Consolidated Financial Statements and Single Audit … rpts/2013... · · 2017-11-05Consolidated...

BOYS TOWN

Consolidated Financial Statements and Single Audit Reports

December 31, 2013

(With Independent Auditors’ Reports Thereon)

BOYS TOWN

Table of Contents

Page

Independent Auditors’ Report 1–2

Consolidated Financial Statements:

Consolidated Statement of Financial Position 3

Consolidated Statement of Activities 4

Consolidated Statement of Cash Flows 5

Consolidated Statement of Functional Expenses 6

Notes to Consolidated Financial Statements 7–35

Single Audit Information

Schedule of Expenditures of Federal Awards and State Financial Assistance 36–40

Notes to Schedule of Expenditures of Federal Awards and State Financial Assistance 41

Independent Auditors’ Report on Internal Control over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards 42–43

Independent Auditors’ Report on Compliance for Each Major Federal Program and State Project; Report on Internal Control over Compliance; and Report on Schedule of Expenditures of Federal Awards and State Financial Assistance Required by OMB Circular A-133, Audits on States, Local Governments, and Non-Profit Organizations, and State of Florida Chapter 10.650, Rules of Auditor General Florida Single Audit Act 44–46

Schedule of Findings and Questioned Costs 47

KPMG LLP Suite 300 1212 N. 96th Street Omaha, NE 68114-2274 Suite 1600 233 South 13th Street Lincoln, NE 68508-2041

KPMG LLP is a Delaware limited liability partnership, the U.S. member firm of KPMG International Cooperative (“KPMG International”), a Swiss entity.

Independent Auditors’ Report

The Board of Trustees Father Flanagan’s Boys’ Home:

Report on the Consolidated Financial Statements

We have audited the accompanying consolidated financial statements of Father Flanagan’s Boys’ Home d/b/a Boys Town (Boys Town), which comprise the consolidated statement of financial position as of December 31, 2013, and the related consolidated statements of activities and cash flows for the year then ended, and the related notes to the consolidated financial statements.

Management’s Responsibility for the Consolidated Financial Statements

Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with U.S. generally accepted accounting principles; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of consolidated 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 consolidated financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditors consider internal control relevant to the entity’s preparation and fair presentation of the consolidated 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 consolidated 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 consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Boys Town as of December 31, 2013, and the changes in their net

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assets and their cash flows for the year then ended, in accordance with U.S. generally accepted accounting principles.

Other Reporting Required by Government Auditing Standards

In accordance with Government Auditing Standards, we have also issued our report dated June 4, 2014 on our consideration of Boys Town’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering Boys Town’s internal control over financial reporting and compliance.

/s/ KPMG LLP

Omaha, Nebraska June 4, 2014

BOYS TOWN

Consolidated Statement of Financial Position

December 31, 2013

(Dollar amounts in thousands)

Boys Town Fatherand Flanagan’s

program- Fund for Boys Townrelated Needy consolidated

Assets affiliates Children Eliminations total

Cash and cash equivalents $ 14,599 — — 14,599 Investment income receivable 39 448 — 487 Accounts receivable 29,008 — (33) 28,975 Inventories 1,370 — — 1,370 Notes receivable 86 — — 86 Prepaid expenses 2,524 — — 2,524 Other assets 1,082 — — 1,082 Pledges receivable 3,694 — — 3,694 Pension asset 51,709 — — 51,709 Investments 112,608 927,464 — 1,040,072 Beneficial interest in trust assets 78,951 — — 78,951 Interest in Father Flanagan’s

Fund for Needy Children 927,694 — (927,694) — Cash restricted for purchase of

long-term assets 187 — — 187 Land, buildings, and equipment, net 137,076 — — 137,076

Total assets $ 1,360,627 927,912 (927,727) 1,360,812

Liabilities and Net Assets

Liabilities:Accounts payable $ 19,121 — — 19,121 Accrued liabilities 30,580 218 (33) 30,765 Deferred revenue 923 — — 923 Notes payable 3,564 — — 3,564 Bonds payable 48,321 — — 48,321 Pension and postretirement

benefits liability 48,708 — — 48,708

Total liabilities 151,217 218 (33) 151,402

Net assets:Unrestricted 1,097,049 927,694 (927,694) 1,097,049

Less noncontrolling interest incontrolled entity deficit 887 — — 887

Total unrestricted 1,096,162 927,694 (927,694) 1,096,162

Temporarily restricted 39,332 — — 39,332 Permanently restricted 73,916 — — 73,916

Total net assets 1,209,410 927,694 (927,694) 1,209,410

Total liabilities andnet assets $ 1,360,627 927,912 (927,727) 1,360,812

See accompanying notes to consolidated financial statements.

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BOYS TOWN

Consolidated Statement of Activities

Year ended December 31, 2013


FatherFlanagan’sFund for

Boys Town and program-related affiliates Needy Boys TownTemporarily Permanently Children consolidated

Unrestricted restricted restricted Total Unrestricted Eliminations total

Revenues, gains, and other support:Contributions $ 195,546 4,180 1 199,727 — — 199,727 Legacies and bequests 9,235 16 194 9,445 — — 9,445 Program service revenues 214,151 — — 214,151 — — 214,151 Other revenues 9,156 3 — 9,159 139 — 9,298 Investment income 3,926 760 — 4,686 17,055 — 21,741 Realized and unrealized gains on investments, net 7,868 2,723 — 10,591 114,902 — 125,493 Change in value of beneficial interest in trust assets — 2,142 5,377 7,519 — — 7,519 Net assets released from restrictions 14,259 (14,256) (3) — — — —

Total revenues, gains, and other support 454,141 (4,432) 5,569 455,278 132,096 — 587,374

Expenses:Program services 430,934 — — 430,934 — — 430,934 Supporting services 40,445 — — 40,445 985 — 41,430

Total expenses 471,379 — — 471,379 985 — 472,364

Revenues, gains, and other support over (under)expenses (17,238) (4,432) 5,569 (16,101) 131,111 — 115,010

Change in net assets of Father Flanagan’s Fund for NeedyChildren 88,451 — — 88,451 — (88,451) —

Support from Father Flanagan’s Fund for Needy Children 42,660 — — 42,660 (42,660) — — Pension-related changes other than net periodic pension cost 17,577 — — 17,577 — — 17,577

Increase (decrease) in net assets 131,450 (4,432) 5,569 132,587 88,451 (88,451) 132,587

Net assets, beginning of year 964,712 43,764 68,347 1,076,823 839,243 (839,243) 1,076,823 Net assets, end of year $ 1,096,162 39,332 73,916 1,209,410 927,694 (927,694) 1,209,410


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BOYS TOWN

Consolidated Statement of Cash Flows



Cash flows from operating activities:Increase in net assets $ 132,587 Adjustments to reconcile increase in net assets to net cash used in operating activities:

Pension-related charges other than net periodic pension cost (17,576) Retiree pension expense (1,678) Postretirement benefits expense 1,514 Realized and unrealized gains on investments, net (125,493) Change in value of beneficial interest in trust assets (7,519) Gain on sale of building and equipment (5,854) Depreciation 12,941 Amortization of discounted pledges (73) Amortization of discounted liabilities (60) Termination of annuity agreements (232) In-kind contributions (70) Contributions restricted for long-term investments (295) Net changes in assets and liabilities:

Increase in investment income receivable (13) Decrease in accounts receivable 3,059 Increase in inventories (93) Decrease in notes receivable 9 Decrease in prepaid expenses 84 Decrease in other assets 312 Decrease in pledges receivable 746 Decrease in beneficial interest in trust assets 481 Decrease in accounts payable (1,525) Decrease in accrued liabilities (1,644) Increase in deferred revenue 830 Decrease in pension and postretirement benefit obligation (2,570)

Net cash used in operating activities (12,132)

Cash flows from investing activities:Purchases of buildings and equipment (17,015) Contributions restricted for investment in property and equipment (100) Sale of assets restricted to investment in equipment and purchase of equipment 129 Sales of building and equipment 7,497 Proceeds from sale of investments 666,701 Purchases of investments (633,905)

Net cash provided by investing activities 23,307

Cash flows from financing activities:Proceeds from gift annuities issued 443 Contributions restricted for investment in endowments 195 Contributions restricted for investment in property and equipment 100 Proceeds from notes payable 150 Payments on bonds payable (8,545) Payments on notes payable (119) Payments on annuity obligations (678) Payments on capital lease obligations (34)

Net cash used in financing activities (8,488)

Net increase in cash and cash equivalents 2,687

Cash and cash equivalents, beginning of year 11,912 Cash and cash equivalents, end of year $ 14,599

Supplemental disclosure of cash flow information:Cash paid during the year for:

Interest $ 2,745


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BOYS TOWN

Consolidated Statement of Functional Expenses



Program services Supporting servicesBoys Town

Boys Town NationalNebraska Home Campus Programs National Hotline and Management

Iowa Educational across Research Public and TotalServices Program America Hospital Services Total general Fund-raising Total expenses

Salaries $ 37,092 7,041 32,943 41,999 2,148 121,223 8,087 3,514 11,601 132,824 Employee benefits 9,118 1,721 8,544 10,791 464 30,638 2,231 976 3,207 33,845 Payroll taxes 3,284 631 3,361 4,019 177 11,472 625 309 934 12,406

Total salaries and related expenses 49,494 9,393 44,848 56,809 2,789 163,333 10,943 4,799 15,742 179,075

Specific assistance to youth 4,147 92 2,037 252 — 6,528 — — — 6,528 Occupancy 2,489 1,004 2,609 2,627 85 8,814 200 91 291 9,105 Contract services 32,959 1,281 2,492 17,054 147 53,933 300 887 1,187 55,120 Supplies 1,956 696 1,405 9,256 277 13,590 216 291 507 14,097 Printing and publications 243 20 426 239 644 1,572 386 10,727 11,113 12,685 Postage 248 3 236 101 288 876 354 4,989 5,343 6,219 Equipment – rental and maintenance 725 154 679 1,915 77 3,550 394 194 588 4,138 Professional fees 1,016 72 1,501 3,527 151,646 157,762 3,499 227 3,726 161,488 Travel 1,868 36 1,532 485 26 3,947 90 180 270 4,217 Telephone 666 44 710 544 59 2,023 65 32 97 2,120 Interest 677 239 179 731 16 1,842 45 720 765 2,607 Other 253 10 613 275 18 1,169 479 376 855 2,024

Total expenses before depreciation 96,741 13,044 59,267 93,815 156,072 418,939 16,971 23,513 40,484 459,423

Depreciation of buildings and equipment 3,501 1,250 3,264 3,852 128 11,995 522 424 946 12,941 Total expenses $ 100,242 14,294 62,531 97,667 156,200 430,934 17,493 23,937 41,430 472,364


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BOYS TOWN

Notes to Consolidated Financial Statements

December 31, 2013


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(1) Nature of Operations

Father Flanagan’s Boys’ Home and its affiliates, a nonsectarian, not-for-profit organization governed by a volunteer board of trustees, operate as Boys Town. Boys Town’s mission is to change the way America cares for children, families, and communities by providing and promoting an Integrated Continuum of Care that instills Boys Town values to heal body, mind, and spirit. Boys Town accomplishes this by providing housing, care, treatment, support, and/or educational services for individual at-risk youth in its residential programs as well as working directly with at-risk families to provide them with the skills, resources, and supports necessary to help keep their family together. Boys Town’s revenues are derived from contributions, contracts, program service fees, and support from Father Flanagan’s Fund for Needy Children (FFNC).

A description of the major program services is as follows:

Nebraska/Iowa Services consists of the Family Home Program, Intervention and Assessment Services, In-home Family Services, Foster Family Services, and Community Support Services including Common Sense Parenting®, and the Center for Behavioral Health.

There are 60 family style Family Homes on the Home Campus, which is in the incorporated Village of Boys Town, Nebraska (the Village). These homes have a total capacity over 400 youth. Six to eight troubled boys or girls from throughout the United States of America, with ages generally ranging from 8 to 18, live in a home with a specially trained professional married couple called Family Teachers. The couple provides treatment planning, skill development, spiritual guidance, a family style environment, and love and care, with the help of an Assistant Family Teacher. Each home is monitored, evaluated, and advised by a Program Director and other support personnel. The homes are certified by the Council on Accreditation. Homes are not mixed by gender but are mixed by age, ethnic, and religious backgrounds. The program is also served by four Intervention and Assessment Homes, which provide short-term intervention and assessment services for youth. In addition to its residential program, the Home Campus also operates a Foster Family Services Program, In-home Family Services, and Community Support Services programs.

The Home Campus also operates a Center for Behavioral Health, which in 2013, served approximately 3,300 youth and families with behavioral problems on an outpatient basis and is a training center for doctoral level psychologists.

The Nebraska Families Collaborative (NFC) is a joint partnership between Boys Town, Child Savings Institute, Heartland Family Service, Nebraska Family Support Network, and OMNI Behavioral Health. NFC receives cases from the Nebraska Department of Health and Human Services child welfare system and is responsible for service coordination and case management of all children and families referred. The NFC works very closely with the service provider and the family to ensure that safety, permanency, and well-being can be achieved. The NFC has been providing service coordination and case management for children and families since November 2009. This past year NFC served approximately 3,200 children and families.

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• The Home Campus Educational Program consists of the Boys Town High School and the Wegner Middle School. The Village schools serve youth at Boys Town and provide academic and vocational training skills necessary for contemporary society. All Boys Town’s schools are fully accredited by the state of Nebraska and the North Central Association. A full range of special education services is provided to all youth who require this type of assistance.

The Boys Town Day School in the Village of Boys Town and the Duncan Day School in Duncan, Nebraska, serve youth who cannot receive education services in a public or alternative school setting due to behavioral problems and academic deficiencies. These schools meet all requirements of Level III schools under Nebraska Department of Education’s Rule 51 and currently educate students from multiple school districts in Nebraska and Iowa. These schools have also served parentally placed private youth and court placed youth. Boys Town served over 120 students in Day School services in 2013.

• Programs across America directly served nearly 29,000 youth in Nebraska/Iowa and 10 affiliated sites nationwide. These affiliated sites are: Boys Town California, Boys Town Central Florida, Boys Town Louisiana, Boys Town Nevada, Boys Town New England, Boys Town New York, Boys Town North Florida, Boys Town Florida, Boys Town Texas, and Boys Town Washington, DC.

Programs offered throughout the nation include Intervention and Assessment Services, Family Home Services, Foster Family Services, In-Home Family Services, and Community Support Services including Common Sense Parenting®, Outpatient Behavioral Health Services, and National Community Support Services.

Boys Town invests and emphasizes quality through staff training, evaluation, and outcomes research by having departments committed to the quality of Boys Town’s programs. The Training and Evaluation Department provides technical training, evaluation, and quality/control/quality assurance of Boys Town’s nationwide system of services. The Program Fidelity Department provides program monitoring, consultation, and staff and program development to the ten program sites across America.

National Community Support Services provides training and resources to parents, child care providers, and educators throughout the United States and internationally. Services are offered through Education and Common Sense Parenting training packages, and books from the Boys Town Press. In 2013, over 11,000 parents, teachers, administrators, and professionals were trained allowing Boys Town to indirectly impact approximately 140,000 children through this training.

• Boys Town National Research Hospital (BTNRH) provides medical and surgical services at two hospital locations and six outpatient clinics in the Omaha, Nebraska, metropolitan area. BTNRH is recognized internationally as a leader in communication disorder research and as a referral center for children with disorders of the ear, hearing and balance, cleft lip and palate, speech, and voice, as well as related disabilities. BTNRH clinical programs served more than 44,000 children and adolescents in 2013 through a total of more than 208,000 patient visits.

Boys Town Pediatrics, BTNRH’s group of pediatric physicians, provides primary care and specialty pediatric medical services at four clinic locations in the Omaha area.

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BTNRH also provides medically directed behavioral health services. These services include four residential treatment centers (RTC). The RTC East is located at the BTNRH downtown campus and has the capacity to serve up to 47 youth. In October 2013, the newest RTC West was opened with an additional 34 beds. This program is attached to the BTNRH west hospital. Additionally, BTNRH operates two open staff secure RTCs located in Village of Boys Town – one home for 13 boys, and one home for 14 girls. Each of these RTCs is staffed with a multidisciplinary medical and behavioral health staff.

The Lied Learning and Technology Center for Childhood Deafness and Vision Disorders, a separate 501(c)(3) corporation, is a research and treatment facility operated and occupied by BTNRH personnel.

• Boys Town National Hotline and Public Services meets the informative and public service needs of youth, parents, teachers, and youth professionals who are involved directly or indirectly with helping youth.

The Boys Town National Hotline (the Hotline) at 1-800-448-3000 helps hundreds of thousands of children and families throughout all 50 states each and every year. The Hotline provides toll free phone, as well as Web based, crisis service for troubled children and families. The Hotline received over 151,000 contacts in 2013. The Hotline operates 24 hours a day, 7 days a week, with trained, skilled, professional operators. The Hotline is equipped to handle calls from people who speak a variety of languages.

In an effort to reach the highest number of youth in need of assistance, through a medium more frequently used by youth, the Boys Town National Hotline launched a Web site mid 2009 called yourlifeyourvoice.org. In 2013, the Web site had over 300,000 visits. More than 14,000 youth contacted the Hotline professionals for assistance through the Web site via e-mail or chat.

In addition to operating the Boys Town National Hotline, Boys Town also operates the Nebraska Family Helpline. The Nebraska Family Helpline was conceived when Nebraska lawmakers realized families experiencing crises needed a central, knowledgeable place to go to get help or answers to their questions. The Helpline counselors assist families in managing immediate crisis situations, make referrals, help them navigate government systems, and follow up with families to ensure they received the help they needed. The Nebraska Family Helpline has been honored in the press and by the legislature for its effective service to Nebraska families. Nearly 3,800 calls were made to the Helpline in 2013 from families seeking assistance.

(2) Summary of Significant Accounting Policies

The following is a summary of significant accounting policies used in the preparation of the consolidated financial statements:

(a) Basis of Presentation

The accompanying consolidated financial statements include the accounts of Father Flanagan’s Boys’ Home, its affiliates (Boys Town California, Inc., Boys Town Central Florida, Inc., Boys Town

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North Florida, Inc., Boys Town Nevada, Inc., Boys Town New England, Inc., Boys Town Chicago, Inc., Boys Town Texas, Inc., Boys Town Louisiana, Inc., Boys Town New York, Inc., Boys Town Washington, D.C., Inc., and Father Flanagan’s Boys Town, Florida, Inc.), Father Flanagan’s Fund for Needy Children (FFFNC), the Lied Learning and Technology Center for Childhood Deafness and Vision Disorders, a separate 501(c)(3) corporation operating in support of BTNRH, and Nebraska Families Collaborative (NFC), a separate nonprofit corporation in which Boys Town has a controlling partnership interest. All intercompany balances and transactions have been eliminated in consolidation. The accumulated noncontrolling interest of NFC is recognized in the consolidated statement of financial position as part of net assets. The noncontrolling interest of NFC related to decrease in unrestricted net assets was $771 for the year ended December 31, 2013.

(b) Basis of Accounting

The accompanying consolidated financial statements have been prepared on the accrual basis of accounting. Resources are reported for accounting purposes into separate classes of net assets based on the existence or absence of donor-imposed restrictions. Net assets that have similar characteristics have been combined into similar categories.

• The unrestricted net assets account for resources over which the governing board has discretionary control to use in carrying on the operations of Boys Town.

• The FFFNC support fund consists of unrestricted net assets, which the Board of Trustees have determined are to be retained for the exclusive purpose of providing financial support to the various Boys Town programs.

• The temporarily restricted net assets account for those resources currently available for use, but expendable only for purposes specified by the donor or grantor, or which will become available for use at a later time.

• The permanently restricted net assets represent the principal amount of gifts and bequests accepted with the donor stipulation that the principal be maintained intact and that only the income from investment thereof be expended either for general purposes or for purposes specified by the donor. Permanently restricted net assets also represent Boys Town’s interest in perpetual trusts held by other trustees but which benefits Boys Town.

(c) Cash and Cash Equivalents

Cash and cash equivalents include investments with an original maturity of three months or less except that such instruments purchased with endowment assets are classified as investments.

(d) Inventories

Inventories are valued at the lower of cost or market with cost determined principally on the first-in, first-out method.

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(e) Interest in Net Assets of Father Flanagan’s Fund for Needy Children

Because of Boys Town’s relationship as FFFNC’s sole member and the overall financial interrelationship of the organization and FFFNC, Boys Town reports its interest in the net assets of FFFNC in the consolidated statement of financial position, with corresponding changes in those net assets reported in the accompanying consolidated statement of activities.

(f) Investments

Investments are reported at fair value. Valuations provided by external investment managers and the custodian bank include observable market quotation prices, observable inputs other than quoted prices such as matrix pricing or indexes and other methods. Investments in securities traded on a national securities exchange are valued at the latest quoted market prices. For debt securities, if quoted market prices are not available, the fair values are estimated using pricing models, quoted prices of similar securities with similar characteristics, or discounted cash flows. For alternative investments in funds that do not have readily determinable fair values including private investments, hedge funds, real estate, and other funds, Boys Town estimates fair value using net asset value per share or its equivalent as a practical expedient to fair value; however, it is possible that the redemption rights of certain investments may be restricted by the funds in the future in accordance with underlying fund agreements.

Donated investments are reported at estimated fair value at the date of receipt. Realized gains and losses on sales of investments are recognized in the consolidated statement of activities as specific investments are sold. Interest is recognized as earned. Dividend income is recognized on the ex-dividend date. All realized and unrealized gains and losses and income arising from investments are recognized in the consolidated statement of activities as increases or decreases to unrestricted net assets unless their use is restricted by donor stipulation or law.

(g) Fair Value Measurements

Boys Town applies the provisions included in Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 820, Fair Value Measurement, for fair value measurements of financial assets and financial liabilities and for fair value measurements of nonfinancial items that are recognized or disclosed at fair value in the consolidated financial statements. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

ASC Topic 820 establishes 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 measurements involving significant unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are as follows:

• Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that Boys Town has the ability to access at the measurement date.

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• Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.

• Level 3 inputs are unobservable inputs for the asset or liability.

(h) Fair Value of Financial Instruments

The following methods and assumptions were used to estimate the fair value of each class of financial instruments:

Cash and cash equivalents, investment income receivable, accounts receivable, prepaid expenses, cash restricted for purchase of long-term assets, accounts payable, accrued liabilities, and deferred revenue: The carrying amounts approximate fair value because of the short maturity of these instruments.

The carrying value of notes receivable approximates the fair value as the terms reflect current market terms for similar notes. Investments are stated at fair value as discussed in note 2(f), note 3, and note 4. The carrying value of pledges receivable approximates fair value as the majority of these pledges were obtained within the previous three years and the discounted cash flows are reflective of current market rates for similar periods. The carrying value of notes payable approximates fair value since interest rates closely reflect market rates.

Beneficial interest in trust assets represents Boys Town’s interest in assets held in perpetuity and remainder trust controlled by independent trustees. The estimated value is Boys Town’s percentage interest in the fair value of the underlying investments as reported by the independent trustees.

Bonds payable were valued using quoted market prices for specific bonds. At December 31, 2013, the carrying value of bonds payable did not differ materially from its estimated fair value.

(i) Land, Buildings, and Equipment

Land, buildings, and equipment are stated at cost, including capitalized interest when applicable. For the year ended December 31, 2013, Boys Town did not capitalize any interest. Provisions for depreciation are computed using the straight-line method based on the estimated useful lives of the assets.

Gifts of long-lived assets such as land, buildings, or equipment are reported as unrestricted support, unless explicit donor stipulations specify how the donated assets must be used. Gifts of long-lived assets with explicit restrictions that specify how the assets are to be used and gifts of cash or other assets that must be used to acquire long-lived assets are reported as restricted support. Absent explicit donor stipulations about how long those long-lived assets must be maintained, expirations of donor restrictions are reported when the donated or acquired long-lived assets are placed into service. Contributions restricted to the purchase of property and equipment in which restrictions are met within the same year as received are reported as increases in unrestricted net assets.

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(j) Impairment of Long-Lived Assets

Long-lived assets, such as property and equipment, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized to the extent the carrying amount of the asset exceeds its fair value.

(k) Contributions

Contributions, unconditional promises to give (pledges), and donated properties and materials are recorded as at their estimated fair value at date of donation. Donated advertising and airtime are recorded as contribution revenues and program expense (professional fees) at their estimated fair value of $151,726, in the consolidated statement of activities. Donated advertising consists of radio, television, and print materials. Donated advertising is valued based on commercial rates paid by other organizations for comparable services, which are considered Level 2 inputs in the fair value hierarchy. Management employs a third party to assist in the valuation and is based on 259,000 airplays at an average of $0.59 per airplay.

All contributions are considered to be available for unrestricted use unless specifically restricted by the donor. Amounts received that are designated for future periods or restricted by the donor for specific purposes are reported as temporarily restricted or permanently restricted support that increases those net asset classes. However, if a restriction is fulfilled in the same time period in which the contribution is received, Boys Town reports the support as unrestricted.

Contributions of services are recognized if the services received 1) create or enhance nonfinancial assets or 2) require specialized skills, are provided by individuals possessing those skills, and would typically need to be purchased if not provided by donation. In 2013, $167 of contributed services was recognized.

(l) Net Patient Service Revenue

BTNRH has agreements with third-party payors that provide for payments at amounts different from its established rates. Payment arrangements include prospectively determined rates per discharge, reimbursed costs, discounted charges, and per diem payments. Net patient service revenue is reported at the estimated net realizable amounts from patients, third-party payors, and others for services rendered.

(m) Provision for Uncollectible Patient Accounts

The provision for uncollectible patient accounts is based upon BTNRH management’s assessment of expected net collections considering the accounts receivable aging, historical collections experience, economic conditions, trends in healthcare coverage, and other collection indicators. Management periodically assesses the adequacy of the allowances for uncollectible accounts and contractual adjustments based upon historical write-off experience. The results of these reviews are used to

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establish the net realizable value of patient accounts receivable. BTNRH follows established guidelines for placing certain patient balances with collection agencies. Self-pay accounts are written off as bad debt at the time of transfer to the collection agency. Deductibles and coinsurance are classified as either third-party or self-pay receivables on the basis of which party has the primary remaining financial responsibility, while the total gross revenue remains classified based on the primary payor at the time of service. There are various factors that can impact collection trends, such as changes in the economy, which in turn may have an impact on unemployment rates and the number of uninsured and underinsured patients, the increased burden of co-payments and deductibles to be made by patients with insurance, and business practices related to collection efforts. These factors continuously change and can have an impact on collection trends and the estimation process. Net patient accounts receivable have been adjusted to the estimated amounts expected to be collected and do not bear interest.

(n) Income Taxes

Boys Town and its affiliates are exempt from federal income taxes under Section 501(c)(3) of the Internal Revenue Code. Boys Town accounts for uncertainties in accounting for income tax assets and liabilities by recognizing the effect of income tax positions only if those positions are more likely than not of being sustained. At December 31, 2013, Boys Town had no uncertain tax positions accrued.

(o) Pension and Other Postretirement Plans

Boys Town has two defined-benefit pension plans consisting of one for employees who retired prior to January 1, 1998, and the other for active employees as of January 1, 1998. Boys Town also provides healthcare benefits for retired employees hired prior to January 1, 2002.

Boys Town records annual amounts relating to its pension and postretirement plans based on calculations that incorporate various actuarial and other assumptions, including discounts rates, mortality, assumed rates of return, compensation increases, turnover rates, and healthcare cost trend rates. Boys Town reviews its assumptions on an annual basis and makes modifications to the assumptions based on current rates and trends when it is appropriate to do so. The effect of modifications to those assumptions is recorded in pension-related changes other than net periodic pension cost and amortized to net periodic cost over future periods using the corridor method. Boys Town believes that the assumptions utilized in recording its obligations under its plans are reasonable based on its experience and market conditions.

(p) Use of Estimates

The preparation of consolidated financial statements in conformity with U.S. generally accepted accounting principles (GAAP) 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 consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

14 (Continued)

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December 31, 2013


(3) Fair Value Measurements

The following table presents assets that are measured at fair value on a recurring basis at December 31, 2013:

December 31,2013 Level 1 Level 2 Level 3

Cash and cash equivalents $ 14,599 14,599 — — Investments (note 4) 1,040,072 293,478 230,365 516,229 Beneficial interest in trust

assets 78,951 110 — 78,841 Cash restricted for purchase

of long-term assets 187 187 — — Total $ 1,133,809 308,374 230,365 595,070

Certain investments classified in Levels 2 and 3 consist of shares or units in investment funds as opposed to direct interests in the funds’ underlying holdings, which may be marketable. Because the net asset value reported by each fund is used as a practical expedient to estimate the fair value of Boys Town’s interest therein, its classification in Level 2 or 3 is based on Boys Town’s ability to redeem its interest at or near the date of the consolidated statement of financial position. If the interest can be redeemed in less than 90 days, the investment is classified in Level 2. The classification of investments in the fair value hierarchy is not necessarily an indication of the risks, liquidity, or degree of difficulty in estimating the fair value of each investment’s underlying assets and liabilities.

Boys Town’s policy is to reflect transfers between levels at the beginning of the year in which a change in circumstances results in the transfers. The following table presents Boys Town’s activity for assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the year ended December 31, 2013:

Balance at December 31, 2012 $ 530,749 Total realized and unrealized gains and

losses included in changes innet assets, net 73,926

Purchases 72,703 Settlements (72,716) Transfers into and/or out of Level 3 (9,592)

Balance at December 31, 2013 $ 595,070

15 (Continued)

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December 31, 2013


Realized and unrealized gains (or losses) included in the increase of net assets for 2013 for assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) are reported in the consolidated statement of activities:

Total realized gains $ 15,534 Change in unrealized gains or losses

relating to assets still held 50,873 Change in value of beneficial

interest in trust assets 7,519 $ 73,926

During 2013, there were no transfers between Level 1 and 2 inputs.

(4) Investments

The primary management of all investments is performed by five professional investment advisors, ninety-three limited partnerships, five mutual funds, and four commingled trusts. Investment income is reported net of management fee expense of $1,621.

16 (Continued)

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December 31, 2013


The estimated fair value of investments and their level within the fair value hierarchy at December 31, 2013 is as follows:

Total Level 1 Level 2 Level 3

Short-term securities:Money market $ 40,048 40,048 — — U.S. Agency fixed income 56,256 — 56,256 —

Total short-termsecurities 96,304 40,048 56,256 —

Long-term investments:Equities:

Domestic 113,012 113,012 — — Fixed income:

U.S. Treasury securities 31,051 31,051 — — Asset-backed 13,114 — 13,114 — Corporate and agency 17,079 1,743 15,336 —

Mutual funds:Equity 7,598 7,598 — — Fixed income 6,014 6,014 — — International 65,507 65,507 — — Emerging markets 28,505 28,505 — —

Alternative investments:Domestic equity funds 154,703 — — 154,703 Absolute return funds 180,161 — — 180,161 International equity 160,171 — 140,872 19,299 Private equity funds 90,105 — — 90,105 Real assets 71,961 — — 71,961

Real estate 4,787 — 4,787 —

Total long-terminvestments 943,768 253,430 174,109 516,229

Total $ 1,040,072 293,478 230,365 516,229

17 (Continued)

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December 31, 2013


The estimated value of certain alternative investments and nonmarketable securities, such as partnerships, and closely held stock was provided by the respective companies and independent appraisals. For these alternative investments, Boys Town used the net asset value (or its equivalent) reported by the underlying fund to estimate the fair value of the investment. Below is a summary of investments accounted for at net asset value:

* Redemptionfrequency Redemption

Unfunded (if currently noticeFair value commitments eligible) period

Domestic equity funds (a) $ 154,703 — q/sa/a 15-90 daysAbsolute return funds (b) 180,161 — q/sa/a 7-180 daysInternational equity (c) 160,171 — m/q/sa 10-30 daysPrivate equity funds (d) 90,105 61,768 N/A N/AReal assets (e) 71,961 10,535 N/A N/A

$ 657,101 72,303

* m – monthly, q – quarterly, sa – semiannual, a – annual

(a) This class includes investments in funds that primarily invest in U.S. common stocks. Of this class, $108 million employ a long-short strategy. Of this balance, $10 million is restricted for the next 60 months and $13 million is restricted for the next 25 months at which time it will be available quarterly subject to a 45-day redemption notice.

(b) The class includes investments in funds that invest in a mix of securities including equities and fixed income. The funds are primarily multistrategy in their approach and may include such tactics as risk arbitrage, distressed credit, and other long-short strategies. Of this balance, $10 million is restricted for the next 24 months and $5 million is restricted for the next 21 months.

(c) This class includes investments in funds that primarily invest in international common stocks. Of this class, $8 million of this class employ a long-short strategy.

(d) This class includes investments in private equity funds that invest primarily in private companies at various stages of development and maturity. These include funds pursuing a leveraged buyout, growth equity, or venture capital strategy through investments across the capital structure. These investments can never be redeemed with the fund. Distributions from each fund will be received as the underlying investments of the funds are liquidated. It is estimated that the underlying assets of the fund will be liquidated over the next 4 to 7 years.

(e) This class includes real estate funds that employ a value-add strategy across multiple property types including multifamily, office, industrial, and retail. It also includes energy funds that invest primarily in interests of oil and gas properties. These investments can never be redeemed with the fund. Distributions from real estate funds will be received as the underlying investments of the funds are liquidated, and distributions from energy funds will be received from the production and marketing

18 (Continued)

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December 31, 2013


of oil and gas and upon final sale of the underlying interests in the properties. It is estimated that the underlying assets of the fund will be liquidated over the next 3 to 7 years.

Due to the nature of the investments held by the funds, changes in market conditions and the economic environment may significantly impact the net asset value of the funds and, consequently, the fair value of the Boys Town’s interests in the funds. Although a secondary market exists for these investments, it is not active and individual transactions are typically not observable. When transactions do occur in this limited secondary market, they may occur at discounts to the reported net asset value. It is, therefore, reasonably possible that if Boys Town were to sell these investments in the secondary market, a buyer may require a discount to the reported net asset value, and the discount could be significant.

(5) Pledges Receivable

Unconditional promises to give are recorded at net realizable value. Conditional promises to give are not included as support until the conditions are substantially met. The discounts on those amounts are computed using a risk-free interest rate applicable to the years in which promises are received. Amortization of the discounts is included in contribution revenue.

Receivable balances as of December 31, 2013 are as follows:

Scholarship $ 6 Program 843 Restricted to future periods 2,913

Unconditional promises to give before unamortized discount 3,762

Less unamortized discount (68) Net unconditional promise to give $ 3,694

Amount due in:Less than one year $ 1,961 One to five years 1,798 Over five years 3

Total $ 3,762

Discount rates ranged from 0.39% to 4.43%.

(6) Net Patient Service Revenue

BTNRH has agreements with third-party payors that provide for payments to BTNRH at amounts different from its established rates. A summary of the payment arrangements with major third-party payors is as follows:

Medicaid – Inpatient services rendered to Medicaid program beneficiaries are paid at prospectively determined rates per discharge. Certain outpatient services are reimbursed based on a percentage rate

19 (Continued)

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December 31, 2013


representing the average discounted ratio of cost to charges. Clinic services are paid based on fee schedule amounts.

Revenue from the Medicaid program accounted for approximately 19% of BTNRH net patient service revenue for the year ended December 31, 2013. Laws and regulations governing the Medicaid program are extremely complex and subject to interpretation. As a result, there is at least a reasonable possibility that recorded estimates will change by a material amount in the near term.

BTNRH has also entered into payment agreements with certain commercial insurance carriers and health maintenance organizations. The basis for payment under these agreements includes discounts from established charges, prospectively determined per diem rates, fee schedules, and prospectively determined rates per discharge.

Net patient service revenue, included in program service revenues in the accompanying consolidated statement of activities, consists of the following:

Gross patient charges:Inpatient charges $ 87,604 Outpatient charges 50,311 Behavioral health/residential charges 22,343

Total gross patient charges 160,258

Less:Deductions from gross patient charges –

contractual adjustments – Medicare,Medicaid, and other 72,192

Net patient service revenue $ 88,066

Patient service revenue (net of contractual allowances and discounts but before the provision for bad debts), recognized in 2013 from these major payor sources, is as follows:

Medicaid $ 16,991 Commercial insurance and other third-party payors 72,864 Patient (self-pay) 1,126

Patient service revenue (net of contractual allowance and discounts) 90,981

Provision for bad debt (2,915)

Patient service revenue (net of contractual allowance, discounts,and provision for bad debts) $ 88,066

20 (Continued)

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December 31, 2013


(7) Land, Buildings, and Equipment, Net

Land, buildings, and equipment, net as of December 31, 2013 are as follows:

Land $ 9,371 Buildings 206,952 Equipment 91,319 Equipment under capital lease 1,092 Construction in process 987

309,721

Less accumulated depreciation 172,645 $ 137,076

(8) Notes and Bonds Payable

Total notes and bonds payable as of December 31, 2013, excluding the capital lease obligations, are summarized below:

(a) Term bond, Series 2005, due through September 1, 2030 $ 8,545 (b) Term bond, Series 2008, September 15, 2028 6,740 (c) Term bond, Series 2008, September 15, 2028 23,670 (d) Term bond, Series 2010, due July 2030 10,335 (e) Kubota Credit Corp, due September 2014 15 (f) Wooldridge Property Partnership 11 (g) Term Loan, unsecured due October 2015 1,775 (h) Term Loan, unsecured due August 2021 714 (i) Mortgage, secured by building, due September 2018 149 (j) Seminole County, secured by building, forgivable June 21, 2020 900

Total debt 52,854

Unamortized discounts (969) Total debt, net of discounts $ 51,885

(a) On September 1, 2005, revenue bonds of Hospital Authority No. 2 of Douglas County (Boys Town Project) were issued at a discount of $100 for net proceeds of $10,899. Unamortized discount at December 31, 2013 is $63. Interest is payable semiannually at rates that vary between 3.75% and 4.15%. Bonds are callable starting September 1, 2015.

(b) On September 15, 2008, a term bond of Hospital Authority No. 2 of Douglas County, Nebraska Healthcare Revenue Bonds (Boys Town Project) was issued at a discount of $187 for net proceeds of $6,553. Unamortized discount at December 31, 2013 is $154. Interest is payable semiannually at 4.75% per annum. Bonds are callable starting September 1, 2018.

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December 31, 2013


(c) On September 15, 2008, a term bond of Nebraska Elementary and Secondary School Finance Authority Educational Facility Revenue Bonds (Boys Town Project) was issued at a discount of $657 for net proceeds of $23,013. Unamortized discount at December 31, 2013 is $541. Interest is payable semiannually at 4.75% per annum. Bonds are callable starting September 1, 2018.

(d) On November 11, 2010, a term bond of Nebraska Elementary and Secondary School Finance Authority Educational Facility Revenue Bonds (Boys Town Project) was issued at a discount of $237 for net proceeds of $10,099. Unamortized discount at December 31, 2013 is $211. Interest is payable semiannually at 3.75% and 4.0% per annum.

(e) Payable in annual installments at a rate of 0%.

(f) Payable in monthly installments at a rate of 6% per annum.

(g) Payable in monthly installments at a rate of 3.4% per annum.

(h) Payable in monthly installments at a rate of 4.6% per annum.

(i) Payable in monthly installments at a rate of 3.1% per annum.

(j) Interest is paid at 0% per annum. Imputed interest was calculated at 6.7%.

Boys Town had an irrevocable letter of credit of $3,085 as of December 31, 2013 in favor of its workers’ compensation insurance carrier. No funds have been drawn as of December 31, 2013.

Boys Town had an available line of credit of $5,000 as of December 31, 2013 of which none was drawn down.

NFC had available line of credit of $1,000 as of December 31, 2013 of which none was drawn down.

FFFNC had an available line of credit of $15,000 as of December 31, 2013 of which no amount was drawn down.

The following table presents aggregate debt maturities as of December 31, 2013:

2014 $ 491 2015 2,100 2016 422 2017 437 2018 573 Thereafter 48,831

Total debt $ 52,854

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December 31, 2013


(9) Pension Plans and Other Postretirement Benefit Plans

Boys Town sponsors a 401(k) plan and defined-benefit pension plans that together cover substantially all of its employees.

All participants of Boys Town’s 401(k) plan receive a match of 100% up to 6% of the participant’s contributed salary on a monthly basis. Total employer expense to the 401(k) plan was $4,857 for the year ended December 31, 2013.

Boys Town sponsors two defined-benefit pension plans consisting of one for employees who retired prior to January 1, 1998 and the other for active employees as of January 1, 1998. The plan assets for the pension plans are held in a master trust.

The benefits are based on the employees’ years of service and highest sixty-month average compensation. Boys Town’s policy is to fund, at a minimum, the net periodic pension cost. Boys Town also provides certain healthcare benefits for retired employees hired prior to January 1, 2002. The healthcare plan is contributory with participants’ contributions adjusted periodically. Boys Town’s postretirement healthcare plan is not currently funded.

The following summarizes the projected benefit obligation, the fair value of plan assets, and the funded status at the measurement date of December 31, 2013:

Pension Health carebenefits benefits

Change in benefit obligation:Benefit obligation at beginning of year $ 67,737 42,992 Service cost 952 702 Interest cost 2,636 1,530 Plan participants’ contributions — 628 Actuarial loss (4,714) (5,457) Benefits and expenses paid (3,503) (1,568) Federal subsidy and reinsurance receipts — 217

Benefit obligation at end of year 63,108 39,044

Change in plan assets:Fair value of plan assets at beginning of year 93,420 — Actual return on plan assets 13,759 — Employer contribution 1,847 940 Plan participants’ contributions — 628 Benefits and expenses paid (3,503) (1,568) Transfers out (370) —

Fair value of plan assets at end of year 105,153 — Funded status at end of year $ 42,045 (39,044)

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December 31, 2013


The accumulated benefit obligation for all defined-benefit pension plans was $59,384 at December 31, 2013. The accumulated post retirement obligation was $39,044 at December 31, 2013.

The projected benefit obligation, accumulated benefit obligation, and fair value of plan assets for the pension plan for active employees, which has an accumulated benefit obligations in excess of plan assets at December 31, 2013 was $58,718, $54,993, and $49,054, respectively.

The following is a summary of amounts recognized in the consolidated statement of financial position as of December 31, 2013:

Pension Healthcarebenefits benefits

Pension asset $ 51,709 — Pension and postretirement benefits liability (9,664) (39,044)

Net amount recognized $ 42,045 (39,044)

Amounts recognized in the consolidated statement of activities for 2013 consist of the following:


Pension benefit $ 1,678 — Postretirement benefit obligation (cost) benefit — (1,592) Federal subsidy — 78 Pension-related charges other than net periodic pension (cost)

benefit 12,838 4,739 $ 14,516 3,225

Amounts recognized in accumulated unrestricted net assets outside of net periodic pension cost consist of the following:


Net loss $ 9,565 1,798 Prior service cost (credit) 233 (3,516)

Net amount recognized $ 9,798 (1,718)

24 (Continued)

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December 31, 2013


The following is a summary of the components of net periodic benefit cost for the year ended December 31, 2013:


Service cost $ 952 702 Interest cost 2,636 1,530 Expected return on plan assets (6,888) — Amortization of prior service cost 88 (718) Amortization of net loss 1,534 —

Net periodic (benefit) cost $ (1,678) 1,514

The estimated net (gain) loss and prior service cost (credit) that will be amortized from unrestricted net assets into net periodic benefit cost in 2013 are as follows:


Net loss $ — — Prior service cost (credit) 88 (718)

Net amount $ 88 (718)

Weighted average assumptions used to determine benefit obligations at December 31, 2013 are as follows:


Discount rate 4.75% 4.75%Rate of compensation increase (employee plan only) 3.50 —

Weighted average assumptions used to determine net periodic cost for the year ended December 31, 2013 are as follows:


Discount rate 4.00% 4.00%Expected long-term return on plan assets 7.50 —Rate of compensation increase (employee plan only) 3.50 —

25 (Continued)

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December 31, 2013


Assumed healthcare cost trend rate at December 31, 2013 is as follows:

Healthcare cost trend rate assumed for next year 8.0%Rate to which the cost trend rate is assumed to decline (the ultimate trend rate) 5.0Year that the rate reaches the ultimate trend rate 2017

A one percentage point change in assumed healthcare cost rates would have the following effect:

One percent One percentincrease decrease

Effect on service and interest cost $ 399 (335)Effect on postretirement benefit obligation 5,433 (4,701)

The expected long-term return on plan assets is based on the asset allocation mix and historical returns, taking into account current and expected market conditions. The actual return (loss) on pension plan assets was approximately 14.7% in 2013. Boys Town’s historical annualized five-year rate of return on plan assets is approximately 11.9%.

Boys Town’s pension plan weighted average asset allocation at December 31, 2013 and target allocation for 2013 are as follows:

Target Plan assets atallocation December 31,

2013 2013

Equity securities 48% 57%Fixed income 17 18 Alternative investments 35 25

Total 100% 100%

The investment strategy for pension plan assets is to maintain a broadly diversified portfolio designed to achieve a target of an average long-term rate of return of 7.5%. Management believes that Boys Town can achieve a long-term average rate of return of 7.5% but cannot be certain that the portfolio will perform to expectations. Assets are strategically allocated between several equity asset classes and debt securities in order to achieve a diversification level that mitigates wide swings in investment returns. Asset allocation target ranges are reviewed annually. Actual asset allocations are monitored and rebalancing actions are executed quarterly, if needed.

Investments in securities traded on a national securities exchange were valued at the latest quoted market prices. The estimated value of certain nonmarketable securities such as partnerships and closely held stock or funds was provided by the respective companies and independent appraisals. For these investments, Boys Town used the net asset value reported by the underlying fund or partnership as a practical expedient

26 (Continued)

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27 (Continued)

to fair value. Due to the nature of these investments, changes in market conditions and the economic environment may significantly impact the net asset value of the investments and, consequently, the fair value of the Boys Town’s interests. Although a secondary market exists for these investments, it is not active and individual transactions are typically not observable. When transactions do occur in this limited secondary market, they may occur at discounts to the reported net asset value. It is, therefore, reasonably possible that if Boys Town were to sell these investments in the secondary market, a buyer may require a discount to the reported net asset value, and the discount could be significant.

The asset allocations of Boys Town’s pension investments as of the December 31, 2013 measurement date were as follows:

Fair value measurements at December 31, 2013Pension benefits – plan assets

Quotedprices in

activemarkets for Significant Significant

identical observable unobservableassets inputs inputs

Total Level 1 Level 2 Level 3

Short-term securities $ 2,946 2,946 — — Long-term investments:

Equities:Domestic 3,276 3,276 — —

Mutual funds:Equity 4,529 4,529 — — Fixed income 15,597 15,597 — — International 11,319 11,319 — — Emerging markets 3,322 3,322 — —

Alternative investments:Domestic equity funds 25,973 — 4,149 21,824 Absolute return funds 18,984 — — 18,984 International equity 11,600 — 9,911 1,689 Private equity funds 3,864 — — 3,864 Real assets 3,743 — — 3,743

Total long-terminvestments 102,207 38,043 14,060 50,104

Total $ 105,153 40,989 14,060 50,104

Certain investments classified in Levels 2 and 3 consist of shares or units in investment funds as opposed to direct interests in the funds’ underlying holdings, which may be marketable. Because the net asset value reported by each fund is used as a practical expedient to estimate the fair value of Boys Town’s interest therein, its classification in Level 2 or 3 is based on Boys Town’s ability to redeem its interest at or near the date of the consolidated statement of financial position. If the interest can be redeemed in the near term,

BOYS TOWN


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28 (Continued)

the investment is classified in Level 2. The classification of investments in the fair value hierarchy is not necessarily an indication of the risks, liquidity, or degree of difficulty in estimating the fair value of each investment’s underlying assets and liabilities.

During 2013, there were no transfers between investment levels. The following table presents the activity for Boys Town’s pension assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the year ended December 31, 2013:

Balance at December 31, 2012 $ 45,407 Total realized gain 1,044 Change in unrealized gain 5,181 Purchases 4,152 Settlements (5,680) Transfers into and/or out of Level 3 —

Balance at December 31, 2013 $ 50,104

The estimated value of alternative investments, such as partnerships, and hedge funds was provided by the respective fund managers. For these alternative investments, Boys Town used the net asset value (or its equivalent) reported by the underlying fund as a practical expedient to fair value. Below is a summary of investments accounted for at net asset value:

* Redemptionfrequency Redemption

Unfunded (if currently noticeFair value commitments eligible) period

Domestic equity funds (a) $ 25,973 — m/q/sa/a 15-90 daysAbsolute return funds (b) 18,984 — q/sa/a 7-180 daysInternational equity (c) 11,600 — m/q 10-30 daysPrivate equity funds (d) 3,864 488 N/A N/AReal assets (e) 3,743 812 N/A N/A

$ 64,164 1,300

* m – monthly, q – quarterly, sa – semiannual, a – annual

(a) This class includes investments in funds that primarily invest in U.S. common stocks. Of this class, $18 million employ a long-short strategy. Of this balance, $3 million is restricted for the next 25 months at which time it will be available annually subject to a 45-day redemption notice.

(b) The class includes investments in funds that invest in a mix of securities including equities and fixed income. The funds are primarily multistrategy in their approach and may include such tactics as risk arbitrage, distressed credit, and other long-short strategies. Of this class, $5 million is restricted for the next 21 months.

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December 31, 2013


(c) This class includes investments in funds that primarily invest in international common stocks.

(d) This class includes investments in private equity funds that invest primarily in private companies at various stages of development and maturity. These include funds pursuing a leveraged buyout, growth equity, or venture capital strategy through investments across the capital structure. These investments can never be redeemed with the fund. Distributions from each fund will be received as the underlying investments of the funds are liquidated. It is estimated that the underlying assets of the fund will be liquidated over the next 3 to 6 years.

(e) This class includes real estate funds that employ a value-add strategy across multiple property types including multifamily, office, industrial, and retail. It also includes energy funds that invest primarily in interests of oil and gas properties. These investments can never be redeemed with the fund. Distributions from real estate funds will be received as the underlying investments of the funds are liquidated, and distributions from energy funds will be received from the production and marketing of oil and gas and upon final sale of the underlying interests in the properties. It is estimated that the underlying assets of the fund will be liquidated over the next 4 to 7 years.

In 2014, Boys Town expects to contribute $1,847 to the pension plan and $1,577 to its healthcare benefit plan and receive $243 in federal subsidy payments.

The following benefit payments and federal subsidy receipts, which reflect expected future service, as appropriate, are expected to be paid for the years 2014 through 2022:

Expectedfederal

Pension Healthcare subsidybenefits benefits receipts

2014 $ 3,500 1,577 243 2015 3,752 1,697 273 2016 3,811 1,787 299 2017 3,943 1,897 320 2018 4,244 1,975 348 Years 2019 – 2023 22,434 10,735 406

(10) Temporarily Restricted Net Assets

Temporarily restricted net assets consist of gifts contributed for a specified period or until the occurrence of some future event.

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Temporarily restricted net assets are available for the following purposes at December 31, 2013:

General education and scholarships $ 20,976 Specific program activities 2,297 Beneficial interest in assets held in trust – 13,026

general operationsFuture periods 2,837 Capital 196

$ 39,332

Net assets were released from donor restrictions by incurring expenses satisfying the restricted purposes or by occurrence of other events specified by the donors for the year ended December 31, 2013:

Capital $ 11,648 Specific program activities 208 General education 69 General operations 2,334

$ 14,259

(11) Permanently Restricted Net Assets

Permanently restricted net assets consist of long-term investments and beneficial interest in assets held by others that are restricted by the donors. The restrictions require that the resources be maintained permanently but permit use of the income derived from the assets.

Permanently restricted net assets consist of the following at December 31, 2013, the income from which is expendable to support:

General operations $ 69,126 General education and scholarships 4,057 Direct care of children 733

$ 73,916

(12) Endowment

The Nebraska Uniform Prudent Management of Institutional Funds Act (NUPMIFA) sets out guidelines to be considered when managing and investing donor-restricted endowment funds.

Boys Town holds endowment funds for support of its programs and operations. As required by generally accepted accounting principles, net assets and the changes therein associated with endowment funds, including funds designated by the Board of Trustees to function as endowments, and beneficial interest in trust assets are classified and reported based on the existence or absence of donor-imposed restrictions. The

30 (Continued)

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December 31, 2013


funds classified as beneficial interest in trust funds are not under the control of Boys Town, and as such, Boys Town does not appropriate these funds or control their investment policies.

The Board of Trustees of Boys Town has interpreted NUPMIFA as allowing Boys Town to appropriate for expenditure or accumulate so much of an endowment fund as Boys Town determines is prudent for the uses, benefits, purposes, and duration for which the endowment is established, subject to the intent of the donor as expressed in the gift instrument. As a result of this interpretation, Boys Town classifies as permanently restricted net assets the original value of gifts donated to the permanent endowment and the original value of subsequent gifts to the permanent endowment. Interest, dividends, and net appreciation of the donor-restricted endowment funds are classified according to donor stipulations, if any. Absent any donor-imposed restrictions, interest, dividends, and net appreciation of donor-restricted endowment funds are classified as temporarily restricted net assets until those amounts are appropriated for expenditure by Boys Town in a manner consistent with the standard of prudence prescribed by NUPMIFA. In accordance with NUPMIFA, Boys Town considers the following factors in making a determination to appropriate or accumulate donor-restricted endowment funds:

(1) the duration and preservation of the endowment fund

(2) the purposes of Boys Town and the donor-restricted endowment fund

(3) general economic conditions

(4) the possible effect of inflation or deflation

(5) the expected total return from income and the appreciation of investments

(6) other resources of Boys Town

(7) the investment policy of Boys Town

Endowment Net Asset Composition by Type of Fund

December 31, 2013

Temporarily PermanentlyUnrestricted restricted restricted Total

Donor-restricted endowmentfunds $ — 6,725 8,102 14,827

Board-designated endowmentfunds 927,694 — — 927,694

Total funds $ 927,694 6,725 8,102 942,521

31 (Continued)

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December 31, 2013


Changes in Endowment Net Assets


Temporarily PermanentlyUnrestricted restricted restricted Total

Endowment net assets,beginning of year $ 839,243 5,666 7,910 852,819

Investment return:Investment income 17,055 140 — 17,195 Net appreciation/depreciation

(realized and unrealized) 114,902 1,022 — 115,924

Total investmentreturn 131,957 1,162 — 133,119

Other revenues 139 1 — 140 Appropriation of endowment

assets for expenditure (43,645) (104) (3) (43,752) New designations — — 195 195

Endowment net assets,end of year $ 927,694 6,725 8,102 942,521

(a) Return Objectives and Risk Parameters

Boys Town has adopted investment and spending policies for endowment assets that attempt to provide a predictable stream of funding to programs supported by its endowment while complying with all donor-imposed restrictions. Under this policy, as approved by the Board of Trustees, the endowment assets are invested in a manner that is intended to produce results that exceed inflation plus the long-term spending rate.

(b) Strategies Employed for Achieving Objectives

To satisfy its long-term rate-of-return objectives, Boys Town relies on a total return strategy in which investment returns are achieved through both capital appreciation (realized and unrealized) and current yield (interest and dividends). Boys Town 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.

(c) Appropriation Policy and How the Investment Objectives Relate to Appropriation Policy

Boys Town preserves the whole dollar value of the original gift as of the gift date of donor-restricted endowments, absent explicit donor stipulations to the contrary. Interest, dividend, and net appreciation of the donor-restricted endowments funds are deemed appropriated for expenditure when earned or when donor-imposed restriction is met.

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BOYS TOWN


December 31, 2013


For board-designated endowment funds, Boys Town appropriates distributions in its annual budget while considering the operations of Boys Town as well as expected investment returns and new endowment contributions. Historically, annual appropriations have generally been between 5% and 7% of the board-designated endowment fund’s average fair value over the prior four quarters ending June 30. Spending is based on 80% of prior year’s spending, adjusted for inflation, plus 20% of 5% of the average market value for the four quarters ended June 30 of the previous fiscal year. Thus, Boys Town expects to achieve inflation-adjusted growth of its endowment assets from the total return on investments as well as from the receipt of new gifts.

(d) Appropriation of Board-Designated Endowment Assets

For 2014, Boys Town has budgeted to appropriate $43,147 of its board-designated endowment assets to be distributed for spending, consistent with Boys Town’s spending rule described above.

(13) Beneficial Interest in Assets Held by Others

Boys Town holds a beneficial interest in assets held in perpetuity and remainder trusts, which are controlled by independent trustees. In 2013, the following support was recognized in the accompanying consolidated statement of activities:

Temporarily PermanentlyUnrestricted restricted restricted

net assets net assets net assets

Contributions $ — 1,864 — Change in value of beneficial interests — 2,142 5,377 Investment income 2,165 366 —

(14) Split-Interest Agreements

Boys Town is the beneficiary of split-interest agreements in the form of charitable gift annuities, charitable remainder trusts, and pooled income funds. Assets of split-interest agreements of $26,975 are included in investments, and $110 is included in beneficial interest in trust assets on the consolidated statement of financial position at December 31, 2013. The value of split-interest agreements is measured as the Boys Town’s fair value share of the assets. Liabilities associated with these agreements are $7,508 and have been included in accrued liabilities on the consolidated statement of financial position.

(15) Joint Cost Allocation

In 2013, Boys Town incurred joint costs of $18,189 for informational materials and activities that included fund-raising appeals. Of these costs, $16,873 was allocated to fund-raising expense, $925 was allocated to program services, and $391 was allocated to management and general expense.

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BOYS TOWN


December 31, 2013


(16) Leases

Boys Town leases building space under long-term operating leases. In addition, Boys Town leases office equipment under capital leases. Future minimum lease payments for operating and capital leases with initial or remaining noncancelable lease terms in excess of one year as of December 31, 2013 were as follows:

Operating Capitalleases leases

2014 $ 1,829 36 2015 1,469 36 2016 1,180 31 2017 381 18 2018 341 1 Thereafter 481 —

Total minimum lease payments $ 5,681 122

Less amount representing interest (21)

Present value of minimum lease payments,included in accrued liabilities $ 101

The operating leases expire through 2029; however, many of the leases contain renewal options. Escalating rent payments are recognized on a straight-line basis over the lease term. Deferred liabilities recorded for lessor incentives related to leasehold improvements are recognized over the lease term as a reduction of rent expense. Rent expense for operating leases was $2,981 in 2013.

Portions of clinic space was sublet under a lease that terminated in 2013. In addition, a shelter located in the Compton area was leased in 2013 and expires during 2018. Rental income was approximately $96 in 2013. Minimum future rentals on noncancelable leases as of December 31, 2013 are as follows:

Subleases

Year ending:2014 $ 120 2015 120 2016 120 2017 120 2018 60

$ 540

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BOYS TOWN


December 31, 2013


(17) Commitments and Contingencies

Boys Town is a defendant in a number of lawsuits incidental to its operations. In the opinion of management, the outcome of such lawsuits will not have a materially adverse effect on Boys Town’s consolidated financial position or its activities.

(18) Subsequent Events

Boys Town has evaluated subsequent events from the consolidated statement of financial position date through June 4, 2014, the date at which the consolidated financial statements were issued, and determined there are no other items to disclose.

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BOYS TOWN

Schedule of Expenditures of Federal Awards and State Financial Assistance


CFDA/Federal CSFA Federal State

grantor agency Program title Subgrantor number expenditures expenditures

Research and Development Cluster:U.S. Department of Health and Human Services – Direct Grants:

NIDCD Research Related to Deafness and Communication Disorders 93.173 $ 3,645,211 — NIDA Drug Abuse and Addiction Research Programs 93.279 537,579 — NCI Cancer Treatment Research 93.395 7,747 — ACF Basic Center Grant 93.623 101,549 — NIDDKD Diabetes, Digestive, and Kidney Diseases Extramural Research 93.847 275,828 — NEI Vision Research 93.867 402,161 — HRSA Health Care and Other Facilities 93.887 452,950 —

U.S. Department of Health and Human Services – Pass-Through Grants:NIDCD Research Related to Deafness and Communication Disorders The University of Iowa 93.173 348,390 — NINDS Extramural Research Programs in the Neurosciences and Neurological Disorders St. Joseph’s Hospital and Medical Center 93.853 8,930 — NIGMS Biomedical Research and Research Training University of Nebraska Medical Center 93.859 199,320 —

Total Department of Health and Human Services Research andDevelopment Grants 5,979,665 —

Other Research and Development Direct Grants and Pass-Through Grants:NSF Biological Sciences 47.074 6,608 — NSF Office of Experimental Program to Stimulate Competitive Research Creighton University 47.081 62,173 — DED Research in Special Education University of Nebraska-Lincoln 84.324 257,068 —

Total Other Research and Development Direct and Pass-Through Grants 325,849 —

Total Research and Development Cluster 6,305,514 —

Child Welfare:U.S. Department of Health and Human Services – Pass-Through Grants:

DHHS Promoting Safe and Stable Families Big Bend Community Based CareTallahassee, Florida 93.556 66,663 —

ChildnetWest Palm Beach, Florida 93.556 232,249 —

Community Based Care of Central FloridaOrlando, Florida 93.556 89 —

Department of Health and Human ServicesCarson City, Nevada 93.556 327,390 —

Texas Department of Family and Protective ServicesAustin, Texas 93.556 103,491 —

Total Promoting Safe and Stable Families 729,882 —

DHHS Temporary Assistance for Needy Families Community Based Care of Central FloridaOrlando, Florida 93.558 4,531 —

Ounce of PreventionTallahassee, Florida 93.558 29,852 —

Iowa Department of Human ServicesDes Moines, Iowa 93.558 2,616,989 —

Total Temporary Assistance for Needy Families 2,651,372 —

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BOYS TOWN





DHHS Grants to States for Access and Visitation Programs Iowa Department of Human ServicesDes Moines, Iowa 93.597 23,519 —

DHHS Stephanie Tubbs Jones Child Welfare Services Program:Big Bend Community Based Care

Tallahassee, Florida 93.645 6,136 — Childnet

West Palm Beach, Florida 93.645 4,043 — Community Based Care of Central Florida

Orlando, Florida 93.645 708 — Iowa Department of Human Services

Des Moines, Iowa 93.645 19,727 —

Total Stephanie Tubbs Jones Child Welfare Services Program 30,614 —

DHHS Foster Care Title IV-EBig Bend Community Based Care

Tallahassee, Florida 93.658 106,243 — Childnet

West Palm Beach, Florida 93.658 209,071 — Children’s Network of Southwest Florida

Fort Myers, Florida 93.658 8,992 — Community Based Care of Central Florida

Orlando, Florida 93.658 199,407 — Devereux Community Based Care of Okeechobee

and the Treasure Coast Port St. Luice, Florida 93.658 8,320 —

Eckerd Youth Alternatives, Inc. Clearwater, Florida 93.658 45,085 —

Florida Network of Youth and Family ServicesTallahassee, Florida 93.658 8,905 —

Heartland for Children Bartow, Florida 93.658 2,096 —

Lakeview Center, Inc. Pensacola, Florida 93.658 75,400 —

United for Families Ft. Pierce, FloridaContract UA446 93.658 48,962 —

County of Los Angeles Department of Children& Family Services, Los Angeles, California 93.658 54,463 —

County of Orange Social Services Santa Ana, California 93.658 552,520 —

Iowa Department of Human ServicesDes Moines, Iowa 93.658 13,045 —

Clark County Department of Family ServicesLas Vegas, Nevada 93.658 50,240 —

Total Foster Care Title IV-E 1,382,749 —

DHHS Adoption Assistance Community Based Care of Central FloridaOrlando, Florida 93.659 1,579 —

County of Orange Social Services Santa Ana, Florida 93.659 168,168 —

Total Adoption Assistance 169,747 —

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BOYS TOWN





Big Bend Community Based Care DHHS Social Services Block Grant Tallahassee, Florida 93.667 69,547 —

Childnet West Palm Beach, Florida 93.667 138,615 —

Children’s Network of Southwest FloridaFort Myers, Florida 93.667 5,888 —

Community Based Care of Central FloridaOrlando, Florida 93.667 156,469 —

Devereux Community Based Care of Okeechobee andthe Treasure Coast Port St. Luice, Florida 93.667 7,323 —

Eckerd Youth Alternatives, Inc. Clearwater, Florida 93.667 26,510 —

Heartland for Children Bartow, Florida 93.667 1,383 —

Lakeview Center, Inc. Pensacola, Florida 93.667 49,356 —

Southeast Florida Behavioral Health NetworkJupiter, Florida 93.667 19,926 —

United for Families Ft. Pierce, FloridaContract UA446 93.667 43,098 —

Iowa Department of Human Services Des Moines, Iowa 93.667 6,045 —

Department of Health and Human ServicesCarson City, Nevada 93.667 302,912 —

Administration for Children’s ServicesNew York, New York 93.667 374,221 —

Total Social Services Block Grant 1,201,293 —

DHHS Child Abuse and Neglect State Grants Big Bend Community Based CareTallahassee, Florida 93.669 7,689 —

Childnet West Palm Beach, Florida 93.669 3,811 —

Total Child Abuse and Neglect State Grants 11,500 —

DHHS Children’s Health Insurance Program Southeast Florida Behavioral Health NetworkJupiter, Florida 93.767 699,895 —

Total Children’s Health Insurance Program 699,895 —

DHHS Block Grants for Community Mental Health Services Southeast Florida Behavioral Health NetworkJupiter, Florida 93.958 123,295 —

Total Block Grants for Community Mental Health Services 123,295 —

State of Florida – Project Funding:Community Based Care Support Big Bend Community Based Care

Tallahassee, Florida 60.094 — 352,239 Childnet

West Palm Beach, Florida 60.094 — 226,579 Community Based Care of Central Florida

Orlando, Florida 60.094 — 6,912

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BOYS TOWN





Devereux Community Based Care of Okeechobee andthe Treasure Coast Port St. Luice, Florida 60.094 — 5,156

Eckerd Youth Alternatives, Inc. Clearwater, Florida 60.094 — 31,622

Heartland for Children Bartow, Florida 60.094 — 1,208

Lakeview Center, Inc. Pensacola, Florida 60.094 — 39,764

United for Families Ft. Pierce, FloridaContract UA446 60.094 — 30,344

Total Community Based Care Support – CSFA 60.094 — 693,824

The Ounce of Prevention Fund of Florida, Inc. – CSFA 64.035 Ounce of Prevention Tallahassee, Florida 64.035 — 63,358

Children and Families in Need of Services – CSFA 80.005 Florida Network of Youth and Family ServicesTallahassee, Florida 80.005 — 569,136

Total Child Welfare 7,023,866 1,326,318

Other Federal Awards:Child Nutrition Cluster:

U.S. Department of Agriculture – Pass-Through Grants:USDA School Breakfast Program Nebraska Department of Education 10.553 41,005 —

Total School Breakfast Program 41,005 —

USDA National School Lunch Program Nebraska Department of Education 10.555 267,340 — USDA National School Lunch Program (Food Donation) Nebraska Health and Human Services 10.555 23,318 —

Total National School Lunch Program 290,658 —

Total Child Nutrition Cluster 331,663 —

Department of Education – Pass-Through Grants:DED Title I Grants to Local Educational Agencies Douglas County School District 001/Nebraska

Department of Education 84.010 85,333 — DED Title I Grants to Local Educational Agencies Educational Service Unit #10/Nebraska

Department of Education 84.010 8,702 —

Total U.S. Department of Education 94,035 —

Other Federal Awards – Direct Grants:DOJ Part E – Developing, Testing, and Demonstrating 16.541 27,400 —

Promising New ProgramsEPA Environmental Justice Small Grant Program 66.604 9,184 — Direct Appropriation Expansion and Operations in the District of Columbia 99.UNK 1,168,905 —

Total Other Federal Awards – Direct Grants 1,205,489 —

Other Federal Awards – Pass-through Grants:HUD Community Development Block Grants/Entitlement Grants City of Las Vegas, Nevada 14.218 7,233 — HUD Community Development Block Grants/Entitlement Grants City of Henderson, Nevada 14.218 1,250 —

Total Other Federal Awards – Pass-Through Grants 8,483 — Total Federal Awards and State Financial Assistance $ 14,969,050 1,326,318

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BOYS TOWN



Abbreviations legend:ACF Administration for Children and FamiliesDED Department of EducationDHHS Department of Health and Human ServicesDOJ Department of JusticeEPA U.S. Environmental Protection AgencyHRSA Health Resources and Services AdministrationHUD Housing and Urban DevelopmentNCI National Cancer InstituteNEI National Eye InstituteNIDA National Institute on Drug AbuseNIDDKD National Institute of Diabetes and Digestive and Kidney DiseasesNIDCD National Institute of Deafness & Other Communication DisordersNIGMS National Institute of General Medical SciencesNINDS National Institute of Neurological Disorders and StrokeNSF National Science FoundationUSDA United States Department of Agriculture

See accompanying notes to schedule of expenditures of federal awards and state financial assistance.

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BOYS TOWN

Notes to Schedule of Expenditures of Federal Awards and State Financial Assistance

December 31, 2013


(a) Basis of Presentation

The accompanying schedule of expenditures of federal awards and state financial assistance has been prepared on the accrual basis of accounting. Under this method, revenues are recognized when earned and expenses are recognized when incurred. Some programs are funded jointly by Boys Town appropriations and federal and state funds. Expenses are subject to audit by the granting agency and, in the opinion of management, disallowed costs, if any, will not have a material effect on the financial position of Boys Town or its federal programs and state projects.

(b) Reporting Entity

Boys Town reporting entity is defined in note 1 to the consolidated financial statements. Nebraska Families Collaborative (NFC) is a separate nonprofit corporation in which Boys Town has a controlling partnership interest. NFC’s federal expenditures of $9,184 are included within this schedule of expenditures of federal awards and state financial assistance.

(c) Direct and Indirect Federal Award Expenditures

Federal award expenditures consist of direct and indirect costs. Direct costs are those that can be easily identified with an individual federally sponsored project. The salary of a principal investigator of a sponsored research project and the materials consumed by the project are examples of direct costs.

Unlike direct costs, indirect costs cannot easily be identified with an individual federally sponsored project. Indirect costs are the costs of services and resources that benefit both sponsored and nonsponsored projects and activities. Indirect costs consist of expenses incurred for administration, maintenance, debt, and building and equipment depreciation. Boys Town and federal agencies use an indirect cost rate to charge indirect costs to individual federally sponsored projects. Before the rate is applied, the U.S. Department of Health and Human Services must approve it.

(2) Summary of Subrecipient Payments

CFDAnumber CFDA title Amount

93.173 Research Related to Deafness and Communication Disorders $ 584,298 93.279 Drug Abuse and Addiction Research Programs 392,986

$ 977,284

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Independent Auditors’ Report on Internal Control over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial

Statements Performed in Accordance with Government Auditing Standards


We have audited, in accordance with the auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States, the consolidated financial statements of Father Flanagan’s Boys’ Home d/b/a Boys Town (Boys Town), which comprise the consolidated statement of financial position as of December 31, 2013, and the related consolidated statements of activities and cash flows for the year then ended, and the related notes to the consolidated financial statements, and have issued our report thereon dated June 4, 2014.

Internal Control over Financial Reporting

In planning and performing our audit of the consolidated financial statements, we considered Boys Town’s internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinion on the consolidated financial statements, but not for the purpose of expressing an opinion on the effectiveness of Boys Town’s internal control. Accordingly, we do not express an opinion on the effectiveness of Boys Town’s internal control.

A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected, on a timely basis. A significant deficiency is a deficiency, or combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance.

Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies. Given these limitations, during our audit, we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified.

Compliance and Other Matters

As part of obtaining reasonable assurance about whether Boys Town’s consolidated financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, and noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion.

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The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards.

Purpose of this Report

The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of Boys Town’s internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering Boys Town’s internal control and compliance. Accordingly, this communication is not suitable for any other purpose.

/s/ KPMG LLP

Omaha, Nebraska June 4, 2014



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Independent Auditors’ Report on Compliance for Each Major Federal Program and State Project; Report on Internal Control over Compliance; and Report on Schedule of Expenditures of Federal Awards and State Financial Assistance Required by OMB Circular

A-133, Audits on States, Local Governments, and Non-Profit Organizations, and State of Florida Chapter 10.650, Rules of Auditor General Florida Single Audit Act


Report on Compliance for Each Major Federal Program and State Project

We have audited Father Flanagan’s Boys’ Home (Boys Town)’s compliance with the types of compliance requirements described in the OMB Circular A-133 Compliance Supplement and the Executive Office of the State of Florida Governor’s State Projects Compliance Supplement that could have a direct and material effect on each of Boys Town’s major federal programs and state projects for the year ended December 31, 2013. Boys Town’s major federal programs and state projects are identified in the summary of auditors’ results section of the accompanying schedule of findings and questioned costs.

Management’s Responsibility

Management is responsible for compliance with the requirements of laws, regulations, contracts, and grants applicable to its federal programs and state projects.

Auditors’ Responsibility

Our responsibility is to express an opinion on compliance for each of Boys Town’s major federal programs and state projects based on our audit of the types of compliance requirements referred to above. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; OMB Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations, and Chapter 10.650, Rules of the Auditor General Florida Single Audit Act. Those standards, OMB Circular A-133, and Chapter 10.650, Rules of the Auditor General Florida Single Audit Act, require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major federal program or a state project occurred. An audit includes examining, on a test basis, evidence about Boys Town’s compliance with those requirements and performing such other procedures as we considered necessary in the circumstances.

We believe that our audit provides a reasonable basis for our opinion on compliance for each major federal program and state project. However, our audit does not provide a legal determination of Boys Town’s compliance.

Opinion on Each Major Federal Program and State Project

In our opinion, Father Flanagan’s Boys’ Home complied, in all material respects, with the types of compliance requirements referred to above that could have a direct and material effect on each of its major federal programs and state projects for the year ended December 31, 2013.

Report on Internal Control over Compliance

Management of Boys Town is responsible for establishing and maintaining effective internal control over compliance with the types of compliance requirements referred to above. In planning and performing our audit of compliance, we considered Boys Town’s internal control over compliance with the types of requirements that could have a direct and material effect on each major federal program and state project to determine the auditing procedures that are appropriate in the circumstances for the purpose of expressing an opinion on compliance for each major federal program and state project and to test and report on internal control over compliance in accordance with OMB Circular A-133 and Chapter 10.650, Rules of the Auditor General Florida Single Audit Act, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of Boys Town’s internal control over compliance.

A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a federal program or state project on a timely basis. A material weakness in internal control over compliance is a deficiency, or combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a federal program or state project will not be prevented, or detected and corrected, on a timely basis. A significant deficiency in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance with a type of compliance requirement of a federal program or state project that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance.

Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over compliance that might be material weaknesses or significant deficiencies. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified.

The purpose of this report on internal control over compliance is solely to describe the scope of our testing of internal control over compliance and the results of that testing based on the requirements of OMB Circular A-133 and Chapter 10.650, Rules of the Auditor General Florida Single Audit Act. Accordingly, this report is not suitable for any other purpose.

Report on Schedule of Expenditures of Federal Awards and State Financial Assistance Required by OMB Circular A-133 and Chapter 10.650, Rules of the Auditor General Florida Single Audit Act

We have audited the consolidated financial statements of Boys Town as of and for the year ended December 31, 2013, and have issued our report thereon dated June 4, 2014, which contained an unmodified opinion on those financial statements. Our audit was conducted for the purpose of forming an opinion on the consolidated financial statements as a whole. The accompanying schedule of expenditures of federal awards and state financial assistance is presented for purposes of additional analysis as required by OMB Circular A-133 and Chapter 10.650, Rules of the Auditor General Florida Single Audit Act, and is not a required part of the consolidated financial statements. Such information is the responsibility of management and was

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derived from and relates directly to the underlying accounting and other records used to prepare the consolidated financial statements. The information has been subjected to the auditing procedures applied in the audit of the consolidated financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the consolidated financial statements or to the consolidated financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the schedule of expenditures of federal awards and state financial assistance is fairly stated in all material respects in relation to the consolidated financial statements as a whole.

/s/ KPMG LLP

Omaha, Nebraska September 23, 2014

BOYS TOWN

Schedule of Findings and Questioned Costs



(a) The type of report issued on the consolidated financial statements: Unmodified opinion

(b) Significant deficiencies in internal control were disclosed by the audit of the consolidated financial statements: None reported Material weaknesses identified: No

(c) Noncompliance, which is material to the consolidated financial statements: No

(d) Significant deficiencies in internal control over major programs: None reported Material weaknesses identified: No

(e) The type of report issued on compliance for major programs: Unmodified

(f) Any audit findings, which are required to be reported under Section .510(a) of OMB Circular A-133 and State of Florida Auditor General Rule 10.650: None reported

(g) Major programs:

CFDA/CSFA

Program title number

Research and Development Cluster VariousState of Florida – Community Based 60.094

Care SupportState of Florida – Children and 80.005

Families in Need of ServicesExpansion and Operations in the 99.UNK

District of Columbia

(h) Dollar threshold used to distinguish between Type A and Type B programs: A threshold of $449,072 was used to distinguish between Type A and Type B programs as those terms are defined in OMB Circular A-133. A threshold of $300,000 was used to distinguish between Type A and Type B for major state projects.

(i) Auditee qualified as a low-risk auditee under Section .530 of OMB Circular A-133: Yes

(2) Findings Relating to the Financial Statements Reported in Accordance with Government Auditing Standards: None reported

(3) Findings and Questioned Costs relating to Federal Awards and State Projects: None reported

(4) Other Issues: No summary schedule of prior audit findings is required because there were no prior audit findings related to federal programs or state projects.

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