CNY Community Foundation 2013 Audit

7/27/2019 CNY Community Foundation 2013 Audit

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CENTRAL NEW YORK COMMUNITYFOUNDATION, INC. AND SUBSIDIARY

Consolidated Financial Statements as ofMarch 31, 2013Together with

Independent Auditors Report


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INDEPENDENT AUDITOR'S REPORT

June 5, 2013

To the Board of Directors of

Central New York Community Foundation, Inc. and Subsidiary:

Report on the Financial StatementsWe have audited the accompanying consolidated financial statements of CentralNew York Community Foundation, Inc. (a New York State not-for-profitcorporation) and its subsidiary, which comprise the consolidated statement offinancial position as of March 31, 2013, and the related consolidated statementsof activities and change in net assets, and cash flows for the year then ended,and the related notes to the consolidated financial statements.

Managements Responsibility for the Consolidated Financial StatementsManagement is responsible for the preparation and fair presentation of theseconsolidated financial statements in accordance with accounting principles

generally accepted in the United States of America; this includes the design,implementation, and maintenance of internal control relevant to the preparationand fair presentation of the consolidated financial statements that are free frommaterial misstatement, whether due to fraud or error.

Auditors ResponsibilityOur responsibility is to express an opinion on these consolidated financialstatements based on our audit. We conducted our audit in accordance withauditing standards generally accepted in the United States of America. Thosestandards require that we plan and perform the audit to obtain reasonableassurance about whether the consolidated financial statements are free frommaterial misstatement.

An audit involves performing procedures to obtain audit evidence about theamounts and disclosures in the consolidated financial statements. Theprocedures selected depend on the auditors judgment, including the assessmentof the risks of material misstatement of the consolidated financial statements,whether due to fraud or error. In making those risk assessments, the auditorconsiders internal control relevant to the entitys preparation and fair presentationof the consolidated financial statements in order to design audit procedures thatare appropriate in the circumstances, but not for the purpose of expressing anopinion on the effectiveness of the entitys internal control. Accordingly, weexpress no such opinion. An audit also includes evaluating the appropriatenessof accounting policies used and the reasonableness of significant accountingestimates 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 appropriateto provide a basis for our audit opinion.


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INDEPENDENT AUDITORS REPORT(Continued)

OpinionIn our opinion, the consolidated financial statements referred to above present fairly, in all materialrespects, the financial position of Central New York Community Foundation, Inc. and its subsidiary

as of March 31, 2013, and the changes in its net assets and its cash flows for the year then ended inaccordance with accounting principles generally accepted in the United States of America.

Report on Summarized Comparative TotalsWe have previously audited the Central New York Community Foundation, Inc. and subsidiary 2012consolidated financial statements, and we expressed an unmodified audit opinion on those auditedconsolidated financial statements in our report dated June 14, 2012. In our opinion, the summarizedcomparative information presented herein as of and for the year ended March 31, 2012 is consistent,in all material respects, with the audited consolidated financial statements from which it has beenderived.


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CENTRAL NEW YORK COMMUNITY FOUNDATION, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

MARCH 31, 2013

(With Comparative Totals for 2012)

2013 2012

ASSETS

Cash and cash equivalents 697,041$ 861,532$Accounts receivable 1,511,092 1,257,096Pledges receivable 1,727,495 880,110Investments 126,582,314 114,166,037Split-interest agreements 6,202,287 5,978,153Perpetual trust held by third party 521,553 524,148Cash surrender value of life insurance 539,014 513,515Real estate interests 875,400 892,517Property and equipment, net 5,285,239 5,556,436Other 50,635 62,882

Total assets 143,992,070$ 130,692,426$

LIABILITIES AND NET ASSETS

LIABILITIES:Accounts payable and accrued expenses 19,536$ 34,905$Split-interest agreements 3,228,640 3,216,622Deferred compensation 234,972 228,202Deferred revenue 200,868 217,846

Grants payable 1,050,679 1,046,901Endowments held for other not-for-profit organizations 2,341,539 1,347,504Note payable 3,450,000 3,475,000

Total liabilities 10,526,234 9,566,980

NET ASSETS:Unrestricted -

Designated by the governing board for long-terminvestments 50,859,491 48,491,560

Designated for donor advisement 30,415,898 26,236,342Other unrestricted net assets 9,215,091 9,289,249

Total unrestricted 90,490,480 84,017,151

Temporarily restricted 35,971,665 30,142,590Permanently restricted 7,003,691 6,965,705

Total net assets 133,465,836 121,125,446

Total liabilities and net assets 143,992,070$ 130,692,426$

The accompanying notes are an integral part of these statements.

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CONSOLIDATED STATEMENT OF ACTIVITIES AND CHANGES IN NET ASSETS

FOR THE YEAR ENDED MARCH 31, 2013


Temporarily Permanently 2013 2012

Unrestricted Restricted Restricted Total Total

PUBLIC SUPPORT AND REVENUE:

Public support -

Donations 6,883,442$ 5,193,129$ 37,986$ 12,114,557$ 7,563,889$

Change in value of split-interest agreements 83,768 171,288 - 255,056 (163,821)

Revenue -

Investment income, net 1,380,757 434,617 - 1,815,374 3,147,993

Net gain on investments 6,587,962 2,163,753 - 8,751,715 521,271

Change in value of real estate interest - (17,117) - (17,117) 55,110

Administrative management income on

endowments held for other not-for-profit 9,401 - - 9,401 7,012

organizations

Other 250,489 8,385 - 258,874 175,585

15,195,819 7,954,055 37,986 23,187,860 11,307,039

Net assets released from restrictions 2,124,980 (2,124,980) - - -

Total public support and revenue 17,320,799 5,829,075 37,986 23,187,860 11,307,039

EXPENSES:

Program -

Grants 8,337,264 - - 8,337,264 6,710,850

Program-sponsored initiatives 1,090,477 - - 1,090,477 1,043,090

Total program 9,427,741 - - 9,427,741 7,753,940

Supporting services -

Management and general 622,838 - - 622,838 608,768

Fundraising 796,891 - - 796,891 666,324

Total expenses 10,847,470 - - 10,847,470 9,029,032

CHANGE IN NET ASSETS 6,473,329 5,829,075 37,986 12,340,390 2,278,007

NET ASSETS - beginning of year 84,017,151 30,142,590 6,965,705 121,125,446 118,847,439

NET ASSETS - end of year 90,490,480$ 35,971,665$ 7,003,691$ 133,465,836$ 121,125,446$

2013


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CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED MARCH 31, 2013


2013 2012

CASH FLOW FROM OPERATING ACTIVITIES:Change in net assets 12,340,390$ 2,278,007$

Adjustments to reconcile change in net assets to net cashflow from operating activities:Depreciation 304,321 221,887Net gain on investments (8,751,715) (521,271)Change in value of split-interest agreements (224,134) 549,581Change in value of perpetual trust held by third party 2,595 26,279Change in cash surrender value of life insurance (25,499) (18,185)Donated stock (3,000,127) (1,304,863)Permanently restricted donations (37,986) -Real estate interest 17,117 (84,361)

Changes in:Accounts receivable (253,996) (654,010)Pledges receivable (847,385) 37,063Other assets 12,247 (31,177)

Accounts payable and accrued expenses (15,369) (43,526)Deferred compensation 6,770 (8,085)Deferred revenue (16,978) 217,846Grants payable 3,778 320,127Liabilities under split-interest agreements 12,018 (377,972)

Endowments held for other not-for-profit organizations 994,035 16,786

Net cash flow from operating activities 520,082 624,126

CASH FLOW FROM INVESTING ACTIVITIES:Purchase of property and equipment (33,124) (508,204)Proceeds from sales and maturities of investments 18,156,047 15,123,602

Purchase of investments (18,820,482) (16,648,997)

Net cash flow from investing activities (697,559) (2,033,599)

CASH FLOW FROM FINANCING ACTIVITIES:Permanently restricted donations 37,986 -

Payments of notes payable (25,000) (25,000)

Net cash flow from financing activities 12,986 (25,000)

CHANGE IN CASH AND CASH EQUIVALENTS (164,491) (1,434,473)

CASH AND CASH EQUIVALENTS - beginning of year 861,532 2,296,005

CASH AND CASH EQUIVALENTS - end of year 697,041$ 861,532$


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NOTES TO CONSOLIDATED FINANCIAL STATEMENTSMARCH 31, 2013

1. THE ORGANIZATION

Central New York Community Foundation, Inc. (the Community Foundation) is a not-for-profit,autonomous, publicly supported, philanthropic institution organized and operated primarily as acollection of charitable funds for the long-term benefit of the Central New York area. Itsprimary service is to receive, manage and disburse charitable funds.

CNY Philanthropy Center, LLC was incorporated in New York State to hold real propertylocated at 431 E. Fayette Street in Syracuse, New York. This property is the home of theCommunity Foundation and a center for philanthropy.

The Community Foundation and CNY Philanthropy Center, LLC share certain common board

members and management.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of ConsolidationThe financial statements include the accounts of the Community Foundation and CNYPhilanthropy Center, LLC. In accordance with generally accepted accounting principles, allsignificant intercompany transactions and balances have been eliminated.

Financial ReportingThe consolidated financial statements have been prepared in conformity with accountingprinciples generally accepted in the United States. Under generally accepted accountingprinciples (GAAP), not-for-profit organizations are required to report information regarding theirfinancial position and activities according to three classes of net assets: permanently restrictednet assets, temporarily restricted net assets and unrestricted net assets.

Permanently restricted net assets consist of the net assets of the Community Foundationthat include donor-imposed restrictions that stipulate that resources be maintainedpermanently. Earnings are to be expended in accordance with donor wishes.

Temporarily restricted net assets consist of the net assets of the Community Foundationwhose use is limited by donor-imposed stipulations that either expire by passage of time orcan be fulfilled and removed by actions of the Community Foundation pursuant to thosestipulations.

Unrestricted net assets are not subject to donor-imposed stipulations.

Fair Value MeasurementGAAP establishes a hierarchy for inputs used in measuring fair value that maximizes the useof observable inputs and minimizes the use of unobservable inputs by requiring that theobservable inputs be used when available. Observable inputs are inputs that marketparticipants would use in pricing the asset or liability developed based on market data obtainedfrom sources independent of the Community Foundation. Unobservable inputs are inputs thatreflect the Community Foundations assumptions about the assumptions that marketparticipants would use in pricing the asset or liability, developed based on the best informationavailable in the circumstances.


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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Fair Value Measurement (Continued)The hierarchy is broken down into three levels based on the reliability of inputs as follows:

Level 1: Valuations based on quoted prices in active markets for identical assets or

liabilities that the Community Foundation has the ability to access. Valuation adjustmentsare not applied to Level 1 instruments. Since valuations are based on quoted prices thatare readily and regularly available in an active market, valuation of these products does notentail a significant degree of judgment.

Level 2: Valuations based on quoted prices in markets that are not active or for which allsignificant inputs are observable, directly or indirectly.

Level3: Valuations based on inputs that are unobservable and significant to the overall fairvalue measurement.

The availability of observable inputs can vary and is affected by a wide variety of factors. Tothe extent that valuation is based on models or inputs that are less observable or unobservable

in the market, the determination of fair value requires more judgment. Accordingly, the degreeof judgment exercised in determining fair value is greatest for instruments categorized in Level3. In certain cases, the inputs used to measure fair value may fall into different levels of thefair value hierarchy. In such cases, for disclosure purposes the level in the fair value hierarchywithin which the fair value measurement in its entirety falls is determined based on the lowestlevel input that is significant to the fair value measurement in its entirety.

The following valuation techniques were used to measure fair value of assets as of March 31,2013 and 2012:

Equity and bond mutual funds - Fair value of mutual funds was based on quoted marketprices.

Common stock - Fair value of common stock was based on quoted market prices.

Common/collective trusts - Fair value of common/collective trusts was valued at the netvalue of participation units held by the Community Foundation at year end. The value ofthese units is determined by the trustee based on the current market values of theunderlying assets of the fund based on information reported by the investment advisor.

Limited partnerships - Fair value of the Community Foundations partnership interests wasvalued based on the underlying investments within each partnership and the CommunityFoundations percentage ownership in each partnership.

Hedge funds and funds of funds - Fair value of hedge funds and funds of funds was valued

based on the underlying investments within each fund and the Community Foundationspercentage ownership of the fund.

US Treasuries and government agency obligations Fair value of US Treasuries andgovernment agency obligations was based on quoted market prices.

Corporate Bonds Fair value of corporate bonds was determined by entering standardinputs into a pricing model. These inputs, listed in order of priority, include benchmarkyields, reported trades, broker/dealer quotes, issuer spreads, benchmark securities, bids,offers, reference data and industry and economic events.


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Fair Value Measurement (Continued) Pooled life income fund - Fair value of the pooled life income fund was based on the

Community Foundation's percent ownership of the funds assets. The funds assets werevalued based on quoted market prices for identical securities. These assets are included

in split-interest agreements in the accompanying consolidated statement of financialposition.

Split-interest agreements (Charitable remainder unitrusts, charitable remainder annuitytrusts, and charitable gift annuities) - Fair value of the split-interest agreements are derivedusing the present value of the projected fair market value of the Community Foundationsinterest in charitable remainder unitrusts, charitable remainder annuity trusts and charitablegift annuities using prevailing market rates and IRS published mortality rates.

Perpetual trust held by third party - Fair value of the perpetual trust held by third party isbased on quoted market prices of the underlying investments.

There were no changes to the valuation techniques during 2013 or 2012.

The Community Foundation has financial instruments, which consist of cash and cashequivalents accounts, cash surrender value of life insurance and note payable. The fair valuesof cash and cash equivalents, and cash surrender value of life insurance equal their carryingvalues based on the short-term nature of the assets. These assets are considered to be level1 measurements. Fair value of the note payable is determined to be a level 2 measurement asthe fair value is estimated based on actual cash payments required by the note agreement andcurrent interest rates. The estimated fair value of the note payable at March 31, 2013approximates carrying value.

Cash and Cash EquivalentsCash and cash equivalents include bank demand deposit accounts and money market funds,which, at times, may exceed federally insured limits. The Community Foundation has notexperienced any losses in such accounts and believes it is not exposed to any significantcredit risk with respect to its cash and cash equivalents. The Community Foundationconsiders all highly liquid investments with a maturity of three months or less when purchasedto be cash equivalents.

Accounts ReceivableAccounts receivable mainly consist of amounts outstanding under the terms of three wills. Ifcollection becomes doubtful, an allowance for doubtful accounts will be established or theaccounts will be charged to income when that determination is made by management. Unpaidbalances remaining after the stated payment terms are considered past due. Recoveries ofpreviously charged off accounts are recorded when received. Management reviews thecollectability of accounts receivable annually. The Community Foundation considers accounts

receivable to be fully collectible.

Pledges ReceivablePledges receivable represent amounts due to the Community Foundation under the terms ofunconditional promises to give. The Community Foundation provides an allowance fordoubtful pledges based upon managements review of outstanding pledges. No allowance fordoubtful pledges was considered necessary at March 31, 2013 or 2012.

The difference between the carrying amount and present value of the pledges receivable is notconsidered material to the accompanying consolidated financial statements and has not beenrecorded by management.


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InvestmentsInvestments in marketable equity and debt securities with readily determinable market valuesare recorded at fair value based on quoted market prices. The fair value of other investmentsfor which readily determinable market values do not exist, including hedge funds and limited

partnerships, are recorded at fair value as determined by the Community Foundation with theassistance of external investment managers using methods and significant assumptions theCommunity Foundation considers appropriate based on its understanding of the underlyingcharacteristics of the investments. Investment income (including realized gains and losses oninvestments, unrealized gains and losses on investments, interest, and dividends) is includedin unrestricted income unless restricted by donor or law.

The Community Foundation maintains an investment pool for its charitable funds. Realizedand unrealized gains and losses from investments are allocated monthly to the individual fundsbased on the relationship of the market value of each fund to the total market value of theinvestment pool, as adjusted for additions to or deductions from the pool.

Investment securities are exposed to various risks, such as interest rate, market and credit

risks. Due to the level of risk associated with certain investment securities and the level ofuncertainty related to changes in the fair value of investment securities, it is at least reasonablypossible that changes in risks in the near term would materially affect the amounts reported inthe consolidated statements of financial position.

Revenue RecognitionContributions are recognized as revenue in the year an unconditional promise to give isreceived and are recorded at fair value. Contributions are recorded as unrestricted,temporarily or permanently restricted support depending on the nature of the donor-imposedrestrictions. When a donor-imposed restriction expires, that is, when a stipulated timerestriction ends or purpose restriction is accomplished, temporarily restricted net assets arereclassified as unrestricted net assets. Donor-imposed restricted contributions whoserestrictions are met within the same year as received are reflected as unrestricted contributionsin the accompanying consolidated financial statements.

All interest and dividend income from investments is recognized as revenue when earned andis accounted for in accordance with their respective net asset classifications.

Split-Interest AgreementsThe Community Foundation is a beneficiary of various trusts and other split-interestagreements. The Community Foundations beneficial interest is measured at the discountedvalue of its expected future cash flows and is reported as temporarily restricted net assets.Liabilities are recorded at the present value of future cash flows, using discount rates rangingfrom 3% to 7%, and are expected to be paid to the designated beneficiary or beneficiaries. Atthe end of the trust and other split-interest agreements, the remaining assets will become

available for the Community Foundations use.

Perpetual Trust Held by Third PartyThe assets held under this agreement are recorded at fair value based on quoted marketprices of the underlying investments. Contribution revenue is recognized as permanentlyrestricted support at the present value of the estimated future cash receipts from the trust'sassets. Under the terms of the trust, the Community Foundation has the irrevocable right toreceive the income earned on the trust's assets in perpetuity; however, the CommunityFoundation will never receive the assets held in trust.


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Cash Surrender Value of Life InsuranceThe Community Foundation receives various donations of life insurance, where theCommunity Foundation is both the owner and the beneficiary of the policies. Life insurance isrecorded at cash surrender value and has been provided to the Community Foundation by the

insurer. Annual premiums on the policies paid by the donors to the Community Foundation arerecorded as donations.

Real Estate InterestThe Community Foundation has interests parcels of real estate with several other companies,which are recorded at the appraised value net of debt.

Property and EquipmentProperty and equipment is recorded at fair market value at date of donation or at cost ifpurchased. The Community Foundation capitalizes property and equipment in excess of $500with a useful life greater than two years. Depreciation expense is calculated using the straight-line method over the estimated useful lives of the assets which range from three (3) to 40years.

Donor RestrictionsRevenues are reported as increases in unrestricted net assets unless use of the related assetsis limited by donor-imposed restrictions. Expenses are reported as decreases in unrestrictednet assets. Gains and losses on investments and other assets or liabilities are reported asincreases or decreases in unrestricted net assets unless their use is restricted by explicit donorstipulation or by law. Expirations of temporary restrictions on net assets (i.e., the donor-stipulated purpose has been fulfilled and/or the stipulated time period has elapsed) arereported as net assets released from restrictions in the statements of activities.

Gifts-In-KindGifts of real property and donations other than cash are recognized at their fair value in theperiod received. It is the Community Foundations policy to sell gifts of real property andinvestments immediately.

Contributed ServicesA substantial number of volunteers have made significant contributions of their time to theCommunity Foundation. The value of this contributed time is not reflected in theseconsolidated financial statements as it does not meet the criteria for recognition.

GrantsGrants are recorded as an expense of the Community Foundation when they are approved bythe Board of Directors.

Wills, Trusts and Estates

The Community Foundation is the beneficiary under various will and trust agreements, the totalrealizable value of which is not presently determinable; therefore, these amounts are notrecorded until the donor is deceased and no longer able to change their beneficiary.

Endowments Held for Other Not-For-Profit OrganizationsThe Community Foundation accepts funds from, and holds certain assets for the benefit ofother not-for-profit organizations. These funds are not considered assets of the CommunityFoundation and therefore are shown as endowments held for other not-for-profit organizationsin the accompanying consolidated statement of financial position.


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Funds Designated for Donor AdvisementThe Community Foundation maintains certain funds that are "designated for donoradvisement" as noted on the consolidated statement of financial position within unrestricted netassets (see Note 12). The Community Foundation charges these funds a management fee,

which is transferred to the operating fund within other unrestricted net assets. These transfersamounted to $224,690 and $206,309 in 2013 and 2012, respectively.

Investment FeesNet investment returns include certain fees paid by the various investment funds to theiraffiliated investment advisor, transfer agents and others as described in each fund prospectusor other published documents. These fees are deducted prior to allocation of the CommunityFoundation's investment earnings activity and thus not separately identifiable as an expense.

Income TaxesThe Community Foundation is exempt from federal income tax under Section 501(c)(3) of theInternal Revenue Code (the Code) and has been determined not to be a private foundationunder Section 509(a) of the Code.

CNY Philanthropy Center, LLC is a single member limited liability company and as such, is adisregarded entity for federal and state income tax purposes.

For tax-exempt entities, their tax-exempt status itself is deemed to be an uncertainty, sinceevents could potentially occur to jeopardize their tax-exempt status. As of March 31, 2013 and2012, the Community Foundation does not have a liability for unrecognized tax benefits. TheCommunity Foundation files income tax returns in the U.S. federal jurisdiction and New YorkState. The Community Foundation is generally no longer subject to U.S. federal and stateincome tax examinations by tax authorities for years before 2010.

Use of EstimatesThe preparation of consolidated financial statements in conformity with GAAP requiresmanagement to make estimates and assumptions that affect the reported amounts of assetsand liabilities and disclosure of contingent assets and liabilities at the date of the consolidatedfinancial statements and the reported amounts of revenues and expenses during the reportingperiod. Actual results could differ from those estimates.

Comparative InformationThe consolidated financial statements include certain prior-year summarized information intotal but not by net asset class. Such information does not include sufficient detail to constitutea presentation in conformity with generally accepted accounting principles. Accordingly, suchinformation should be read in conjunction with the Community Foundations consolidatedfinancial statements for the year ended March 31, 2012, from which the summarizedinformation was derived.

ReclassificationCertain amounts in the March 31, 2012 consolidated statement of financial position andconsolidated statement of activities and changes in net assets have been reclassified toconform to the 2013 presentation.


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3. INVESTMENTS

Investments consisted of the following at March 31:

2013 2012

Cash $ 568,561 $ 1,167,906Equity mutual funds 39,258,659 29,389,988Common stock - 5,977,360Bond mutual fund 12,891,484 9,680,265Common/collective trusts 4,236,811 4,036,799Limited partnerships 37,226,734 34,393,763Hedge funds and funds of funds 20,907,112 17,644,653U.S. Treasury and governmental agency obligations 3,923,394 4,525,268Corporate bonds 7,569,559 7,350,035

$ 126,582,314 $ 114,166,037

Investment management fees were approximately $453,000 and $481,000 for the years ended

March 31, 2013 and 2012, respectively. These fees have been included in investmentincome in the accompanying consolidated statement of activities and changes in net assets.

4. SPLIT-INTEREST AGREEMENTS

Split-interest agreements consisted of the following at March 31:

2013 2012

Asset Liability Asset Liability

Charitable remainder trusts $ 5,298,334 $ 2,821,960 $ 5,185,245 $ 2,841,459Pooled life income fund 480,795 197,695 476,343 199,855Charitable gift annuities 423,158 208,985 316,565 175,308

$ 6,202,287 $ 3,228,640 $ 5,978,153 $ 3,216,622

5. PLEDGES RECEIVABLE

Pledges receivable are due as follows for the fiscal year ending March 31:

2014 $ 689,7342015 361,761

2016 295,2502017 280,7502018 100,000

$ 1,727,495


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6. FAIR VALUE MEASUREMENTS

The following are measured at fair value on a recurring basis at March 31, 2013:

Description Level 1 Level 2 Level 3 Total

Equity mutual funds $ 39,258,659 $ - $ - $ 39,258,659

Bond mutual funds 12,891,484 - - 12,891,484Common/collective trust - 2,237,875 1,998,936 4,236,811

Limited partnerships - 36,268,039 958,695 37,226,734

Hedge funds and funds of funds - 3,926,774 16,980,338 20,907,112U.S. Treasury and governmental

agency obligations 3,923,394 - - 3,923,394

Corporate bonds - 7,569,559 - 7,569,559

Total investments 56,073,537 50,002,247 19,937,969 126,013,753

Perpetual trust held by third party 521,553 - - 521,553

Split-interest agreementsBeneficial interest in split-interestagreements - - 4,730,902 4,730,902

Assets in split-interest agreements

Equity mutual funds 967,054 - - 967,054Bond mutual funds 504,331 - - 504,331

1,992,938 - 4,730,902 6,723,840

Total $ 58,066,475 $ 50,002,247 $ 24,668,871 $ 132,737,593

The following are measured at fair value on a recurring basis at March 31, 2012:

Description Level 1 Level 2 Level 3 Total

Equity mutual funds $ 29,389,988 $ - $ - $ 29,389,988

Common stock 5,977,360 - - 5,977,360Bond mutual funds 9,680,265 - - 9,680,265

Common/collective trust - 2,169,723 1,867,076 4,036,799

Limited partnerships - 33,451,967 941,796 34,393,763Hedge funds and funds of funds - 1,555,307 16,089,346 17,644,653

U.S. Treasury and governmental

agency obligations 4,525,268 - - 4,525,268Corporate bonds - 7,350,035 - 7,350,035

Total investments 49,572,881 44,527,032 18,898,218 112,998,131

Perpetual trust held by third party 524,148 - - 524,148Split-interest agreements - - 5,978,153 5,978,153

524,148 - 5,978,153 6,502,301

Total $ 50,097,029 $ 44,527,032 $ 24,876,371 $ 119,500,432


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6. FAIR VALUE MEASUREMENTS (Continued)

The following is a reconciliation of the beginning and ending balances for the CommunityFoundations financial instruments measured at fair value on a recurring basis using significantunobservable inputs (Level 3):

Description

Common/collective

trusts

Limited

partnerships

Hedge fundsand funds of

funds

Split-interest

agreements Level 3 total

Balance at April 1, 2011 $ 1,703,807 $ 646,217 $17,703,478 $ 6,527,734 $ 26,581,236

Net gains (losses)

on investments 51,956 99,274 15,418 (385,760) (219,112)Net purchases (sales) 103,356 196,305 (1,611,968) - (1,312,307)

Change in value split-

interest agreements - - - (163,821) (163,821)Interest and dividends 23,313 - 18,092 - 41,405

Fees (15,356) - (35,674) - (51,030)

Balance at March 31, 2012 1,867,076 941,796 16,089,346 5,978,153 24,876,371

Net gains (losses)on investments 169,440 99,254 1,158,992 132,150 1,559,836

Net purchases (sales) (31,881) (86,449) (268,000) - (386,330)Change in value split-

interest agreements - - - 91,984 91,984

Interest and dividends 6,066 4,094 - - 10,160Fees (11,765) - - - (11,765)Transfers to level 1 - - - (1,471,385) (1,471,385)

Balance at March 31, 2013 $ 1,998,936 $ 958,695 $16,980,338 $ 4,730,902 $ 24,668,871

During 2012, the Community Foundation reclassified its assets in split-interest agreementspreviously held in Level 3 to Level 1 due to a change in managements assessment andclarification of the inputs being used to determine the fair value.

The Community Foundation had the following investments that are valued using net assetvalue at March 31, 2013:

Description Fair ValueUnfunded

Commitments

Redemption

Frequency (ifcurrently eligible)

RedemptionNotice Period

Common/collective trustsCommon/collective trusts liquid $ 2,237,875 $ - Monthly 0 30 days

Common/collective trusts illiquid 1,998,936 736,345 Ineligible

Limited partnerships:Limited partnerships liquid 36,268,039 - Monthly - Annually 4 60 days

Limited partnerships illiquid 958,695 424,950 Ineligible

Hedge funds and funds of fundsHedge funds and funds of funds

-liquid 3,926,774 - Monthly 1-3

years

45-90 days

Hedge funds and funds of funds

-illiquid 16,980,338 - Ineligible

Total $ 62,370,657 $ 1,161,295


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The Community Foundation had the following investments that are valued using net assetvalue at March 31, 2012:

Description Fair Value

Unfunded

Commitments

Redemption

Frequency (if

currently eligible)

Redemption

Notice Period

Common/collective trusts

Common/collective trusts liquid $ 2,169,723 $ - Monthly 0 30 daysCommon/collective trusts illiquid 1,867,076 880,000 Ineligible

Limited partnerships:

Limited partnerships liquid 33,451,967 - Monthly - Annually 4 60 daysLimited partnerships illiquid 941,796 522,600 Ineligible

Hedge funds and funds of funds

Hedge funds and funds of funds-liquid 1,555,307 - Monthly 1-3

Years

45-90 days

Hedge funds and funds of funds-illiquid 16,089,346 - Ineligible

Total $ 56,075,215 $ 1,402,600

Common/Collective TrustsThe Foundation invests in three common/collective trusts that invest in equity securities ofcompanies operating within one or more global developing markets, domestic and foreignprivate equity partnerships and collective investment funds. The fair values of theseinvestments have been estimated using the net asset value per share of the investments asprovided by the investment managers. Investments in this category for which there is noreadily determinable fair value are classified level 3 as the valuation due to the liquidity of thefunds. The remaining investments in this category are classified as level 2. One of theinvestments in this category, valued at $2,237,875, may be redeemed with 0-30 days notice.The remaining two investments in this category, valued at $1,998,936, redemptions are notpermitted during the life of the funds.

Limited PartnershipsThe Foundation invests in six limited partnerships that invest in equity securities, debt and debtlike securities (both privately and publically traded), secured and unsecured loans, and realestate partnerships. Interests in limited partnerships are based on valuations per shareprovided by the general partners of the respective partnership as of March 31, 2013, adjustedfor cash receipts, cash disbursements, and securities distributions through March 31, 2013.Investments in this category for which there is no readily determinable fair value are classifiedas level 3 as the valuation is based on significant unobservable inputs. The remaininginvestments in this category are classified as level 2. One of the limited partnerships, valuedat $958,695, is ineligible for redemptions until such time and in such amounts as determinedby the General Partners. When the underlying assets are sold, the proceeds, less any

incentives due the general Partner, will be distributed to the limited partners. The remaininginvestments in limited partnerships, valued at $36,268,039, have restrictions on redemptionranging from 4 to 60 business days. There are no other known circumstances under whichthese investments might be unredeemable.


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Hedge Funds and Funds of FundsThe Foundation invests in eight hedge funds and funds of funds that pursue multiple strategiesto diversify risks and reduce volatility. The fair values of these investments have beenestimated using the net asset value per share of the investments as provided by the fund

managers. Investments in this category for which there is no readily determinable fair valueare classified as level 3 as the valuation due to the liquidity of the funds. The remaininginvestments in this category are classified as level 2. These funds invest in private, primarilyvia pooled vehicles, offered by professional investment managers. These investments aresubject to an initial lock-up period that prohibits redemption for the first three years afterpurchase. Redemptions can be made quarterly or annually after the initial lock-up period haslapsed, subject to a 20% gate for the next three years. The redemption restrictions will lapse inDecember 2014, at which time redemptions are allowed with 60 to 100 days notice.

Level 3 MeasurementsManagement determines the fair value measurement valuation policies and procedures,including those for Level 3 recurring measurements. The Community Foundations Board ofDirectors assesses and approves these policies and procedures. At least annually,

Management: (1) determines if the current valuation techniques used in fair valuemeasurements are still appropriate, and (2) evaluates and adjusts the unobservable inputsused in the fair value measurements based on current market conditions and third-partyinformation.

7. REAL ESTATE INTERESTS

At March 31, 2013 and 2012, the Community Foundation has a 37% interest in a limitedpartnership, which has been recorded at the Community Foundation's share of the estimatedfair value at March 31, 2013. The estimated value is comparable to the sales price receivedfor partial sale of real estate in the year ended March 31, 2008 and is considered toapproximate fair value at March 31, 2013. A 31 acre parcel of land is the partnership's soleasset. Under the terms of the donor agreement, the donor has agreed to contribute up to$20,000 per year for the Community Foundation's share of ordinary carrying costs on thepartnership property. The Community Foundations interest in this property amounted to$581,936 at March 31, 2013 and 2012.

At March 31, 2013 and 2012 the Community Foundation has a 32% interest in a commercialproperty held in a limited liability company. This interest has been recorded at the appraisedvalue less an outstanding mortgage on the property, which approximates fair value at March31, 2013 and 2012. This property has an appraised value of $1,250,000 and the outstandingmortgage had a balance of approximately $433,000 and $381,000 at March 31, 2013 and2012, respectively. The Community Foundations interest in this property amounted to$264,214 and $281,331 at March 31, 2013 and 2012, respectively.

At March 31, 2013 and 2012, the Community Foundation has a 45%, interest in a limitedpartnership, which has been recorded at the Community Foundation's share of the estimatedfair value at year end. The estimated value is based on an appraisal performed on November1, 2011 and is considered to approximate fair value at March 31, 2013. A .52 acre parcel ofland is the partnership's sole asset. The Community Foundations interest in this propertyamounted to $29,250 at March 31, 2013 and 2012.


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8. PROPERTY AND EQUIPMENT

Property and equipment consisted of the following as of March 31:

2013 2012

LandLand improvements $ 253,77514,251 $ 253,77514,251Furniture and fixtures 731,046 714,590Buildings 5,098,998 5,087,798

6,098,070 6,070,414

Less: Accumulated depreciation (812,831) (513,978)

$ 5,285,239 $ 5,556,436

Depreciation expense amounted to $304,321 and $221,887 in 2013 and 2012, respectively.

9. DEFERRED COMPENSATION

The Community Foundation has two deferred compensation plans for key employees. Theassets of the deferred compensation plans will be distributed at the earlier of termination ofemployment, retirement at age 70 years or death. The liability for deferred compensationplans amounted to $234,972 and $228,202 in 2013 and 2012, respectively.

10. GRANTS PAYABLE

Grants payable consisted of unconditional promises to give to other organizations, which hadnot been paid as of March 31, 2013. These amounts are payable as follows in the yearsending March 31:

2014 $ 842,4142015 161,0462016 38,2192017 9,000

$ 1,050,679


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11. NOTE PAYABLE

In 2011, the Community Foundation entered into a note payable with a bank. The noterequires annual payments of $25,000 plus interest at LIBOR plus 1.6% (1.852% at March 31,2013) through March 2025. The remaining principal and interest is due on April 1, 2026. Thisnote payable is secured by certain assets of the Community Foundation. Required future

principal payments are as follows at March 31:

2013 $ 25,0002014 25,0002015 25,0002016 25,0002017 25,000Thereafter 3,325,000

$ 3,450,000

Supplemental Cash Flow InformationInterest paid during 2013 and 2012 on the note payable was $58,765 and $65,464,

respectively.

12. NET ASSETS

Included in unrestricted net assets is $30,415,898 and $26,236,342 of donor advised funds atMarch 31, 2013 and 2012, respectively. Grant recommendations are accepted from thedonors or other advisors of these funds, although the Community Foundation retains variancepower; therefore, the ultimate discretion of the use of these funds lies with the Board ofDirectors of the Community Foundation. Thus, such funds represent unrestricted net assets ofthe Community Foundation.

Temporarily restricted net assets consisted of the following at March 31:

2013 2012

Charitable remainder trusts - time restriction $ 2,486,335 $ 2,337,973Pooled life income fund - time restriction 283,100 276,488Cash surrender value of life insurance - time restriction 539,014 513,515Scholarships 14,408,636 10,924,659Field of interest 8,165,021 6,499,429Other 10,089,559 9,590,526

$ 35,971,665 $ 30,142,590

During 2013 and 2012, approximately $2,125,000 and $2,521,000 was released fromrestriction through the passage of time and satisfaction of donor-restrictions. At March 31,2013 and 2012, the face value of the donated life insurance policies was approximately$1,189,000 and $1,064,000, respectively.


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13. ENDOWMENT FUND

The Community Foundations endowment net assets funds consist of the following at March31, 2013:

Unrestricted

Temporarily

Restricted

Permanently

Restricted Total

Board designated endowment funds $ 50,859,491 $ - $ - $ 50,859,491

Donor-restricted endowment funds - 3,682,328 7,003,691 10,686,019

Total endowment funds $ 50,859,491 $ 3,682,328 $ 7,003,691 $ 61,545,510

The Community Foundations endowment net assets funds consist of the following at March31, 2012:

Unrestricted

Temporarily

Restricted

Permanently

Restricted Total

Board designated endowment funds $ 48,491,560 $ - $ - $ 48,491,560Donor-restricted endowment funds - 3,359,962 6,965,705 10,325,667

Total endowment funds $ 48,491,560 $ 3,359,962 $ 6,965,705 $ 58,817,227

Changes in endowment net assets were as follows:

Unrestricted

Temporarily

Restricted

Permanently

Restricted Total

Endowment net assets, April 1,

2011 $ 49,139,641 $ 3,262,609 $ 7,029,544 $ 59,431,794

Donations 95,386 500 (63,839) 32,047

Investment income 1,634,138 95,368 - 1,729,506

Realized/unrealized gains 302,392 64,895 - 367,287

Other income 37,253 - - 37,253

Grants paid (954,982) (63,410) - (1,018,392)

Appropriations (591,773) - - (591,773)

Other expenses (1,675,218) - - (1,675,218)

Administrative fees 504,723 - - 504,723

Endowment net assets, March 31,

2012 $ 48,491,560 $ 3,359,962 $ 6,965,705 $ 58,817,227

Donations 217,165 34,000 37,986 289,151

Investment income 896,118 66,894 - 963,012

Realized/unrealized gains 4,211,276 300,706 - 4,511,982

Other income 37,420 - - 37,420

Grants paid (961,612) (79,234) - (1,040,846)

Appropriations (813,711) - - (813,711)

Other expenses (1,806,503) - - (1,806,503)

Administrative fees 587,778 - - 587,778

Endowment net assets, March 31,

2013 $ 50,859,491 $ 3,682,328 $ 7,003,691 $ 61,545,510


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13. ENDOWMENT FUND (Continued)

Interpretation of Relevant LawNew York Not-for-Profit Corporation Law was amended to add a new article known as thePrudent Management of Institutional Funds Act, which became effective in September 2010.The Community Foundations Board of Directors has interpreted the applicable provisions of

New York Not-for-Profit Corporation Law to mean that the classification of appreciation onendowment gifts, beyond the original gift amount, follows the donors restrictions on the use ofthe related income. The Community Foundation also observes the Uniform Management ofInstitutional Funds Act protection of the historic gift value of individual endowment funds.

Funds with DeficienciesFrom time to time, the fair value of assets associated with individual donor-restrictedendowment funds may fall below the level that the donor or the relevant state law requires theCommunity Foundation to retain as a fund of perpetual duration. In accordance with generallyaccepted accounting principles, deficiencies of this nature are reported in unrestricted netassets. There were no deficiencies reported at March 31, 2013 or 2012, respectively.

Return Objectives and Risk Parameters

The Community Foundation has adopted investment and spending policies for endowmentassets that attempt to provide a predictable stream of funding to programs supported by itsendowments while seeking to maintain the purchasing power of the endowment assets.Endowment assets include those assets of donor-restricted funds that the CommunityFoundation must hold in perpetuity or for a donor-specified period(s) as well as board-designated funds. Under this policy, as approved by the Board of Directors, the endowmentassets are invested in a manner that is intended to preserve capital, considering the impact ofinflation, strive for consistent annual total returns, achieve long-term total returns which meetor exceed inflation, plus spending for operations and grants and earn the highest possiblereturn given the risk tolerance established by the Community Foundation. The CommunityFoundation expects its endowment funds, over time, to provide an average rate of return ofapproximately 8% annually. Actual returns in any given year may vary from this amount.

Strategies Employed for Achieving ObjectivesThe Community Foundation relies on a total return strategy in which investment returns areachieved through both capital appreciation (realized and unrealized) and current yield (interestand dividends). The Community Foundation targets a diversified asset allocation that places agreater emphasis on equity-based investments to achieve its long-term return objectives withinprudent risk constraints.

Endowment Spending Policy and Investment ObjectivesThe Community Foundation uses the total return strategy for endowment fund income. Underthis concept, endowment income to be distributed was established at 5%, based upon theaverage of the market value of the endowment assets accounts. If the total return amountexceeds the actual earnings of the endowment funds in any one year, then the amount needed

to fund such excess will first be taken from the accumulated excess earnings from prior years,then from the accumulated net capital gains of endowment funds and, conversely, anyundistributed income after the allocation of the total return distribution is added back to theendowment fund balance.


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14. PENSION PLAN

The Community Foundation sponsors a 401(k) defined contribution employee savings plan(the Plan) covering all full-time employees meeting eligibility requirements. After qualifyingservice, full-time employees are eligible to receive matching contributions from the CommunityFoundation. The Community Foundation matches 100% of contributions up to a limit set by

the Board of Directors. The Community Foundation's contributions amounted to $86,183 and$83,157 in 2013 and 2012, respectively.

15. ENDOWMENTS HELD FOR OTHER NOT-FOR-PROFIT ORGANIZATIONS

The Community Foundation accepts funds from, and holds funds for the benefit of, other not-for-profit organizations. These funds are not considered assets of the Community Foundationand therefore are shown as Endowments held for other not-for-profit organizations in theaccompanying consolidated statement of financial position.

Total endowments held for other not-for-profit organizations activity consisted of the followingfor the years ended March 31:

2013 2012

Contributions $ 878,353 $ 45,349Investment activity and other 148,444 34,138Grants (32,762) (62,701)

Net change in endowments held for othernot-for-profit organizations 994,035 16,786

Endowments held for other not-for-profit organizations -beginning of year 1,347,504 1,330,718

Endowments held for other not-for-profit organizations -end of year $ 2,341,539 $ 1,347,504

16. SUBSEQUENT EVENTS

Subsequent events have been evaluated through June 5, 2013, which is the date theconsolidated financial statements were available to be issued.

Documents

CNY Community Foundation 2013 Audit