audited financial statement - girl scouts...(with summarized financial information for the year...

1650 Harbor Bay Parkway, Suite 100 Alameda, CA 94502-3013 800.447.4475 / www.girlscoutsnorcal.org Alameda-Chico-Eureka-Redding-Red Bluff-San Jose-Santa Rosa-Ukiah

This letter has not been subject to the audit.

February 2015

Greetings from Girl Scouts of Northern California,

We are pleased to share the Report on Audit of Financial Statements for the year ended September 30,

2014, and are proud that during 2014 over 50,000 girls experienced programs that build leadership,

growth mindset, empathy, and problem-solving skills – all while having fun with friends!

Mission Delivery. We grew membership for the third year in a row,

to 50,541 girls, including over 15,000 girls who attend school in

under-resourced communities. Almost 7,300 girls participated in

grant-funded outreach programs in detention centers, shelters,

farmworker camps and afterschool centers. 31,000 girls developed

business smarts through the cookie program, 6,000 girls

participated in science, technology, engineering, and math programs,

and almost 12,000 girls experienced summer camp!

Volunteerism. 31,360 adult members volunteered over 2.5 million

hours. We continued to expand online and in-person training,

including Journey Weekends, where volunteer troop leaders (and

girls) learn about growth-mindset and strategies to help girls set and

achieve goals.

Diversity and Inclusion. We increased Latina membership to 9,000 girls and 2,300 adults (a 14%

increase!), helping to ensure that Girl Scouts is relevant and accessible for more girls and their families.

Community Support and Financial Health. We achieved a surplus budget and completed year three of

our 5-Year, $20 million Campaign for Girls, which has now raised over $11.1 Million to expand outreach

to girls and volunteers, build innovative programs and invest in camp properties. At Camp Bothin we

celebrated a new accessible shower house, exploration trail, and renovated art barn, and at Camp

Butano Creek we broke ground on a new lodge and tree-house village!

Thank you for supporting Girl Scouts of Northern

California and helping to develop tomorrow’s leaders:

girls of courage, confidence, and character who make

the world a better place.

Sincerely,

Diana L. Bell Marina H. Park

President CEO

Financial Statements and

Report of Independent Certified Public Accountants

Girl Scouts of Northern California

September 30, 2014 (with comparative financial

information for September 30, 2013)

Contents

Page

Report of Independent Certified Public Accountants 3

Statement of financial position 5

Statement of activities 6

Statement of functional expenses 7

Statement of cash flows 8

Notes to financial statements 9

Grant Thornton LLP 101 California Street, Suite 2700 San Francisco, CA 94111

T 415.986.3900 F 415.986.3916 www.GrantThornton.com

Grant Thornton LLP U.S. member firm of Grant Thornton International Ltd.

3

Report of Independent Certified Public Accountants

To the Board of Directors Girl Scouts of Northern California

We have audited the accompanying financial statements of Girl Scouts of Northern California (the “Council”), which comprise the statement of financial position as of September 30, 2014, and the related statement of activities, functional expenses and cash flows for the year 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.

Auditor’s responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s 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.

Grant Thornton LLP U.S. member firm of Grant Thornton International Ltd

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We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Girl Scouts of Northern California as of September 30, 2014, and the results of its changes in net assets and its cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America.

Report on 2013 summarized comparative information We have previously audited the Council’s 2013 financial statements (not presented herein), and we expressed an unmodified audit opinion on those audited financial statements in our report dated January 31, 2014. In our opinion, the accompanying summarized comparative information as of and for the year ended September 30, 2013 is consistent, in all material respects, with the audited financial statements from which it has been derived.

San Francisco, California March 3, 2015

Girl Scouts of Northern California September 30, 2014

(with summarized financial information for the year ended September 30, 2013)

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The accompanying notes are an integral part of this financial statement.

Statement of financial position

2014 2013

Assets

Current assets

Cash 1,218,277$ 4,780,400$

Short-term investments 4,513,518 -

Pledges receivable, net 351,597 546,119

Accounts receivable 141,766 87,745

Inventory 413,194 468,826

Prepaid expenses and other assets 414,151 342,329

Total current assets 7,052,503 6,225,419

Long-term assets

Long-term prepaid expenses 6,926 29,942

Long-term investments 7,552,502 7,491,056

Pledges receivable long-term, net 209,945 339,154

Property and equipment, net 7,742,850 7,382,367

Total long-term assets 15,512,223 15,242,519

Total assets 22,564,726$ 21,467,938$

Liabilities and net assets

Current liabilities

Accounts payable 207,493$ 591,821$

Accrued expenses 1,662,443 1,334,036

Custodial funds 97,522 116,107

Deferred revenue 172,820 272,088

Current portion of capital lease obligation - 27,034

Total current liabilities 2,140,278 2,341,086

Deferred rent liability 110,728 34,517

Total long-term liabilities 110,728 34,517

Total liabilities 2,251,006 2,375,603

Net assets:

Unrestricted 16,831,811 15,210,927

Temporarily restricted 2,499,396 2,899,304

Permanently restricted 982,513 982,104

Total net assets 20,313,720 19,092,335

Total liabilities and net assets 22,564,726$ 21,467,938$

September 30,

Girl Scouts of Northern California For the year ended September 30, 2014


6


Statement of activities

2013

Temporarily Permanently

Unrestricted restricted restricted Total Total

Revenue

Public support 556,972$ 1,527,598$ -$ 2,084,570$ 2,477,546$

Special events Gross revenue 200,865 28,134 - 228,999 66,876

Cost of special events (44,944) - - (44,944) (40,981)

Net special events income 155,921 28,134 - 184,055 25,895

Program related revenueProduct sales

Gross revenue 22,135,052 - - 22,135,052 20,306,583

Cost of sales (9,650,603) - - (9,650,603) (9,684,245)

Net product sales income 12,484,449 - - 12,484,449 10,622,338

Other program related revenue

Program event fees 641,359 - - 641,359 628,369

Outdoor program fees 2,018,730 - - 2,018,730 1,972,492

Less financial aid (70,286) - - (70,286) (68,637)

Net program event and outdoor program fees 2,589,803 - - 2,589,803 2,532,224

Other program fees 58,599 - - 58,599 58,669

Total other program related revenue 2,648,402 - - 2,648,402 2,590,893

Merchandise sales

Gross receipts 1,284,235 - - 1,284,235 1,404,231

Less cost of sales (801,450) - - (801,450) (911,967)

Net sales of merchandise 482,785 - - 482,785 492,264

Total program related revenue 15,615,636 - - 15,615,636 13,705,495

Other revenue (losses)Interest and dividend income 242,029 31,568 409 274,006 204,618

Gain on investments 64,921 14,648 - 79,569 435,420

Miscellaneous income 282,740 - - 282,740 166,119

Rental income 323,976 - - 323,976 305,157

Total other revenue 913,666 46,216 409 960,291 1,111,314

Total public support and revenue 17,242,195 1,601,948 409 18,844,552 17,320,250

Net assets released from restrictions

Purpose and time restrictions 2,001,856 (2,001,856) - - -

Total net assets released from restriction 2,001,856 (2,001,856) - - -

Total revenue 19,244,051 (399,908) 409 18,844,552 17,320,250

Operating expensesProgram services 14,835,547 - - 14,835,547 14,361,513

Supporting services

Management and general 1,598,245 - - 1,598,245 1,585,397

Fundraising 1,189,375 - - 1,189,375 1,054,170

Total supporting services 2,787,620 - - 2,787,620 2,639,567

Total operating expenses 17,623,167 - - 17,623,167 17,001,080

Change in net assets 1,620,884 (399,908) 409 1,221,385 319,170

Net assets, beginning of year 15,210,927 2,899,304 982,104 19,092,335 18,773,165

Net assets, end of year 16,831,811$ 2,499,396$ 982,513$ 20,313,720$ 19,092,335$

2014

For the years ended September 30,



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Statement of functional expenses

2013

Total

Program Management Fund- supporting Total

services and general raising services expenses Total

Cost of revenues:Cost of goods sold: product sales 9,650,603$ -$ -$ -$ 9,650,603$ 9,684,245$

Cost of goods sold: merchandise sales 801,450 - - - 801,450 911,967

Cost of special events 4,917 - 40,027 40,027 44,944 40,981

Cost of revenue 10,456,970 - 40,027 40,027 10,496,997 10,637,193

Operating expenses:Salaries 7,055,844 661,796 622,654 1,284,450 8,340,294 7,983,558

Benefits 2,034,534 147,137 154,414 301,551 2,336,085 2,112,797

Payroll taxes 447,525 82,298 65,029 147,327 594,852 566,302

Contract hire 37,666 1,720 15,127 16,847 54,513 239,020

Workers' compensation insurance 199,863 36,754 29,042 65,796 265,659 177,255

Telephone and postage 147,186 25,794 28,533 54,327 201,513 218,292

Outside services 810,816 196,866 86,634 283,500 1,094,316 1,285,265

Supplies 832,978 27,275 12,595 39,870 872,848 910,767

Occupancy 955,447 188,535 51,171 239,706 1,195,153 1,023,188

Equipment expense 191,997 61,866 6,067 67,933 259,930 122,517

Printing and publications 167,466 5,576 44,120 49,696 217,162 208,120

Transportation 585,668 9,453 8,252 17,705 603,373 572,183

Conferences and meetings 58,634 1,494 4,824 6,318 64,952 44,711

Dues 4,664 842 6 848 5,512 7,080

Interest 3,177 3,674 414 4,088 7,265 3,110

Individual financial assistance 131,697 - - - 131,697 111,944

Insurance 362,250 6,258 1,778 8,036 370,286 368,913

Recruitment 51,696 19,378 2,576 21,954 73,650 49,940

Bank and credit card charges 138,265 7,165 6,273 13,438 151,703 185,207

Other expenses 58,299 21,645 17,681 39,326 97,625 57,227

Total operating expense

before depreciation 14,275,672 1,505,526 1,157,190 2,662,716 16,938,388 16,247,396

Depreciation and amortization expense 559,875 92,719 32,185 124,904 684,779 753,684

Total operating expenses 14,835,547 1,598,245 1,189,375 2,787,620 17,623,167 17,001,080

Total expenses 25,292,517$ 1,598,245$ 1,229,402$ 2,827,647$ 28,120,164$ 27,638,273$

2014

For the years ended September 30,



8


Statement of cash flows

2014 2013

Cash flows from operating activities:Change in net assets 1,221,385$ 319,170$

Adjustments to reconcile change in net assets to net cash

provided by operating activities:

Depreciation and amortization 684,779 753,684

Net realized and unrealized gains on investments (79,882) (435,420)

Change in discount on pledges receivable (13,520) (155)

Gain on disposal of equipment (7,002) (113)

Proceeds from sales of donor restricted securities (24,742) -

Change in operating assets and liabilities:

Accounts and pledges receivable 283,230 294,591

Inventory 55,632 73,551

Prepaid expenses and other assets (48,806) 1,277

Accounts payable (251,730) 295,719

Accrued expenses and other liabilities 90,114 194,084

Custodial funds (18,585) 2,845 Deferred revenue (99,268) 107,761 Deferred rent 76,211 34,517

Net cash provided by operating activities 1,867,816 1,641,511

Cash flows from investing activities:Acquisition of property and equipment (949,163) (715,503)

Proceeds from disposal of equipment - 113

Purchases of investments (14,199,109) (1,126,396)

Proceeds from sale of investments 9,704,028 1,454,197

Net cash used in investing activities (5,444,244) (387,589)

Cash flows from financing activities: Payments on capital lease obligations (10,437) (42,312) Payments on mortgages payable - (7,584)

Proceeds from sales of donor restricted securities 24,742 - Net cash provided by/(used in) financing activities 14,305 (49,896)

Increase/(decrease) in cash and cash equivalents (3,562,123) 1,204,026

Cash and cash equivalents, beginning of year 4,780,400 3,576,374

Cash and cash equivalents, end of year 1,218,277$ 4,780,400$

Supplimental disclosure of cash flow information:

Cash paid for interest 359$ 3,110$

Noncash investing activities:

Noncash adjustment for capital expenditures 316,575$ 210,880$

Years ended September 30,



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Notes to financial statements

Note 1 – Organization and summary of significant accounting principles

Organization Girl Scouts of Northern California (the “Council”) helps girls develop the skills and knowledge to become confident and build bright futures. That means better, stronger communities for everyone around them.

The Council includes over 50,000 girl and 31,000 adult members from Santa Clara County to the Oregon border and from Chico to the Pacific Ocean, covering over 33,000 square miles. The Council is focused on five core goals:

1. Mission Delivery - Providing leadership opportunities for “all girls everywhere,” through developing volunteers and funding to support strong programs.

2. Diversity and Inclusion - The Council serves girls in low income and rural communities, through staff- and volunteer-led troops, camp financial aid, after-school and weekend programs. The Council has developed and is continuing to expand innovative programs that reach girls and their families in Vietnamese and Hispanic communities.

3. Vibrant Programs – Fun, friendship and leadership development are the foundation of all Girl Scout programs. The Council partners with other community organizations to create opportunities that girls want and experiences that change lives, focusing on:

a. Green By Nature - Through environmental programs like Girl Scouts Save the Bay, girls explore California’s eco-systems, spend time in nature and learn how to “act now” to protect Northern California’s waterways.

b. Girls Go Tech - Girls explore science, technology, engineering and math through hands-on experiences like robotics teams, in-school and after-school science programs, career exploration days and programs in a box, that include everything from designing toys to building “green” doll houses.

c. Growing Strong - The Council makes well-being a priority and help girls grow strong in body, mind and spirit–through physical challenges like summer camp, rock climbing, self-discovery through the arts and drama, education on topics like nutrition and opportunities to give back through community service projects.

d. Business Smarts - The cookie program and fall sale teach business skills like goal-setting, money handling, public speaking, budgeting and sales.



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Note 1 – Organization and summary of significant accounting principles (continued)

Organization, continued

4. Engaged Volunteers - Adult volunteers are the core of Girl Scouts of Northern California, contributing their time and energy to lead Girl Scout troops, train volunteers and run product sales, camps and programs. With volunteers pulled in more directions than ever, the Council is committed to simplifying their work through technology and training.

5. Financial Strength - The Council mainly derives its revenues and support from donors, grants, special events, product sales, and program fees. The Council was formed by the merger of five Girl Scout Councils on October 1, 2007. During the year ended September 30, 2014, the Council continued to focus on prudent financial management to deliver our mission both today and over the long term.

The accompanying financial statements do not include financial data for individual Girl Scout troops and other groups such as service units, committees and volunteer-led camps.

Cash does not include bank accounts held by Girl Scout troops and other groups such as service units, committees and volunteer-led camps under the federal identification number of Girl Scouts of Northern California. Bank accounts held by troops and groups are under the federal identification number but are not under the control of the Council. The Council has no signature authority over and will not access these funds other than with permission from the troop as long as a troop or group is functioning according to Girl Scout policy and procedure. Individual troops and groups have the responsibility to use funds in their control for the purposes of Girl Scouting as determined by the members and adult volunteers. If a troop or group is about to disband, the troop may use the funds to pay for lifetime memberships in Girl Scouts of the USA, to pay for a final group activity, to donate to groups or projects they consider worthwhile, to donate to the Juliette Lowe Fund (a separate nonprofit organization) or to the Girl Scouts of Northern California’s financial assistance funds. If a troop or group disbands without making a determination as to the final distribution of funds, the funds will revert to the Council for holding for a period of 12 months in case the troop re-forms or members of the troop join other troops. If, after this time, funds are not claimed, they will be considered a donation to the Girl Scouts of Northern California financial assistance fund. Annually, troops and groups are required to report to Girl Scouts of Northern California the balance in their accounts and the sources and uses of funds since the last reporting date.

Campaign for girls During the year ended September 30, 2012, the Council publicly launched a campaign to raise $20 million for the Council. The campaign will provide the resources to expand leadership opportunities for girls, reach underserved communities, and improve camps and program centers for the next generation of leaders.



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Basis of accounting

The financial statements have been prepared on the accrual basis of accounting, wherein revenues are recognized as earned and expenses are recorded when incurred.

Financial statement presentation Generally accepted accounting principles in the United States of America (“US GAAP”) require that the Council present information about its financial position and activities in three classes of net assets: unrestricted, temporarily restricted, and permanently restricted, with the changes in each of these classes of net assets presented in the statement of activities.

Unrestricted - Unrestricted net assets have no donor-imposed restrictions and result from revenues from providing services, producing and delivering goods, receiving unrestricted contributions, and receiving dividends or interest from investing in income-producing assets, less expenses incurred in providing services, producing and delivering goods, raising contributions, and performing administrative functions.

Temporarily restricted - The Council reports gifts of cash and other assets 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 are released from restrictions. At September 30, 2014 and 2013, the Council had temporarily restricted net assets of $2,499,396 and $2,899,304, respectively.

Permanently restricted - Permanently restricted net assets are subject to donor imposed stipulations that they be invested to provide a perpetual asset or source of income to the Council. Generally, donors of these assets require the Council to maintain and invest the original contributions in perpetuity, but permit the use of some or all investment earnings and also any unrealized gain for general or specific purposes. At September 30, 2014 and 2013, the Council had permanently restricted net assets of $982,513 and $982,104, respectively.

Revenues are reported as increases in unrestricted net assets unless use of the related assets is limited by donor-imposed restrictions. Expenses are reported as decreases in unrestricted net assets. Gains or losses on investments and other assets or liabilities are reported as increases or decreases in unrestricted net assets unless their use is restricted by explicit donor stipulation or by law.

Cash and cash equivalents Management considers all highly-liquid investments with a maturity of three months or less at the purchase date to be cash and cash equivalents.



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Credit risk

The Council maintains cash and cash equivalents with commercial banks and other major financial institutions. Cash equivalents include overnight investments and money market funds. Cash balances may exceed the Federal Deposit Insurance Corporation (“FDIC”) limits from time to time.

The Council’s investments have been placed with high quality financial institutions. The Council monitors these investments and has not experienced significant credit losses. The credit risk in pledges receivable is addressed as the Council evaluates the collectability of pledges based on experience and available information about the donors.

Investments Equity securities are reported at estimated fair value based on quoted market prices and are subject to market fluctuations. Investment transactions are recorded on trade date. Gains and losses that result from market fluctuations are recognized in the period such fluctuations occur and are included as increases or decreases in unrestricted net assets in the statement of activities unless their use is temporarily or permanently restricted by the donor. Realized gains or losses resulting from sales or maturities are calculated on an adjusted cost basis. Adjusted cost is the estimated fair value of the security at the beginning of the year, or the cost if purchased during the year. Dividend and interest income are accrued when earned.

Investments of $4,513,518 are classified as short term investments as of September 30, 2014. These are intended to be used for general operations during the short term. Investments received as contributions are recorded at the estimated fair value at the date of the contribution.

Accounts receivable Accounts receivable consists of amounts due from troops for product sales, from vendors for deposits, payments for membership events, and product sale checks that were returned due to nonsufficient funds. The Council generally remits these nonsufficient funds to a collection agency for collections. The Council estimates the amount to be collected based upon historical experience and management evaluation of outstanding accounts receivable. There was no allowance for uncollectible accounts at September 30, 2014 or 2013. Uncollectible receivables are written off by the Council after the exhaustion of all collection efforts or when further collection efforts are expected to be useless based on historical collection percentages.

Inventory Inventory consists of Girl Scout merchandise and supplies and is stated at the lower of weighted-average cost or market value.



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Property and equipment

Property and equipment is stated at cost or, if donated, at appraised value at the time of donation. The Council capitalizes all acquisitions of property and equipment with a cost or value in excess of $5,000 and with an estimated useful life in excess of one year. When property or equipment is retired or sold, the cost and accumulated depreciation of dispositions are removed from the accounts, and any gain or loss is reflected as a change in unrestricted net assets. Maintenance and repairs are charged to expense as incurred.

The Council’s construction in progress at September 30, 2014 and 2013 is stated at cost. No provision for depreciation is made on construction in progress until such time as the relevant assets are completed and placed in service. Leasehold improvements are depreciated over the shorter of the useful life or remaining lease term.

Property and equipment is depreciated using the straight-line method over estimated useful lives as follows:

Furniture and fixtures 5 to 20 years Machinery and equipment 3 to 10 years Buildings and improvements 5 to 50 years Vehicles 5 years Software 3 to 5 years

Custodial funds Custodial funds consist primarily of membership fees collected which will be remitted to Girl Scouts of the USA and other fees collected for the future use of girl members.

Deferred revenue Deferred revenue consists of revenue collected for events that have not yet occurred and rental income collected prior to the related rental period.

Revenue recognition

Public support and contributions receivable - Contributions, including unconditional pledges (contributions receivable), are recognized as revenue in the period received or unconditionally promised. Unconditional pledges receivable becoming due in the next year are recorded at their net realizable value. Unconditional pledges receivable due in subsequent years are reported at the present value of their net realizable value, using risk-adjusted interest rates applicable to the years in which the promises are received. Contributions related to legacies and bequests are recognized when the Council receives written notice that the donation is irrevocable. The allowance for uncollectible contributions at September 30, 2014 and 2013 was $10,500 and $0, respectively.



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Revenue recognition, continued

The Council performed services under government and non-government grants and exchange transaction agreements and entered into new exchange transaction agreements, primarily with governmental agencies. Under the terms of these agreements, the Council agreed to perform certain services in exchange for reimbursement of some or all expenses associated with the contracted program. The Council accounts for exchange transactions as fee for service and/or reimbursement arrangements in which revenue is recognized as services are performed and costs are incurred according to the terms of the underlying agreement.

Donated services received are recorded as contribution revenue and matching expense at the estimated fair value of the services when the services are provided. Only those donated services which require specialized skills, are provided by individuals who possess those skills, and for which the service would need to be purchased if not contributed are recorded in the financial statements in accordance with US GAAP. These are disclosed in detail in Note 9. A large number of volunteers contribute significant amounts of time to the activities of the Council without compensation, including members of the board of directors, committees, and troop and service unit leaders. The financial statements do not reflect the value of those contributed services because they do not meet the recognition criteria.

The Council leases or in other cases has use permits for various properties in California for some of its program activities at discounted lease rates. The fair value of the use of these properties has not been recorded in the financial statements at September 30, 2014 or 2013 as the value is not material.

The Council records revenue from special events at the time of the event. Gross revenue from special events held during the years ended September 30, 2014 and 2013 was $228,999 and $66,876, respectively.

Program event fees - Program fees consist of camp and event fees and other related programs for girls that are held throughout the year to develop a sense of accomplishment and increase self-confidence and leadership skills. Revenue from program fees are recorded when earned and are shown net of financial aid.

Product sales - Girl Scout product sale activities help girls learn invaluable skills such as goal-setting, decision-making, money management, and delivering on a promise. Each troop or group that sells products earns money for its treasury and plans how to spend that money to achieve its goals. The Council’s share of proceeds from the product sale activities helps to provide the financial assistance needed to make Girl Scouting available for all girls, to fund camp and program activities, to keep event/camp fees for all members to a minimum, to improve and maintain camp and other activity sites, to recruit and train volunteer leaders, and to pay Council operating expenses.



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Revenue recognition, continued

Revenue is recognized once delivery of products has occurred, the price is fixed or determinable, and collectability is reasonably assured.

Merchandise sales - Merchandise sales consist primarily of sales of Girl Scout-related equipment and supplies. Sales occur primarily at the Council’s retail stores and via an on line store. Proceeds from merchandise sales help to cover the cost of maintaining the Council retail stores as a service to members. Revenue is recognized at the time of the sale.

Rental income - Rental income consists primarily of rental fees earned from renting out camp facilities to troops and nonprofit organizations when not in use and rental of a portion of one office building on an annual basis. Revenue is recognized as the rental period occurs.

Miscellaneous income - Miscellaneous income consists primarily of reimbursements from vendors for some expenses and prepayments.

Shipping and handling costs - Freight billed to customers is considered sales revenue and the related freight costs are included as a cost of sales.

Functional allocation of expenses

Certain costs of providing various programs and other activities are summarized on a functional basis in the statement of activities and statement of functional expenses. Accordingly, certain costs are allocated among the programs and supporting services benefited.

Income taxes

The Internal Revenue Service has determined that the Council is exempt from income taxes except for taxes on unrelated taxable business income under Section 501(c)(3) of the Internal Revenue Code. The Franchise Tax Board has determined that the Council is exempt from California income and Franchise tax under section 23701(d) of the California Revenue and Taxation Code. In addition, the Council has been determined by the Internal Revenue Service not to be a private foundation within the meaning of Section 509(a) of the Code. As a result, the Council is exempt from paying income taxes, and thus no provision for income taxes has been reflected in these financial statements. As required by US GAAP, the Council has identified and evaluated its significant tax positions for which the statute of limitations remain open and determined there is no material unrecognized benefit or liability to be recorded.

The open tax years are the years ended September 30, 2011 through September 30, 2014 for federal tax purposes and the years ended September 30, 2010 through September 30, 2014 for California tax purposes. There have been no material changes in unrecognized benefits at September 30, 2014 or 2013, nor are any material changes anticipated in the twelve months following September 30, 2014. There have been no related tax penalties or interest, which would be classified as a tax expense in the statement of activities.



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Use of estimates

The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect certain reported amounts and disclosure. Accordingly, actual results could differ from those estimates.

Recent accounting pronouncements

In October 2012, Financial Accounting Standards Board (“FASB”) issued the Accounting Standards Update (“ASU”) No. 2012-05 – Statement of Cash Flows (“Topic 230”) Not-for-Profit Entities – Classifications of the Sale Proceeds of Donated Financial Assets in the Statement of Cash Flows. The update requires a not-for-profit entity to classify sale proceeds of donated financial assets consistent with cash donations as an operating activity, if such assets were converted nearly immediately into cash, unless the donor restricted the use of the proceeds to long-term purposes, in which case those cash receipts should be classified as a financing activity. If those assets were not immediately converted to cash, the proceeds upon sale should be classified as an investing activity. This guidance was effective for the Council beginning October 1, 2013 and did not have a material impact on the financial statements.

Comparative information and reclassifications The Council’s financial statements include comparative financial information. Certain reclassifications have been made to prior year balances in order to conform to the current year presentation. These reclassifications had no impact on net asset classifications or the change in net assets as previously reported.

Note 2 – Pledges receivable

Contributions, including unconditional promises to give (pledges receivable), are recognized as revenues in the period received. Conditional promises to give are not recognized until they become unconditional, that is when the conditions on which they depend are substantially met. Contributions of assets other than cash are recorded at their estimated fair values. Contributions to be received after one year are discounted at a 4% risk-adjusted rate.

2014 2013 Pledges receivable at September 30 are expected to be collected in: Less than one year $ 362,097 $ 546,119 One year to five years 226,761 369,490

Total pledges receivable 588,858 915,609 Less unamortized discount to present value (16,816) (30,336) Less allowance for uncollectible pledges (10,500) -

Total pledges receivable, net $ 561,542 $ 885,273



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Note 3 – Concentration of credit risk

Support and revenue The Council is dependent to some extent upon donations, bequests, and other support (including time contributed) from individuals, foundations, corporations and other entities. If the level of this support varies, there may be a resulting negative impact upon the level and types of activities and program services offered by the Council.

The Council receives approximately 66% of its public support and revenue from net product sales and receives most of its revenue from the San Francisco Bay Area in the following counties: Santa Clara, Alameda, Contra Costa, Marin, San Francisco and San Mateo.

Investments Investments are generally exposed to various risks, such as interest rate, credit and overall market volatility. To address the risk, the Council maintains a formal investment policy that sets out performance criteria, investment guidelines, asset allocation guidelines and requires review of the investment manager’s performance. Investments are managed by multiple investment managers, who have responsibility for investing the funds in various investment classes. This entire process is actively overseen by an Investment Committee that includes volunteer investment professionals who are non-members of the Board of Directors.

Note 4 – Investments

Investments are reported at fair value. Fair value is defined as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. A hierarchal disclosure framework prioritizes and ranks the level of market price observability used in measuring investments at fair value. Investments measured and reported at fair value are classified and disclosed in one of the following categories:

Level I - Quoted prices are available in active markets for identical investments as of the reporting date. The investments in Level I are publicly traded.

Level II - Pricing inputs, including broker quotes, are generally those other than exchange quoted prices in active markets, which are either directly or indirectly observable as of the reporting date and fair value is determined through the use of models or other valuation methodologies.

Level III - Pricing inputs are unobservable for the investment and include situations where there is little, if any, market activity for the investment. The inputs into the determination of fair value require significant management judgment or estimation.



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Note 4 – Investments (continued)

The following table summarizes the Council’s investments at fair value as of September 30 by level within the fair value hierarchy:

Assets measured at fair value on a recurring basis at September 30, 2014 Level I Level II Level III Total

Money market funds $ 7,866 $ - $ - $ 7,866 Bond mutual funds 7,638,691 - 6,422 7,645,113 Equity mutual funds 3,144,747 - - 3,144,747 Balanced mutual funds 1,268,294 - - 1,268,294

Total $ 12,059,598 $ - $ 6,422 $ 12,066,020

Assets measured at fair value on a recurring basis at September 30, 2013 Level I Level II Level III Total

Money market funds $ 10,929 $ - $ - $ 10,929 Bond mutual funds 2,727,433 - 6,022 2,733,455 Equity mutual funds 3,542,515 - - 3,542,515 Balanced mutual funds 1,204,157 - - 1,204,157

Total $ 7,485,034 $ - $ 6,022 $ 7,491,056

With regard to its invested assets, the Council adopted an Investment Policy calling for three separate portfolios to be created for different investment goals. Additionally, the Council determined to fund its cash flow needs from investments rather than borrowing when practical. At September 30, 2014, the Council expected to fund its cash flow needs from current operating cash, thus decreasing the holdings of money market funds that were needed in prior years. The Council maintained a prudent and diversified portfolio managed by an Investment Committee staffed by volunteer investment professionals. During the years ended September 30, 2014 and 2013, the Council was in compliance with its investment policy.

The Council’s investment plan is intended to maximize the income and principal growth of the investment portfolio at a level of risk deemed acceptable by the Council’s Board of Directors.

In July 2009, the Council adopted a spending policy to comply with Uniform Prudent Management of Institutional Funds Act (“UPMIFA”). The policy calls for the allowable distribution from endowment investments to be calculated as a percentage of the average balance of the previous twelve quarters, with such percentage to be no greater than the rate of return earned on the endowment fund during the previous twelve quarters. If such calculation would result in a distribution equal to 4% or more of the average balance of the previous twelve quarters, then the Investment Committee will set the spending rate percentage at 4%, subject to review by the Board of Directors. The policy was amended on July 17, 2010 to reduce the spending rate percentage to 4%.



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Note 4 – Investments (continued)

The spending rate policy shall be reviewed annually by the Investment Committee which will recommend any adjustments to the Board of Directors. The Investment Committee will recommend adjustments to the spending rate percentage as it deems appropriate in order to fulfill the purposes described in the spending rate policy and the Investment Policy, but in no event shall the spending rate percentage be higher than 4% unless authorized by a majority of the Board based on a determination that such higher spending rate is necessary to support programs in a manner that is consistent with donor’s intent.

Any portion of the annual, distributable funds not distributed in any given year will be retained in the endowment funds and may be available for expenditure in future years, upon determination of the Finance Committee.

Net gains from investments for the years ended September 30, which were included in operations, were as follows:

2014 2013

Realized gain $ 398,869 $ 100,145 Unrealized gain / (loss) (319,300) 335,275 Interest and dividends 274,006 204,618

Net gains and interest and dividend income $ 353,575 $ 640,038

Investment fees for the years ended September 30, 2014 and 2013 amounted to $388 and $396, respectively.

Note 5 – Property and equipment

Property and equipment consist of the following at September 30:

2014 2013 Buildings and improvements $ 15,866,386 $ 15,444,335 Leasehold improvements 219,492 219,492 Equipment 1,367,698 1,588,640 Furniture and fixtures 542,575 856,622 Vehicles 500,365 500,365 Software 124,742 177,186

18,621,258 18,786,640 Less: accumulated depreciation and amortization (13,555,846) (13,519,587)

Land 1,751,811 1,751,811 Construction in progress 925,627 363,503

Total property, plant, and equipment, net $ 7,742,850 $ 7,382,367



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Note 6 – Temporarily restricted net assets

Temporarily restricted net assets are available for the following purposes at September 30:

2014 2013 Adult development for working with girls aged 10-17 (purpose restriction) $ 278,469 $ 341,153 Financial assistance and other (time and purpose restriction) 218,896 189,153 Property improvements (purpose restriction) 567,135 1,129,354 Programs for Glenn County (purpose restriction) 75,659 80,590 Outreach/GIFT (purpose restriction) 244,879 218,134 Hispanic Initiative (purpose restriction) 105,873 163,138 Girls Go Tech (purpose restriction) 300,017 21,278 Got Choices girls in detention centers (purpose restriction) 145,672 88,046 Green by Nature/Girls Scouts Save the Bay (purpose restriction) 30,884 24,872 Girls with disability (purpose restriction) 34,476 37,475 Camperships (purpose restriction) 19,103 44,065 Unappropriated endowment earnings (time restricted) 176,589 164,560 Campaign for Girls (time restricted) 301,744 397,486

Total temporarily restricted net assets $ 2,499,396 $ 2,899,304

Note 7 – Endowments

The Council’s endowment consists of 16 individual funds established for a variety of purposes. Its endowment includes only donor-restricted funds. As required by US GAAP, net assets associated with endowment funds are classified and reported on based on the existence or absence of donor-imposed restrictions. The Board of Directors of the Council has interpreted the UPMIFA as requiring the preservation of the original gift as of the gift date of the donor-restricted endowment funds, absent explicit donor stipulations to the contrary.

As a result of this interpretation, the Council classifies as permanently restricted net assets (a) the original value of gifts donated to the permanent endowment, (b) the original value of subsequent gifts to the permanent endowment, and (c) accumulations to the permanent endowment made in accordance with the direction of the applicable donor gift instrument, if any, at the time the accumulation is added to the fund. The remaining portion of the donor-restricted endowment fund that is not classified in permanently restricted net assets is classified as temporarily restricted net assets until those amounts are appropriated for expenditure by the organization in a manner consistent with the standard of prudence prescribed by UPMIFA. In accordance with UPMIFA, the Council considers the following factors in making a determination to appropriate or accumulate donor-restricted endowment funds:

1. The duration and preservation of the fund;

2. The purposes of the Council and the donor-restricted endowment funds;

3. General economic conditions;

4. The possible effect of inflation and deflation;

5. The expected total return from income and the appreciation of investments;

6. Other resources of the organization; and,

7. The investment policies of the organization.



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Note 7 – Endowments (continued)

Endowment net asset composition by type of fund for the fiscal years ended September 30, 2014 and 2013 was as follows:

2014

Unrestricted Temporarily

restricted Permanently

restricted Total Donor-restricted endowment funds $ - $ 176,589 $ 705,543 $ 882,132

Total funds $ - $ 176,589 $ 705,543 $ 882,132

2013



restricted Total Donor-restricted endowment funds $ - $ 164,560 $ 705,134 $ 869,694

Total funds $ - $ 164,560 $ 705,134 $ 869,694

Changes in endowment net assets for the fiscal years ended September 30, 2014 and 2013:

Fiscal year ended September 30, 2014



restricted Total Endowment net assets at October 1, 2013 $ $ 164,560 $ 705,134 $ 869,694 Investment return:

Investment income - 89,641 - 89,641 Net appreciation/(unrealized loss) - (43,017) - (43,017)

Total investment return - 46,624 - 46,624 Appropriation of endowment assets for expenditure - (34,595) - (34,595) Reinvestment of endowment earnings - - 409 409

Endowment net assets at September 30, 2014 $ - $ 176,589 $ 705,543 $ 882,132

Fiscal year ended September 30, 2013



restricted Total Endowment net assets at October 1, 2012 $ - $ 98,761 $ 704,745 $ 803,506 Investment return:

Investment income - 63,338 - 63,338 Net appreciation - 37,060 - 37,060

Total investment return - 100,398 - 100,398 Appropriation of endowment assets for expenditure - (34,599) - (34,599) Reinvestment of endowment earnings - - 389 389

Endowment net assets at September 30, 2013 $ - $ 164,560 $ 705,134 $ 869,694



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Note 7 – Endowments (continued)

Permanently restricted net assets consist of the following at September 30:

2014 2013 Investments $ 705,543 $ 705,134 Land—Camp Bothin/Arequipa 276,970 276,970

Total permanently restricted net assets $ 982,513 $ 982,104

With minor exceptions, income generated from the investment of the cash donations is expendable to support any activities of the Council. Camp Bothin/Arequipa was deeded to the Council in October 1988 by the Henry E. Bothin Center and the Mann County Open Space District solely for the purpose of conducting Girl Scout programs and with the restriction that the land not be sold.

Funds with deficiencies - From time to time, the fair value of assets associated with individual donor restricted endowment funds may fall below the level that the donor or UPMIFA requires the Council to retain as a fund of perpetual duration. There were no such deficiencies of this nature as of September 30, 2014 or 2013.

Return objectives and risk parameters - The Council 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 seeking to maintain the purchasing power of the endowment assets. Endowment assets include those assets of donor-restricted funds that the Council must hold in perpetuity or for a donor-specified period(s). Under this policy, as approved by the Board of Directors, the endowment assets are invested in a manner that is intended to produce results that grow the fund. The Council expects its endowment funds, over time, to provide an average return of approximately 6% annually. Actual returns in any given year may vary from this amount.

Strategies employed for achieving objectives - To satisfy its long-term rate-of-return objectives, the Council 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). The Council targets a diversified asset allocation that places a balanced emphasis on equity-based investments to achieve its long-term return objectives within prudent risk constraints.

Spending policy and how the investment objectives relate to spending policy - The Council has a policy of appropriating for distribution each year up to 4% of the endowment fund’s average fair value over the previous 12 quarters. In establishing this policy, the Council considered the long-term expected return on its endowment. Accordingly, over the long-term, the Council expects the current spending policy to allow its endowment to grow 6% annually and set its spending rate at 4% annually. This is consistent with the Council’s objective to maintain the purchasing power of the endowment assets held in perpetuity or for a specified term as well as to provide additional real growth through new gifts and investment return.



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Note 8 – Net assets released from restriction

Net assets were released from donor restrictions by incurring expenses satisfying the restricted purposes by the donor as follows during the years ending September 30:

2014 2013 Adult development for working with girls aged 10-17 (purpose restriction) $ 315,090 $ 104,966 Financial assistance and other (time and purpose restriction) 96,296 110,863 Property improvements (purpose restriction) 822,463 251,358 Programs for Glenn County (purpose restriction) 4,931 5,465 Outreach/GIFT (purpose restriction) 192,597 187,476 Hispanic Initiative (purpose restriction) 85,588 73,403 Girls Go Tech (purpose restriction) 63,317 280,838 Got Choices girls in detention centers (purpose restriction) 177,772 248,012 Green by Nature/Girls Scouts Save the Bay (purpose restriction) 39,114 58,863 Girls with disability (purpose restriction) 3,000 2,664 Camperships (purpose restriction) 63,158 42,717 Appropriated endowment earnings (time restricted) 24,383 24,397 Campaign for Girls (time restricted) 114,147 80,540

Total temporarily restricted net assets released $ 2,001,856 $ 1,471,562

Note 9 – Contributed goods and services

Contributed professional services were received and used for the following purposes during the year ended September 30:

2014 2013

Donated consulting services $ - $ 77,045 Other donated services 240 1,700 Gifts in kind for special events 11,866 10,457 Contributed goods 37,216 31,606

Total contributed goods and services recognized in public support and special events revenues $ 49,322 $ 120,808

Note 10 – Product sales

Product sales are detailed as follows for the years ended September 30, 2014 and 2013:

Cookiesales

Fallsale Total

2014 Sales $ 19,592,465 $ 2,542,587 $ 22,135,052 Cost of sales 7,924,846 1,725,757 9,650,603

Net sales $ 11,667,619 $ 816,830 $ 12,484,449

2013

Sales $ 17,868,362 $ 2,438,221 $ 20,306,583 Cost of sales 8,041,340 1,642,905 9,684,245

Net sales $ 9,827,022 $ 795,316 $ 10,622,338



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Note 11 – State unemployment insurance

Prior to the year ended September 30, 2013, the Council operated under a nonprofit joint agencies trust self-insurance agreement for state unemployment insurance, and unemployment benefits were charged directly to the Council. Under this arrangement, the Council made periodic deposits to an account from which unemployment benefits were paid.

Beginning in the year ended September 30, 2013, the Council operated under state unemployment insurance program consisting of direct billings from the State of California, Employment Development Department (“EDD”). At September 30, 2014, a liability in the amount of $3,590 was recorded to reflect the September 30, 2014 invoice from EDD. The liability at September 30, 2013 was $7,873. The Council regularly employs approximately 170 employees, each of whom may be entitled to unemployment benefits ranging from $40 to $450 per week for 26 weeks, up to the maximum benefit of $11,700 per employee. The potential liability to the Council for all future months beyond year-end is not determinable at this time, although management believes the amount would not be material to the financial statements.

Note 12 – Line of credit

The Council has a $4,000,000 line of credit with Wells Fargo Bank. Advances on the line of credit bear interest at the prime rate plus 0%, but not less than 4%. The line of credit expires March 10, 2015. The line is secured by the Council’s accounts receivable, inventory, and property and equipment. At September 30, 2014 and 2013, there was no outstanding balance on the line of credit. The line of credit agreement contains various covenants, which require the Council to maintain certain financial ratios and investment balances. At September 30, 2014 and 2013, the Council was in compliance with these requirements.

Note 13 – Capital lease obligations

The Council leased certain equipment under long-term capital lease agreements. Such agreements expired during the year ended September 30, 2014. Amortization of the leased property is included in depreciation expense. The cost and accumulated amortization related to such equipment are as follows as of September 30:

2014 2013 Cost $ - $ 192,754 Less accumulated amortization - (188,268)

Net book value $ - $ 4,486

Interest expense on the capital leases totaled $359 and $2,880 for the years ended September 30, 2014 and 2013, respectively. Future minimum payments on capital leases are none.



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Note 14 – Related party transactions

The Council is a chartered member of Girls Scouts of the USA (“GSUSA”). As part of being a chartered member, the Council collects and passes through membership fees on behalf of GSUSA. The Council also purchases a majority of its merchandise inventory from GSUSA. In fiscal year 2014, approximately 83% of the Council’s merchandise inventory was purchased from GSUSA. The liability to GSUSA for merchandise purchases at September 30, 2014 and 2013 was $33,183 and $136,178, respectively, and is included in accounts payable in the statement of financial position. The total merchandise purchased from GSUSA in fiscal years 2014 and 2013 was $590,290 and $702,960, respectively, and is classified in inventory in the statement of financial position and product and merchandise cost of sales in the statement of activities.

The total paid to GSUSA for membership dues collected on behalf of GSUSA in fiscal years 2014 and 2013 was $264,330 and $269,070, respectively, which are presented net in the statement of activities. GSUSA provided grants to the Council in fiscal years 2014 and 2013 in the amounts of $155,250 and $31,524, respectively, including corporation and foundation gifts, which are included in the public support section in the statement of activities. GSUSA also provided miscellaneous income to offset increased costs for the National Girl Scout Council Retirement Plan in fiscal years 2014 and 2013, in the amount of $161,775 and $112,223, respectively, which are included in miscellaneous income in the statement of activities.

The Council considers members of the Board of Directors, corporate officers, key employees, and their immediate family members to be related parties. Included in pledges receivable for the years ended September 30, 2014 and 2013, are pledges receivable from related parties totaling $141,103 and $191,688, respectively. Included in revenues for the years ended September 30, 2014 and 2013, are contributions from related parties totaling $90,557 and $471,410, respectively, which are included in public support on the statement of activities.

Note 15 – Commitment

Operating leases

The Council leases office space under several operating lease commitments. Rent expense related to these lease commitments was $598,884 for the year ending September 30, 2014. Monthly rental payments increase annually on the anniversary of the rent commencement date. The rent is expensed on a straight-line basis over the life of the lease.

Future minimum rental payments are as follows at September 30, 2014:

Year ending September 30, 2015 $ 376,946 2016 422,164 2017 434,829 2018 443,141 2019 432,774 2020 445,758 2021 459,130 2022 472,904 2023 445,387

Total $ 3,933,033



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Note 15 – Commitment (continued)

Construction contracts

The Council entered into a construction contract for capital improvement projects in Camp Butano during the year ended September 30, 2014. The total value of the contract obligation is $1,943,085, of which $1,701,829 is remaining at September 30, 2014.

Note 16 – Loan

The Council secured a $1,500,000 loan with Wells Fargo Bank during the year ended September 30, 2014 to fund capital improvement projects in Camp Butano. The loan bears interest at the prime rate plus 0%, but not less than 4%, during the first year draw period and 2.95% thereafter. The availability of advances terminates on September 1, 2015 and the loan expires on September 1, 2019. The loan is secured by the Council’s accounts receivable, inventory, and property and equipment. At September 30, 2014, there was no outstanding balance on the loan. The loan agreement contains various covenants, which require the Council to maintain certain financial ratios and investment balances. At September 30, 2014, the Council was in compliance with these requirements.

Note 17 – Pending litigation and claims

From time to time, the Council is involved in legal proceedings in the normal course of business, but does not expect them to have a material adverse effect on the financial statements. As of September 30, 2014 and 2013, the Council has been named as a defendant in an injury claim. The Council is investigating the claim. If the Council were to be found liable the Council believes that it has sufficient insurance to cover the resulting costs.

Note 18 – Defined benefit pension plan

The Council participates in the National Girl Scout Council Retirement Plan (“NGSCRP” or the “Plan”). The Plan is a multi-employer, noncontributory, defined benefit pension plan sponsored by the Girl Scouts of the USA (EIN 13-1624016; PN 002). Effective July 31, 2010, the Plan was frozen to new entrants and to further benefits accruals for existing participants, although previously earned benefits can continue to vest. Accrued benefits earned prior to July 31, 2010 are based on years of service and salary levels.

The Council made contributions into the Plan of $1,002,562 and $809,025 during the fiscal years ended September 30, 2014 and 2013, respectively. These contributions represented 3.7% and 3.1% of total contributions into the Plan. For the year ending December 31, 2014, the Plan implemented a funding improvement strategy, in which the Council was not required to pay a surcharge.



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Note 19 – Defined contribution plan

The Council has a contributory 403(b) defined contribution plan that is available to all regular employees who are expected to work 1000 hours or more each year. The plan became subject to ERISA effective January 1, 2011. For the years ended September 30, 2014 and 2013, the Council matched salary deferrals by employees up to 2.5% of salary. Total payments to the plan for the years ended September 30, 2014 and 2013 totaled $178,283 and $170,260, respectively.

Note 20 – Subsequent events

The Council has evaluated subsequent events through March 3, 2015, the date the financial statements were available to be issued. There were no material subsequent events.

audited financial statement - girl scouts...(with summarized financial information for the year...

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