Nature of operations: The George Gund Foundation (the Foundation) is a private foundation located in Cleveland, Ohio which makes grants to educational, community service, and philanthropic organizations.
Basis of accounting: The Foundation’s financial statements are presented on the accrual basis of accounting. Accordingly, revenues are recorded when earned, and expenses are recognized when incurred. The Foundation has only unrestricted net assets.
Use of estimates: The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Cash and cash equivalents: Cash and cash equivalents consist of highly-liquid investments with maturity dates of three months or less, which are readily convertible into cash.
Investments: Marketable and U.S. Government securities are reported at their market values. Securities traded on a national securities exchange are valued at the last reported trading price on the last business day of the year. Realized gains or losses are determined by comparison of asset cost to net proceeds received. Unrealized gains or losses are determined by comparison of asset cost to market values at the end of the year.
Investments include program-related loans, net of allowance, which are due from various not-for-profit organizations, valued at $8,208,724 and $8,749,350 at December 31, 2017 and 2016, respectively. The notes receivable are due at various dates, from 2018 through 2032 and carry interest at rates between 1% and 2%; principal and interest payment arrangements vary by note. There were no unfunded note commitments as of December 31, 2017 and 2016. The Foundation has an additional mission-related loan due from a not-for-profit organization valued at $623,636 and $724,979 as of December 31, 2017 and 2016, respectively. This investment is secured by a deposit account.
The Foundation invests in certain alternative investments which include investments in limited partnerships. Market values represent the Foundation’s pro rata interest in the net assets of each limited partnership as of December 31, 2017 and 2016, as provided by the fund managers. Market values as of December 31, 2017 and 2016 are not based on audited financial information supplied by the general partner or manager of the funds. Audited information is only available annually based on the partnerships’ or funds’ year end. Management reviews monthly valuations provided by the general partner or manager of the funds and assesses the reasonableness of the fair values provided at the interim dates and included in the financial statements. As of December 31, 2017 and 2016, the Foundation had total unfunded capital commitments related to alternative investments of $1,037,500 and $1,598,806, respectively. There is a conditional unfunded capital commitment of $3,250,000 at December 31, 2017. Because of the inherent uncertainty of the valuation of alternative investments, the market values reflected in the accompanying financial statements may differ significantly from realizable values.
Allowance for uncollectible interest: Investments in program-related loans are stated at the present value of the amount management expects to collect from outstanding balances. Management provides for probable uncollectible amounts through a provision for uncollectible accounts, and a credit to a valuation allowance, based on its assessment of the current status of individual accounts. At December 31, 2017 and 2016, an allowance for uncollectible accounts in the amount of $-0- and $583,000, respectively, is netted against investments in notes receivable.
Interest receivable is stated at the amount management expects to collect from outstanding balances. Management provides for probable uncollectible amounts through a provision for uncollectible interest, and a credit to a valuation allowance, based on its assessment of the current status of individual accounts. At December 31, 2017 and 2016, an allowance for uncollectible interest in the amount of $-0- and $268,886, respectively, is netted against interest receivable.
Furniture, equipment, and leasehold improvements Furniture, equipment, and leasehold improvements are stated at cost. Amortization and depreciation is recorded using both straight-line and accelerated methods over the estimated useful lives of the assets. Depreciation and amortization expense amounted to $57,251 and $53,360 for the years ended December 31, 2017 and 2016, respectively.
Fair value measurement - definition and hierarchy: The Foundation follows FASB ASC 820-10, Fair Value Measurements. Under this standard, fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (i.e., the "exit price") in an orderly transaction between market participants at the measurement date.
In determining fair value, the Foundation uses various valuation approaches, including market, income, and / or cost approaches. FASB ASC 820-10 establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs, and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs that market participants would use in pricing the asset or liability, developed based on market data obtained from sources independent of the Foundation. Unobservable inputs reflect the Foundation's assumptions used in pricing the asset or liability based on the best information available in the circumstances. The hierarchy is broken down into three levels, based on the reliability of inputs, as follows:
Level 1 – Valuations based on quoted prices (unadjusted) in active markets for identical assets or liabilities that the Foundation has the ability to access.
- Assets and liabilities utilizing Level 1 inputs include: exchange-traded equity securities that are actively traded.
Level 2 – Valuations based on quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly.
- Assets and liabilities utilizing Level 2 inputs include: government bonds, corporate bonds, foreign bonds, private equity investments, charitable reserve funds, and program related savings.
Level 3 – Valuations based on inputs that are unobservable and significant to the overall fair value measurement.
- Assets and liabilities utilizing Level 3 inputs include: equity securities that are not actively traded, private equity investments, and program related/other investments held in loans.
Recent accounting pronouncements In August 2016, the FASB issued ASU 2016-14 entitled, Presentation of Financial Statements of Not-for-Profit Entities. The update was issued to improve the current net asset classification requirements and the information presented in financial statements and notes about a not-for-profit entity's liquidity, financial performance, and cash flows. The effective date is for fiscal years beginning after December 15, 2017, and is to be applied retrospectively. Management has not yet determined whether the new standard will have a material effect on its financial statements.
In May 2015, the FASB issued ASU 2015-07 entitled, Disclosures for Investments in Certain Entities that Calculate Net Asset Value per Share (or Its Equivalent). The amendments in this update remove the requirement to categorize within the fair value hierarchy all investments for which fair value is measured using the net asset value per share practical expedient. The amendments also remove the requirement to make certain disclosures for investments eligible to be measured at fair value using the net asset value per share practical expedient. The effective date is for fiscal years beginning after December 15, 2016, and is to be applied retrospectively. During 2017, the Foundation implemented this update retrospectively as it relates to the charitable reserve fund. Adoption of this accounting standards update did not have an impact on reported amounts in the financial statements, but rather changed the fair value disclosures.