Island Conservation
FINANCIAL STATEMENTS AND INDEPENDENT AUDITORS' REPORT
December 31, 2014 and 2013
CONTENTS
Page
INDEPENDENT AUDITORS’ REPORT 1
FINANCIAL STATEMENTS
STATEMENTS OF FINANCIAL POSITION 2
STATEMENTS OF ACTIVITIES 3
STATEMENTS OF CASH FLOWS 4
STATEMENT OF FUNCTIONAL EXPENSES - 2014 5
STATEMENT OF FUNCTIONAL EXPENSES - 2013 6
NOTES TO FINANCIAL STATEMENTS 7
INDEPENDENT AUDITORS' REPORT
To the Board of Directors Island Conservation Santa Cruz, California
We have audited the accompanying financial statements of Island Conservation (a nonprofit organization), which comprise the statements of financial position as of December 31, 2014 and 2013, and the related statements of activities, cash flows and functional expenses for the years then ended, and the related notes to the financial statements.
Management's Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.
Auditors' Responsibility
Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the 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 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 financial statements referred to above present fairly, in all material respects, the financial position of Island Conservation as of December 31, 2014 and 2013, and the changes in its net assets and its cash flows for the years ended in accordance with accounting principles generally accepted in the United States of America.
Oakland, California June 17, 2015 DZH Phillips LLP P 415 781 2500 DZH Phillips LLP P 510 834 6542 135 Main Street, 9th Floor F 415 781 2530 1330 Broadway, Suite 630 F 510 834 2556 San Francisco, CA 94105 E [email protected] Oakland, CA 94612 E [email protected]
Island Conservation
STATEMENTS OF FINANCIAL POSITION December 31, 2014 and 2013
ASSETS 2014 2013 Current Assets: Cash and cash equivalents (Note 3) $ 2,538,139 $ 3,069,608 Grants receivable (Note 4) 1,137,954 800,033 Contracts receivable 252,439 247,988 Prepaid expenses 56,789 71,605 Other current assets 3,517 -
Total Current Assets 3,988,838 4,189,234
Grants receivable beyond one year (Note 4) 1,167,161 2,269,239 Deposits 14,931 14,931 Property and equipment, net (Note 5) 168,090 175,375
TOTAL ASSETS $ 5,339,020 $ 6,648,779
LIABILITIES Current Liabilities: Accounts payable and accrued expenses $ 126,767 $ 257,498 Accrued vacation 142,009 144,086 Deferred revenue - 8,362 Current maturities of long-term debt - 2,474
TOTAL CURRENT LIABILITIES AND TOTAL LIABILITIES 268,776 412,420
NET ASSETS Unrestricted 1,811,570 1,772,716 Temporarily restricted (Note 6) 3,258,674 4,463,643
TOTAL NET ASSETS 5,070,244 6,236,359
TOTAL LIABILITIES AND NET ASSETS $ 5,339,020 $ 6,648,779
The accompanying notes are an integral part of these statements 2 Island Conservation
STATEMENTS OF ACTIVITIES Years ended December 31, 2014 and 2013
December 31, 2014 December 31, 2013 Temporarily Temporarily Unrestricted Restricted Total Unrestricted Restricted Total SUPPORT AND REVENUE Foundation and community grants $ 1,388,232 $ 1,160,500 $ 2,548,732 $ 1,750,107 $ 4,928,905 $ 6,679,012 Contract income 986,371 - 986,371 1,343,475 - 1,343,475 Contributions 129,539 - 129,539 61,086 - 61,086 In-kind contributions (Note 7) 57,439 - 57,439 1,198 - 1,198 Other income 35,454 - 35,454 17,651 - 17,651 Net assets released from restrictions: Purpose or time restrictions were met 2,365,469 (2,365,469) - 1,698,564 (1,698,564) -
TOTAL SUPPORT AND REVENUE 4,962,504 (1,204,969) 3,757,535 4,872,081 3,230,341 8,102,422
EXPENSES Program services 3,640,376 - 3,640,376 3,543,357 - 3,543,357 Supporting services: Administration 795,446 - 795,446 871,091 - 871,091 Fundraising 487,828 - 487,828 429,265 - 429,265
TOTAL EXPENSES 4,923,650 - 4,923,650 4,843,713 - 4,843,713
Change in net assets 38,854 (1,204,969) (1,166,115) 28,368 3,230,341 3,258,709
Net assets at beginning of year 1,772,716 4,463,643 6,236,359 1,744,348 1,233,302 2,977,650
Net assets at the end of year $ 1,811,570 $ 3,258,674 $ 5,070,244 $ 1,772,716 $ 4,463,643 $ 6,236,359
The accompanying notes are an integral part of these statements. 3 Island Conservation
STATEMENT OF CASH FLOWS Years ended December 31, 2014 and 2013
2014 2013 Cash flows provided by (used in) operating activities: Change in net assets $ (1,166,115) $ 3,258,709 Adjustments to reconcile change in net assets to net cash (used in) provided operating activities: Depreciation 39,540 29,590 (Increase) decrease in operating assets: Contracts and grants receivables 759,706 (2,491,403) Prepaid expenses 14,816 (21,043) Deposits - (9,289) Other current assets (3,517) - Increase (decrease) in operating liabilities: Accounts payable and accrued expenses (132,808) (12,166) Deferred revenue (8,362) 8,362
Net cash provided (used in) by operating activities (496,740) 762,760
Cash flows provided by (used in) investing activities: Purchase of equipment (32,255) (169,070)
Net cash used in investing activities (32,255) (169,070)
Cash flows provided by (used in) financing activities: Principal payments on debt (2,474) (9,456)
Net cash used in financing activities (2,474) (9,456)
Net increase (decrease) in cash and cash equivalents (531,469) 584,234
Cash and cash equivalents - beginning of the year 3,069,608 2,485,374
Cash and cash equivalents - end of the year $ 2,538,139 $ 3,069,608
Supplemental Data: Interest paid $ 28 $ 564
The accompanying notes are an integral part of these statements. 4 Island Conservation
STATEMENT OF FUNCTIONAL EXPENSES Year ended December 31, 2014
Supporting Services Program Common Services Administration Fundraising Facility Costs Total
Salaries $ 1,867,465 $ 517,372 $ 308,327 $ - $ 2,693,164 Payroll taxes 101,812 33,852 23,078 - 158,742 Employee benefits (Note 8) 227,233 39,883 35,523 - 302,639 Consultants and professional fees 488,237 68,342 - 23,836 580,415 Travel and transportation 392,746 5,627 45,232 - 443,605 Occupancy 678 - - 231,265 231,943 Supplies 83,386 5,464 5,662 39,599 134,111 Telephone 2,935 50 1,578 54,696 59,259 Charters 55,624 - 1,871 - 57,495 Insurance 4,669 86 - 44,713 49,468 Depreciation 4,678 - - 34,862 39,540 Equipment, repairs and maintenance 32,349 5,920 - - 38,269 Books and subscriptions 6,081 1,836 15,183 - 23,100 Printing and duplication 4,320 14,300 1,358 - 19,978 Bank and payroll fees 11,889 6,370 195 - 18,454 Professional development 11,022 4,312 2,276 - 17,610 Postage and shipping 14,253 466 2,291 - 17,010 Recruitment 1,112 12,631 1,898 - 15,641 Animal care 9,514 - - - 9,514 Licenses and fees 6,984 781 - - 7,765 Grants to others 5,900 - - - 5,900 Interest 28 - - - 28 Allocation of common facility costs 307,461 78,154 43,356 (428,971) -
Total Expenses $ 3,640,376 $ 795,446 $ 487,828 $ - $ 4,923,650
The accompanying notes are an integral part of these statements. 5 Island Conservation
STATEMENT OF FUNCTIONAL EXPENSES Year ended December 31, 2013
Supporting Services Program Common Services Administration Fundraising Facility Costs Total
Salaries $ 1,937,289 $ 606,588 $ 307,174 $ - $ 2,851,051 Payroll taxes 113,570 44,747 22,899 - 181,216 Employee benefits (Note 8) 186,678 74,317 23,154 - 284,149 Travel and transportation 433,835 6,002 21,674 - 461,511 Consultants and professional services 362,088 49,833 8,000 - 419,921 Occupancy 63,081 - - 145,593 208,674 Supplies 76,622 2,669 5,640 23,691 108,622 Telephone 27,946 - 2,164 37,030 67,140 Insurance 17,312 - - 36,323 53,635 Professional development 33,350 465 340 - 34,155 Postage and shipping 27,276 4,788 430 - 32,494 Depreciation 13,041 - - 16,549 29,590 Printing and duplication 7,451 11,597 803 - 19,851 Bank and payroll fees 11,930 6,117 1,173 - 19,220 Charters 10,342 - 7,150 - 17,492 Grants to others 15,000 - - - 15,000 Equipment repairs and maintenance 5,954 8,012 - - 13,966 Books and subscriptions 5,959 1,654 4,339 - 11,952 Licenses and fees 7,575 2,991 110 - 10,676 Animal care 2,834 - - - 2,834 Interest 564 - - - 564 Allocation of common facility costs 183,660 51,311 24,215 (259,186) -
Total Expenses $ 3,543,357 $ 871,091 $ 429,265 $ - $ 4,843,713
The accompanying notes are an integral part of these statements. 6 Island Conservation
NOTES TO FINANCIAL STATEMENTS December 31, 2014 and 2013
Note 1 – Organization Island Conservation (the Organization) is a non-profit corporation founded in 1994 and incorporated in 1997. The Organization’s mission is to prevent extinctions by removing invasive species from islands. The Organization works around the globe in partnership with government and other non-governmental organizations (NGOs) to achieve its mission. Working with these partners, the Organization’s staff scientists and island ecosystem recovery specialists work to: evaluate invasive species’ impacts on native island animals and plants; determine feasibility of invasive species removal; design and implement plans to remove invasive species; and monitor the recovery of native island animals and natural systems after invasive species are removed. The Organization is supported primarily through private and public grants and contributions. The Organization is headquartered in Santa Cruz, California and has satellite offices in: Boqueron, Puerto Rico; Honolulu, Hawaii; Kelowna, British Columbia; Nassau, The Bahamas; Santiago, Chile; Sydney, Australia; and Washington, DC. Note 2 – Summary of Significant Accounting Policies Significant accounting policies are described below to enhance the usefulness of the financial statements to the reader. Method of Accounting The financial statements of the Organization have been prepared using the accrual method of accounting, which involves the recognition of revenues and gains when earned and expenses and losses when incurred. Cash and Cash Equivalents
For purposes of the statement of cash flows, the Organization considers all unrestricted highly liquid investments with an initial maturity of three months or less to be cash equivalents.
Grants Receivable
Grants receivable include unconditional commitments from various foundations that are recorded at the net realizable value of the amount expected to be collected by management. Grants receivable beyond one year are discounted using a risk-based discount rate.
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Island Conservation
NOTES TO FINANCIAL STATEMENTS (continued) December 31, 2014 and 2013
Fixed Assets and Depreciation
Fixed assets are recorded at cost when purchased and fair value when received as a donation. Depreciation is provided over the estimated useful lives of respective assets, using the straight-line method of depreciation. A workable unit with a cost or basis of $5,000 or more is considered fixed assets and accordingly capitalized.
Income Tax Status The Organization is recognized as a public charity exempt from Federal income tax under Section 501(c)(3) of the Internal Revenue Code and Section 23701(d) of the California Revenue and Taxation Code, whereby only unrelated business income, as defined by Section 512(a)(1) of the Internal Revenue Code and similar code sections of the California Revenue and Taxation Code, is subject to income tax. Management believes that all of the Organization’s activities were directly related to its exempt purpose, thus the accompanying financial statements do not include any provision for income taxes. Basis of Presentation Net assets, revenues, expenses, gains, and losses are classified based on the existence or absence of donor-imposed restrictions. Accordingly, net assets of the Organization and changes therein are classified and reported as follows: Unrestricted net assets Unrestricted net assets represent net assets that are not subject to donor-imposed stipulations. The Board of Directors periodically designates a portion of the unrestricted net assets for use on specific projects.
Temporarily restricted net assets Temporarily restricted net assets represent net assets subject to donor-imposed stipulations that may or will be met either by actions of the Organization and/or the passage of time. Restricted Resources Contributions are recognized when the donor makes a promise to the Organization that is, in substance, unconditional. The Organization reports gifts of cash and other assets as restricted support if they are received with donor stipulations that limit the use of the donated assets. When a donor restriction expires, that is, when a stipulated time restriction ends or purpose restriction is accomplished, temporarily restricted net assets are reclassified to unrestricted net assets and reported in the statement of activities as net assets released from restrictions. Gifts of fixed assets are recorded as unrestricted support unless explicit donor stipulations specify how the donated asset 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
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Island Conservation
NOTES TO FINANCIAL STATEMENTS (continued) December 31, 2014 and 2013 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, the Organization reports expirations of donor restrictions when donated or acquired long-lived assets are placed in service. In-Kind Support The organization records contributed services at the fair value of the services received, if the services received require specialized skills, are provided by individuals possessing those skills, and would typically need to be purchased if not received through donation. Allocation of Expenses The organization considers the cost related to operation and maintenance of its office facilities to be common costs. These costs are allocated to activities benefited based on employee effort as reported by employees. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Significant accounting estimates reflected in the Organization’s financial statements include valuation and collectability of grants receivable and the functional allocation of expenses. Actual results may differ from those estimates.
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Island Conservation
NOTES TO FINANCIAL STATEMENTS (continued) December 31, 2014 and 2013
Note 3 – Concentration of Credit risk Concentrations of credit risk primarily include cash and cash equivalents. The Organization maintains cash balances in financial institutions that from time to time exceed the guaranteed amount of the Federal Deposit Insurance Corporation (FDIC). Total uninsured cash and cash equivalents at December 31, 2014 was $1,607,914.
Note 4 – Grants Receivable At December 31, 2014 and 2013, grants receivable are expected in the following periods: Pledges receivable with due dates extending beyond one year were discounted using discount rate of 1.87% at December 31, 2014. 2014 2013 In one year or less $ 1,137,954 $ 800,033 Between one year to five years 1,200,000 2,337,500
Total grants receivable 2,337,954 3,137,533 Less: unamortized discount (32,839) (68,261)
Grants receivable, net $ 2,305,115 $ 3,069,272
At December 31, 2014 and 2013, approximately 77% of grants receivable was due from one private foundation. Note 5 – Property and Equipment Property and equipment consists of:
2014 2013 Non-depreciable: Software development in progress $ 39,136 $ 25,874
Depreciable: Projected related equipment 154,486 135,493 Leasehold improvements 144,860 144,860 Furniture and fixtures 20,061 20,061 Vehicles and boats 98,842 98,842
457,385 425,130 Less: accumulated depreciation (289,295) (249,755)
Property and equipment, net $ 168,090 $ 175,375
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Island Conservation
NOTES TO FINANCIAL STATEMENTS (continued) December 31, 2014 and 2013
Note 6 – Temporarily Restricted Net Assets At December 31, 2014 and 2013, temporarily restricted net assets were available for the following purposes: 2014 2013 Future periods $ 1,800,000 $ 2,635,000 Marine bird program 801,638 606,564 Galapagos and South America Islands restoration 504,460 1,000,000 Juan Fernandez Island 55,000 89,193 Board development 31,250 31,250 Pinzon and Florena 30,690 60,000 Lehua restoration 20,000 - Tonga project 14,000 - Mocha Island restoration 1,636 1,636 Desecheo Island restoration - 20,000 South Farallones Island restoration - 20,000
$ 3,258,674 $ 4,463,643
Note 7 – Contributed Services The Organization recognizes certain voluntary services as explained under note 2 above. Voluntary services recorded as expenses and in-kind contributions on the statement of activities were as follows:
December 31, Type of service Activity 2014
Legal services Administration 3,666 Legal services Program 51,935
$ 55,601
During the year ended December 31, 2013, no contributed services were recorded on the financial statements. Note 8 – Retirement Plan The Organization has established a retirement plan. The plan provides for an employer match of all employee elective deferrals up to 3% of compensation. For the years ended December 31, 2014 and 2013, the Organization matched 3% and 1%, respectively, and contributed $61,107 and $18,005, respectively, to the plan.
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Island Conservation
NOTES TO FINANCIAL STATEMENTS (continued) December 31, 2014 and 2013
Note 9 – Operating Leases The Organization has several non-cancelable operating lease arrangements for its offices. Future minimum lease payments for these arrangements at December 31, 2014 were as follows:
Year ending December 31, 2015 184,634 Year ending December 31, 2016 135,518 Year ending December 31, 2017 126,994 Year ending December 31, 2018 42,648
$ 489,794
During the years ended December 31, 2014 and 2013 rent expense was $180,014 and $190,350, respectively.
Note 10 – Line of Credit The Organization has a line of credit in the amount of $500,000 with a financial institution which matures on August 10, 2015. The line of credit is secured by all accounts, contract rights, chattel paper, general intangibles, and other rights to payments of every kind and bears interest at prime plus 1%, with a floor of 5%. The line was not accessed during the years ended December 31, 2014 or 2013 and at December 31, 2014 and 2013, there was no outstanding balance. Note 11 – Subsequent Events
Subsequent events were evaluated through June 17, 2015, which is the date the financial statements were available to be issued.
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