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THE NORTH CAROLINA ARBORETUM SOCIETY Asheville, North Carolina

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THE NORTH CAROLINA ARBORETUM SOCIETY Asheville, North Carolina THE NORTH CAROLINA ARBORETUM SOCIETY Asheville, North Carolina Audited Financial Statements For the Years Ended June 30, 2012 and 2011 THE NORTH CAROLINA ARBORETUM SOCIETY Asheville, North Carolina For the Years Ended June 30, 2012 and 2011 TABLE OF CONTENTS Page(s) Independent Auditors’ Report 11 Financial Statements: Statements of Financial Position 2 Statements of Activities 3 Statements of Cash Flows 4 Notes to Financial Statements 5-16 Supplementary Information: Statements of Functional Expenses – Summary 17 Statements of Functional Expenses 18-19 THE NORTH CAROLINA ARBORETUM SOCIETY Notes to the Financial Statements For the Years Ended June 30, 2012 and 2011 Note 1 – Description of Activities and Summary of Significant Accounting Policies Description of Activities The North Carolina Arboretum Society (the “Society”) is a certified affiliate of the North Carolina Arboretum (the “Arboretum”), within the University of North Carolina system. The Society was incorporated in the State of North Carolina in 1990 as a 501(c)(3) non-profit organization. The Society is collocated with and is organized to support the Arboretum, located in Asheville, North Carolina. In particular, the Society provides financial assistance, volunteer assistance, and promotion of the North Carolina Arboretum. The Society acts as the financial pass-through agent for programmatic and facility usage, expenses and revenues, acts as the fund-raising agent for the Arboretum, conducts various retail and for-fee events, coordinates and supports the volunteer program, and generally provides leadership and assistance for all facets of the Arboretum operations. Basis of Accounting The financial statements of The North Carolina Arboretum Society have been prepared on the accrual basis of accounting. Financial Statement Presentation The Society has presented its financial statements in accordance with generally accepted accounting principles for not-for-profit organizations. Under this guidance, the Society is required to report information regarding its financial position and activities according to three classes of net assets: unrestricted net assets, temporarily restricted net assets, and permanently restricted net assets. In addition, the Society is required to present a statement of cash flows. Cash Equivalents The Society considers all highly liquid investments purchased with a maturity of three months or less to be cash equivalents. Cash and money market funds, which are reported as “Temporarily restricted or Permanently restricted endowment funds” are not included in cash for purposes of the Statements of Cash Flow. Use of Estimates The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results may differ from those estimates. 5 THE NORTH CAROLINA ARBORETUM SOCIETY Notes to the Financial Statements For the Years Ended June 30, 2012 and 2011 Note 1 – Description of Activities and Summary of Significant Accounting Policies (continued) Fair Value of Financial Instruments The Society discloses for each class of financial instruments the methods, and when a valuation technique is used, the significant assumptions applied in determining the fair values of financial assets and liabilities. If there is a change in the valuation technique, then the Society discloses both the change and the reasons for the change. The Society estimates that the fair value of all financial instruments does not differ materially from the aggregate carrying values of its financial instruments recorded in the accompanying statements of financial position. The estimated fair value amounts have been determined by the Society using available market information and appropriate valuation methodologies. The Society’s financial instruments consist primarily of cash and cash equivalents, accounts and note receivable, promises to give, inventory, accounts payable, accrued expenses, unearned revenues and long-term debt. Accounts Receivable Accounts receivable represents amounts from program services and salary advances. Management deems all accounts receivable collectible within the next twelve months; accordingly, no allowance for doubtful accounts is considered necessary. Inventory Inventories are determined under the first-in, first-out basis and consist of retail merchandise recorded at cost. Inventories totaled $34,907 and $42,561 for the years ended June 30, 2012 and 2011, respectively. Property and Equipment Expenditures for major renewals, betterment, and additions are capitalized. Repairs, maintenance and minor renewals and expenditures of less than $500 are expensed in the year incurred. Depreciation is computed using the straight-line method, based on the estimated useful lives of the assets. Donations of property and equipment are recorded as support at their estimated fair value at the date of donation. Such donations are reported as unrestricted support unless the donor has restricted their use. Contributions of cash that are designated to be used to acquire property and equipment are reported as restricted support. Unless the donor has stipulated how long donated assets must be maintained, the Society reports the expiration of donor restrictions when the donated or acquired assets are placed in service; at that time, the assets are transferred from restricted net assets to unrestricted net assets. The Society reclassifies temporarily restricted net assets to unrestricted net assets at that time. 6 THE NORTH CAROLINA ARBORETUM SOCIETY Notes to the Financial Statements For the Years Ended June 30, 2012 and 2011 Note 1 – Description of Activities and Summary of Significant Accounting Policies (continued) Public Support and Revenue Unconditional promises to give are recorded as received. Unconditional promises to give, due in the next year, are reflected as current promises to give and are recorded at their net realizable value. Unconditional promises to give, due in subsequent years, are reflected as long-term promises to give and are recorded at the present value of their net realizable value, using risk-free interest rates applicable to the years in which the promises are received to discount the amounts. The majority of promises to give are received as a result of an ongoing campaign drive. Amounts deemed uncollectible are charged to bad debt expense as they are deemed uncollectible (the “direct write-off” method). Generally accepted accounting principles require that the allowance method be used to reflect bad debt expense. However, the effect of using this method is not materially different than that of the method currently used. For the years ended June 30, 2012 and 2011, uncollectible promises to give totaled $0 and $5,946, respectively. Grants and other contributions of cash and other assets are reported as temporarily 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 Contributions and investments established as an endowment by the donor under whom the principal is retained in perpetuity are permanently restricted. Investment earnings, unless otherwise restricted, are available to support current program services. Unearned revenues Unearned revenues include certain contract advances received that are recognized when earned. Functional Expenses The Society allocates its expenses on a functional basis between its program and supporting services. Expenses that can be identified specifically with program or support services are allocated directly according to their nature and expenditure classification. Other expenses that are common to both functions are allocated between support or program services based on evaluations of the related benefits. Management and general expenses include those expenses that are not directly identifiable with any specific function but provide for overall support and direction of the Society. 7 THE NORTH CAROLINA ARBORETUM SOCIETY Notes to the Financial Statements For the Years Ended June 30, 2012 and 2011 Note 1 – Description of Activities and Summary of Significant Accounting Policies (continued) Donated Services and Materials A substantial number of volunteers have donated a significant amount of time to the Society’s operations and program services. Contributed services that create or enhance non-financial assets or require specialized skills and are provided by individuals possessing those skills have been recognized as support unless documentation with respect to the value of those services has not been provided. Donated materials and equipment are reflected as contributions in the accompanying financial statements at their estimated fair market value at the date of receipt. Management requires sufficient documentation to support the value of donated materials or equipment before these amounts are recorded in the financial statements. Marketing and Advertising Costs Marketing and advertising costs are charged to operations in the year incurred,
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