishes a framework for measuring fair value. That framework provides 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). Under GAAP, the three levels of the fair value hierarchy are described below:

Level 1: Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that AIGA has the ability to access.

Level 2: Inputs to the valuation methodology include:

Quoted prices for similar assets or liabilities in active markets; Quoted prices for identical or similar assets or liabilities in inactive markets; Inputs other than quoted prices that are observable for the asset or liability; and Inputs that are derived principally from or corroborated by observable market

data by correlation or other means.

If the asset or liability has a specified (contractual) term, the Level 2 input must be observable for substantially the full term of the asset or liability.

Level 3: Unobservable inputs that reflect managements own assumptions.

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Property and Equipment Property and equipment are stated at cost or, if donated, at the estimated fair market value of the assets at the date of donation. Costs for repairs and maintenance are charged to expenses as incurred. All plant assets, other than land, are depreciated over their estimated useful lives using the straight-line method. Estimated useful lives used to calculate depreciation are as follows:

Building and improvements 30 years Furniture, fixtures and equipment 5 years Computer equipment 3 years

Deferred Revenue and Related Expenses Revenue received and expenses paid in the current period for publications, conferences, exhibitions, programs and other events scheduled to take place in the subsequent period are deferred on the statement of financial position. The majority of non-membership deferred revenue and related expenses relate to the national conference which is held in October, subsequent to the fiscal year. Membership dues are allocated to the period to which they relate and are recognized accordingly. Membership dues billed and received in advance are reflected as deferred revenue in the statement of financial position. Donated Materials and Services Donated materials, generally, printing and paper supplies, are estimated at $409,882 and $106,024 for the years ended September 30, 2014 and 2013, respectively. In addition, AIGA received contributed rent in the amount of $110,200 for the year ended September 30, 2014. Such donations are recorded in the statement of activities as programs revenue, with an offset to expenses as program services, as donors of such items receive commensurate value in return. Volunteer officers and committees which serve without remuneration play an important role in the functioning of AIGA. No amounts have been reflected in the financial statements for such donated services, as they do not meet the criteria for recognition. Functional Allocation of Expenses Expenses have been charged to program or supporting services, either directly when identifiable, or indirectly based on managements estimation of the services benefited.

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Income Taxes AIGA is exempt from federal income tax under Section 501(c)(3) of the Internal Revenue Code and is classified as a publicly supported organization as described in Section 509(a). AIGAs tax filings prior to 2011 are no longer subject to examination by tax authorities. Reclassifications Certain reclassifications have been made to the prior year financial statements to conform to the current year presentation. Subsequent Events These financial statements were approved by management and available for issuance on February 5, 2015. Management has evaluated subsequent events through this date.

3 - PREPAID EXPENSES AND DEPOSITS Prepaid expenses and deposits consisted of the following:

September 30, 2014 2013 AIGA Design Conference $ - $ 187,838 Gain: AIGA Design and Business Conference 47,729 - Other conferences 4,727 23,910 Security deposits 304,660 4,660 Other prepayments 61,724 96,968 $ 418,840 $ 313,376

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NOTES TO FINANCIAL STATEMENTS 4 - INVESTMENTS AND INVESTMENT RETURN

AIGAs investments, which are considered to be Level 1, consisted of the following:

September 30, 2014 2013 Common stock $ 1,552,102 $ 1,491,180Corporate fixed income 8,022,657 233,345Mutual funds 8,530,372 698,816Corporate and foreign income 316,620 -U.S. Govt. Bonds 1,087,196 -Short-term deposits 2,279,922 73,796 $ 21,788,869 $ 2,497,137

The investment return is summarized as follows:

Year Ended September 30, 2014 2013 Interest and dividends $ 112,052 $ 85,446 Net unrealized gain (loss) on investments (378,546) 19,056 Net realized gain on sale of investments 63,152 85,323 $ (203,342) $ 189,825

AIGA invests in various investment securities in accordance with a board-adopted investment risk strategy. Investment securities are exposed to various risks such as interest rate, market, and credit risks. Due to the level of risk associated with certain investment securities, it is at least reasonably possible that changes in the values of investment securities will occur in the near term and that such changes could materially affect the amounts reported in the statements of financial position.

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NOTES TO FINANCIAL STATEMENTS 5 - PROPERTY AND EQUIPMENT

Property and equipment consisted of the following:

September 30, 2014 2013 Land $ - $ 388,800 Building - 2,066,035 Building improvements - 1,423,995 Office machinery and equipment 50,016 645,233 Furniture and fixtures 5,525 303,193 55,541 4,827,256 Less - Accumulated depreciation 40,538 2,701,813 $ 15,003 $ 2,125,443

On July 11, 2014, AIGA sold the building at 164 Fifth Avenue in New York, NY. The proceeds from the sale were $23,000,000, offset by associated costs of $2,969,500, resulting in a net gain on sale of $20,030,500. In connection with the sale, the new owner agreed to lease the building to AIGA for a term of eight months and agreed to waive all rent for this period.

6 - MORTGAGE FINANCING COST Mortgage financing cost, which represents the unamortized balance of expenses incurred associated with the March 2006 refinancing, is amortized over the life of the loan and consisted of the following:

September 30, 2014 2013 Legal fees $ - $ 5,073 Other - 82,168 - 87,241 Less - Accumulated amortization - 48,951 $ -0- $ 38,290

Amortization expense for the years ended September 30, 2014 and 2013 was $4,534 and $5,816, respectively.

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NOTES TO FINANCIAL STATEMENTS 7 - LINE OF CREDIT AND LOAN PAYABLE

AIGA had a $250,000 line of credit with a bank, payable on demand. Interest was determined based on the prime rate plus 1%. The interest rate at September 30, 2013 was 4.25%. The line of credit was satisfied in full on July 11, 2014. Interest expense for fiscal 2014 and 2013 was $10,768 and $13,478, respectively. AIGA had a term loan agreement with a bank in the amount of $77,000 with principal and interest payments over a 36-month period at a fixed interest rate of $4.25%. The term loan agreement was satisfied in full on July 11, 2014. Interest expense for fiscal 2014 and 2013 was $1,997 and $2,623 respectively. In June 2013, AIGA obtained a line of credit (Portfolio Loan Agreement or PLA) with a bank. The amount of the line of credit is based on a percentage of investment assets pledged by AIGA on which the line of credit is secured. At September 30, 2014, the line of credit amounted to $1,000,000. The interest rate is determined by a variable rate (Corresponding PLA Index) plus 3.0%. The interest rate at September 30, 2014 was 3.16%. There was no amount outstanding under this line of credit at September 30, 2014. Interest expense for fiscal 2014 was $11,162.

8 - DEFERRED REVENUE Deferred revenue consisted of the following:

September 30, 2014 2013 Conferences $ 413,460 $ 1,121,787 Membership dues 941,017 1,039,169 $ 1,354,477 $ 2,160,956

9 - MORTGAGE PAYABLE

AIGA had a 15-year mortgage loan agreement with Citibank, N.A. for $1,900,000, at a fixed interest rate of 6.69% that was due to mature on April 1, 2020. The mortgage loan agreement was satisfied in full on July 11, 2014. Interest expense on the mortgage debt for the years ended September 30, 2014 and 2013 was $52,649 and $75,323, respectively.

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NOTES TO FINANCIAL STATEMENTS

10 - AIGA LEGACY CAMPAIGN The AIGA Legacy Campaign is the banner under which a variety of funds have been created to channel charitable gifts toward the challenges facing the profession. The funds to which people giving to the campaign can commit their donations include funds in support of AIGAs archives and scholarship programs, as well as the AIGA Legacy Fund (for special projects), the Legacy Endowment (to secure the future of AIGA), the Diversity Fund, the Design Writing & Criticism Awards and the AIGA Disaster Relief Fund. Board-designated net assets consisted of the following:

September 30, 2014 2013 AIGA Legacy Fund $ 189,332 $ 105,924 Archives Funds - 38,007 Scholarship Funds 53,533 51,237 Legacy Endowment - 44,300 Diversity Fund - 14,577 Denver Archives - 87,150 $ 242,865 $ 341,195

11 - TEMPORARILY RESTRICTED NET ASSETS Temporarily restricted net assets consisted of the following:

September 30, Program 2014 2013

Scholarship Funds $ 56,006 $ 61,345 Disaster Relief Fund - 9,087 Archives Funds - 2,758 AIGA Legacy Fund 303,939 256,070 Diversity Fund - 975 Legacy Endowment - 1,101 Total $ 359,945 $ 331,336

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12 - PERMANENTLY RESTRICTED NET ASSETS Permanently restricted net assets are restricted to investments held in perpetuity, the income from which is expendable to support the Henry Wolf AIGA Scholarships.

13 - RETIREMENT PLAN AIGA has a defined contribution retirement plan that covers substantially all full-time employees. Contributions, which are made entirely by AIGA, will vary each year and are determined by the Executive Director, as part of AIGAs budget, approved annually at the Board of Directors meeting. Expense for the years ended September 30, 2014 and 2013 was $178,071 and $4,927 respectively.

14 - RELATED PARTY TRANSACTIONS AIGA provides management and personnel services to AIGAs New York Chapter. Fees and expenses billed by AIGA were as follows:

Year Ended September 30, 2014 2013 Management fees $ 12,000 $ 12,000 Payroll and related benefits 96,670 138,615 $ 108,670 $ 150,615

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15 - SUBSEQUENT EVENTS On November 6, 2014, AIGA entered into an operating lease with 233 Broadway Owners, LLC, pursuant to which AIGA will lease a portion of the 17th floor office space located at 233 Broadway, New York, New York. The lease contains rent abatements and provides for landlord renovations. Future minimum rental payments, including escalations, under the operating lease are summarized as follows:

Year Ending September 30,

2015 $ 100,122 2016 406,328 2017 416,487 2018 395,623 2019 447,037 Thereafter 2,882,683

$ 4,648,280

AIGA Financial Statement FY2014

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