2018 Financial Statements
Statements of Financial Position
| December 31 | 2018 | 2017 |
|---|---|---|
Assets |
||
| Cash and cash equivalents | $13,431,320 | $5,850,889 |
| Investments, net | 472,398,973 | 557,446,512 |
| Interest and dividends receivable | 353,830 | 334,974 |
| Federal excise tax | 528,000 | 846,000 |
| Other assets | 217,868 | 230,323 |
| Total assets | $486,929,991 | $564,708,698 |
Liabilities |
||
| Accounts payable and accrued expenses | $835,125 | $839,858 |
| Grants payable | 23,131,334 | 12,402,508 |
| Deferred federal excise tax | 5,244,000 | 6,663,000 |
| Total liabilities | 29,210,459 | 19,905,366 |
Net Assets |
||
| Net assets without donor restrictions | 457,719,532 | 544,803,332 |
| Total liabilities and net assets | $486,929,991 | $564,708,698 |
The accompanying notes are an integral part of the financial statements.
Statements of Activities
| December 31 | 2018 | 2017 |
|---|---|---|
Net Investment Income |
||
| Total investment (loss) / income, net of expenses | $(45,223,458) | $66,451,112 |
Expenses |
||
| Grants expensed | 38,623,243 | 22,380,348 |
| Program support and management and general (see note 10) | 2,980,081 | 2,833,417 |
| Provision for (recovery of) program-related loans | 1,000,000 | (291,500) |
| Loss on disposal of fixed assets | 13,338 | — |
| Total expenses | 42,616,662 | 24,922,265 |
| (Decrease) / increase in net assets before federal excise taxes | (87,840,120) | 41,528,847 |
| Federal excise tax benefit / (provision) | 756,320 | (1,321,687) |
| Net (decrease) / increase in net assets without donor restrictions | (87,083,800) | 40,207,160 |
| Net assets – beginning | 544,803,332 | 504,596,172 |
| Net assets – ending | $457,719,532 | $544,803,332 |
The accompanying notes are an integral part of the financial statements.
Statements of Cash Flows
| December 31 | 2018 | 2017 |
|---|---|---|
Cash Flows from Operating Activities |
||
| Change in net assets | $(87,083,800) | $40,207,160 |
| Adjustments to reconcile change in net assets to net cash used in operating activities: | ||
| Depreciation and amortization | 47,289 | 57,251 |
| Provision for program related loans | 1,000,000 | — |
| Net realized and unrealized losses (gains) on investments | 47,968,884 | (63,624,925) |
| Loss on disposal of fixed assets | 13,338 | — |
| Deferred federal excise tax | (1,419,000) | 1,024,502 |
| Changes in assets and liabilities: | ||
| Receivables | 299,144 | (95,473) |
| Other assets | (27,672) | (25,658) |
| Accounts payable and accrued expenses | (4,733) | 87,472 |
| Grants payable | 10,728,826 | (4,307,870) |
| Net cash used in operating activities | (28,477,724) | (26,677,541) |
Cash Flows from Investing Activities |
||
| Proceeds from sale of investments | 134,352,665 | 99,213,306 |
| Purchases of investments | (98,274,010) | (76,629,682) |
| Purchase of equipment and improvements | (20,500) | (22,442) |
| Net cash provided by investing activities | 36,058,155 | 22,561,182 |
| Net (decrease) increase in cash and cash equivalents | 7,580,431 | (4,116,359) |
| Cash and cash equivalents – beginning | 5,850,889 | 9,967,248 |
| Cash and cash equivalents – ending | $13,431,320 | $5,850,889 |
Supplemental Disclosure of Cash Flow Information |
||
| Cash paid during the year: | ||
| Income taxes, excise | $341,800 | $368,000 |
| Interest | $— | $— |
The accompanying notes are an integral part of the financial statements.
Notes to Financial Statements — December 31, 2018 and 2017
Note 1
Summary of Significant Accounting Policies
Nature of operations The George Gund Foundation (the Foundation) is a private foundation located in Cleveland, Ohio that 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.
Accounting pronouncement adopted In August 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standard Update (ASU) 2016-14, Presentation of Financial Statements of Not-for-Profit Entities (Topic 958). The ASU amends the previous reporting model for not-for-profit organizations and enhances their required disclosures. The major changes include: (a) requiring the presentation of only two classes of net assets; net assets without donor restrictions and net assets with donor restrictions, (b) requiring that all not-for-profit organizations present an analysis of expenses by function and nature in the statement of activities, a separate statement, or in the notes and disclose a summary of the allocation methods used to allocate costs, (c) requiring the disclosure of quantitative and qualitative information regarding liquidity and availability of resources, (d) presenting investment return net of external and internal investment expenses, and (e) modifying other financial statement reporting requirements and disclosures intended to increase the usefulness of not-for-profit financial statements. The Foundation has adopted this ASU as of and for the year ended December 31, 2018, and it has been applied retrospectively.
Basis of presentation The Foundation has adopted ASU 2016-14. Under this provision, the Foundation is required to report information regarding its financial position and activities according to two classes of net assets: net assets without donor restrictions and net assets with donor restrictions. Accordingly, net assets of the Foundation and changes therein are classified and reported as follows:
Net Assets without Donor Restrictions – Net assets without donor restrictions are available for use at the discretion of the Board of Trustees (the Board) and/or management for general operating purposes. The Board may designate a portion of these net assets for specific purposes, which makes them unavailable for use at management’s discretion.
Net Assets with Donor Restrictions – Net assets with donor restrictions consist of assets whose use is limited by donor-imposed, time and / or purpose restrictions. The Foundation did not have any assets with donor restrictions as of December 31, 2018 and 2017.
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, the 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 $5,550,785 and $8,208,724 at December 31, 2018 and 2017, respectively. The notes receivable are due at various dates, from 2019 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, 2018 and 2017. The Foundation has an additional mission-related loan due from a not-for-profit organization valued at $520,252 and $623,636 as of December 31, 2018 and 2017, 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, 2018 and 2017, as provided by the fund managers. Market values as of December 31, 2018 and 2017 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, 2018 and 2017, the Foundation had total unfunded capital commitments related to alternative investments of $1,037,500. There was a conditional unfunded capital commitment of $3,250,000 at December 31, 2018 and 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 accounts 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, 2018 and 2017, an allowance for uncollectible accounts in the amount of $1,000,000 and $-0-, 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, 2018 and 2017, management determined that no allowance for uncollectible interest was deemed necessary.
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 $47,289 and $57,251 for the years ended December 31, 2018 and 2017, respectively.
Fair value measurement – definition and hierarchy The Foundation follows FASB Accounting Standard Codification (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 in mutual 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 February 2016, the FASB issued ASU No. 2016-02 entitled “Leases (Topic 842),” which may change the Foundation’s statement of financial position by adding lease-related assets and liabilities. This may affect compliance with contractual agreements. This new standard is effective for the Foundation for annual reporting periods beginning after December 15, 2019, with early adoption permitted. Management has not yet determined whether this new standard will have a material effect on its financial statements.
Reclassifications Certain amounts in the 2017 financial statements have been reclassified to conform to the 2018 presentation. As a result of the adoption of ASU No. 2016-02, investment fees in the amount of $3,180,651 and $2,996,489 for 2018 and 2017 have been offset against net investment income.
Note 2
Investments
Cost and market value of investments were as follows:
| 2018 | 2017 | |||
|---|---|---|---|---|
| Market Value | Cost | Market Value | Cost | |
| Fixed income securities | $17,102,762 | $17,187,865 | $18,998,258 | $19,153,224 |
| Common stocks and alternative investments | 455,296,211 | 199,478,140 | 538,448,254 | 204,839,531 |
| Total | $472,398,973 | $216,666,005 | $557,446,512 | $223,992,755 |
Market values of investments are based on December 31, 2018 and 2017 published quotations, except that estimates are used when quotations are not available. Fixed income securities consist of U.S. government securities, U.S. government guaranteed securities, corporate securities, and charitable reserve funds. Common stocks and alternative investments consist principally of U.S. and international equity securities, program and mission-related investments, and investments in limited partnerships.
Note 3
Fair Value Disclosure and Measurement
Published market quotations do not necessarily represent realizable values, particularly where sizable holdings of a company’s stock exist, as in the case of the Foundation’s holding of the Kellogg Company common stock.
The Foundation’s assets and liabilities recorded at fair value have been categorized based upon a fair value hierarchy in accordance with FASB ASC 820-10. See Note 1 for a discussion of the Foundation’s policies regarding this hierarchy.
The following fair value hierarchy tables present information about the Foundation’s assets and liabilities measured at fair value on a recurring basis:
| Fair Value Measurements at Reporting Date Using | ||||
|---|---|---|---|---|
| December 31, 2018 | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Balance |
Corporate stock |
||||
| Consumer goods | $102,129,818 | $— | $— | $102,129,818 |
| Financial | 20,440,020 | — | — | 20,440,020 |
| Services | 9,882,785 | — | — | 9,882,785 |
| Industrial goods | 9,582,467 | — | — | 9,582,467 |
| Basic materials | 8,056,997 | — | — | 8,056,997 |
| Technology | 17,737,867 | — | — | 17,737,867 |
| Healthcare | 4,424,622 | — | — | 4,424,622 |
| Media | 2,424,273 | — | — | 2,424,273 |
| Closely-held | — | — | 100 | 100 |
Preferred stock |
||||
| Preferred stock | — | 115,300 | — | 115,300 |
Bonds |
||||
| Corporate | — | 2,609,208 | — | 2,609,208 |
| United States Treasury and Agency | — | 4,596,954 | — | 4,596,954 |
| State and municipal | — | 1,117,065 | — | 1,117,065 |
Limited partnerships |
||||
| Limited partnerships | — | 206,831,822 | 67,573,692 | 274,405,514 |
Other investments |
||||
| Program-related savings | — | 25,411 | — | 25,411 |
| Program-related loans, net of allowance | — | — | 5,550,785 | 5,550,785 |
| Mission-related investment | — | — | 520,252 | 520,252 |
Charitable reserve fund (a) |
||||
| Charitable reserve fund (a) | — | — | — | 8,779,535 |
| Total fair value assets | $174,678,849 | $215,295,760 | $73,644,829 | $472,398,973 |
(a) In accordance with Subtopic 820-10, certain investments that are measured at fair value using the net asset value per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the statements of financial position.
| Fair Value Measurements at Reporting Date Using | ||||
|---|---|---|---|---|
| December 31, 2017 | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Balance |
Corporate stock |
||||
| Consumer goods | $116,927,716 | $— | $— | $116,927,716 |
| Financial | 18,318,758 | — | — | 18,318,758 |
| Services | 21,403,223 | — | — | 21,403,223 |
| Industrial goods | 5,617,190 | — | — | 5,617,190 |
| Basic materials | 13,928,403 | — | — | 13,928,403 |
| Technology | 18,952,187 | — | — | 18,952,187 |
| Healthcare | 10,365,062 | — | — | 10,365,062 |
| Media | 6,013,328 | — | — | 6,013,328 |
| Mfg – Other | 1,488,239 | 1,488,239 | ||
| Closely-held | — | — | 100 | 100 |
Preferred stock |
||||
| Preferred stock | — | 124,100 | — | 124,100 |
Bonds |
||||
| Corporate | — | 4,880,438 | — | 4,880,438 |
| United States Treasury and Agency | — | 3,437,886 | — | 3,437,886 |
| State and municipal | — | 905,754 | — | 905,754 |
| Foreign | — | 57,890 | — | 57,890 |
Limited partnerships |
||||
| Limited partnerships | — | 228,371,042 | 88,081,198 | 316,452,240 |
Other investments |
||||
| Program-related savings | — | 25,348 | — | 25,348 |
| Program-related loans, net of allowance | — | — | 8,208,724 | 8,208,724 |
| Mission-related investment | — | — | 623,636 | 623,636 |
Charitable reserve fund (a) |
||||
| Charitable reserve fund (a) | — | — | — | 9,716,290 |
| Total fair value assets | $213,014,106 | $237,802,458 | $96,913,658 | $557,446,512 |
(a) In accordance with Subtopic 820-10, certain investments that are measured at fair value using the net asset value per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the statements of financial position.
The following table provides a reconciliation of changes in Level 3 assets and liabilities measured at fair value on a recurring basis for the year ended December 31, 2018:
| Fair Value Measurements Using Significant Unobservable Inputs (Level 3) | ||||
|---|---|---|---|---|
| Limited Partnerships | Other Investments | Common Stock | Total | |
| Beginning balance – January 1, 2018 | $88,081,198 | $8,832,360 | $100 | $96,913,658 |
| Total gains or losses (realized / unrealized) included in changes in net assets | (19,058,398) | — | — | (19,058,398) |
| Allowance for bad debt | — | (1,000,000) | — | (1,000,000) |
| Sales proceeds | (1,449,108) | (1,761,323) | — | (3,210,431) |
| Ending balance – December 31, 2018 | $67,573,692 | $6,071,037 | $100 | $73,644,829 |
| The amount of total gains or losses for the period included in changes in net assets attributable to the change in unrealized gains or losses relating to assets still held at the reporting date | $(19,707,612) | $— | $— | $(19,707,612) |
The following table provides a reconciliation of changes in Level 3 assets and liabilities measured at fair value on a recurring basis for the year ended December 31, 2017:
| Fair Value Measurements Using Significant Unobservable Inputs (Level 3) | ||||
|---|---|---|---|---|
| Limited Partnerships | Other Investments | Common Stock | Total | |
| Beginning balance – January 1, 2017 | $70,587,806 | $9,474,329 | $100 | $80,062,235 |
| Total gains or losses (realized / unrealized) included in changes in net assets | 18,540,360 | — | — | 18,540,360 |
| Purchases | 411,307 | 362,500 | — | 773,807 |
| Sales proceeds | (1,458,275) | (1,004,469) | — | (2,462,744) |
| Ending balance – December 31, 2017 | $88,081,198 | $8,832,360 | $100 | $96,913,658 |
| The amount of total gains or losses for the period included in changes in net assets attributable to the change in unrealized gains or losses relating to assets still held at the reporting date | $17,940,760 | $— | $— | $17,940,760 |
The following table represents the Foundation’s level 3 financial instruments, the valuation techniques used to measure the fair value of those financial instruments, the significant unobservable inputs, and the ranges of values for those inputs:
| Instrument | 2018 Fair Value | 2017 Fair Value | Prinicipal Valuation Technique | Unobservable Inputs | Range of Significant Input Values | Weighted Average |
|---|---|---|---|---|---|---|
| Closely held stock | $100 | $100 | Recent Sales | Recent Sales | — | — |
| Program-related loans | $5,550,785 | $8,208,724 | Discounted Cash Flows | Applicable interest and term | — | — |
| Mission-related loan | $520,252 | $623,636 | Discounted Cash Flows | Applicable interest and term | — | — |
At December 31, 2018, the Foundation’s limited partnerships are subject to withdrawal restrictions as follows:
| Limited Partnerships | |
|---|---|
| Available for redemption: | |
| Monthly | $268,071,432 |
| Subject to distribution | 6,334,082 |
| Total | $274,405,514 |
Investments that are available for redemption may be redeemed by the Foundation generally with 15- to 30-day advance notice on a monthly basis, subject to the terms of the investment agreement.
Investments subject to distribution cannot be redeemed by the Foundation, but rather will be distributed by the limited partnership upon the liquidation of the underlying assets of the partnership. Distributions are generally expected, but not guaranteed, over the next five years.
The investment objective for limited partnerships is long-term capital appreciation in excess of what is available in the public markets. Private equity funds generally hold illiquid debt and equity securities of public and / or privately held companies. This asset class includes venture capital, buyout, and distressed funds.
Gains and losses (realized and unrealized) from Level 3 investments included in changes in net assets include net realized investment gains of $649,214 and $599,600 for the periods ended December 31, 2018 and 2017, respectively, and net unrealized investment (losses) / gains of ($19,707,612) and $17,940,760 for the periods ended December 31, 2018 and 2017, respectively.
At December 31, 2018 and 2017, the Foundation’s charitable reserve fund was not subject to withdrawal restrictions. The fund holds mostly fixed income investments and is measured at fair value using the net asset value per unit as a practical expedient. There are no unfunded commitments related to this fund.
Note 4
Credit Concentration
Aside from its holdings in the Kellogg Company, the Foundation’s portfolio of investments is highly diversified; however, at December 31, 2018 and 2017, 18% and 20% of the total market value of securities, and approximately 69% and 72%, respectively, of dividend income in each year are attributable to ownership of Kellogg Company stock.
Note 5
Grants
Grants are expensed upon approval by the Board of Trustees, payable upon the performance of specified conditions, and paid when the specified conditions are satisfied. Discretionary grants in amounts up to $10,000 and cumulative for the year up to $780,000 for the years ended December 31, 2018 and 2017 are recommended by the program officers and approved by the executive director. These discretionary grants are expensed upon approval and ratified by the Board of Trustees at the following board meeting. Grants that are cancelled or in excess of needed amounts are included as a reduction of grant expense in the year they are cancelled or returned.
Note 6
Leases
The Foundation occupies office space in the Landmark Office Towers. The lease was renewed in March of 2018, and is effective January 1, 2019. This renewal extends the lease through December 31, 2023. There is a renewal option for an additional period. Rental expense for the years ended December 31, 2018 and 2017 amounted to $151,059 and $135,148, respectively.
The future minimum lease commitments under leases with terms in excess of one year are as follows:
| 2019 | $135,315 |
| 2020 | 139,368 |
| 2021 | 143,496 |
| 2022 | 147,849 |
| 2023 | 150,775 |
| $716,803 |
Note 7
Net Assets
Net assets include two board-designated funds (principal and income), both of which consist entirely of net assets without donor restrictions. The principal fund consists of investments in securities and receives the realized and unrealized gains or losses on those assets. The income fund receives interest and dividends on the principal fund investments, which are used for grants and administrative expenses. The statements of financial position included the following income fund accounts:
| 2018 | 2017 | |
|---|---|---|
| Cash | $6,707,913 | $964,629 |
| Receivables | 881,830 | 1,180,974 |
| Other assets | 103,029 | 66,234 |
| Due to principal fund | (4,376,352) | (3,680,785) |
| Accounts payable | (835,125) | (839,858) |
| Grants payable | (23,131,334) | (12,402,508) |
| Deferred federal excise tax | 7,000 | 7,000 |
| $(20,643,039) | $(14,704,314) |
The following is a summary of the changes in total net assets:
| 2018 | 2017 | |
|---|---|---|
| Income fund | $(5,938,725) | $(1,807,231) |
| Principal fund | (81,145,075) | 42,014,391 |
| Increase in net assets | (87,083,800) | 40,207,160 |
| Net assets – beginning | 544,803,332 | 504,596,172 |
| Net assets – ending | $457,719,532 | $544,803,332 |
The change in individual funds includes transfers by the Foundation of $27,378,262 and $24,721,262 in 2018 and 2017, respectively, from the principal fund to the income fund.
Note 8
Employee Benefit Plan
The Foundation has an employee’s tax-sheltered annuity plan for all eligible employees. Such a plan is intended to comply with the requirements of Section 403(b) of the Internal Revenue Code (IRC). Employer contributions are required at 9% of the participant’s compensation up to the social security wage base for the year, and 14.7% of the participant’s compensation in excess of this wage base, with a limit of $275,000 of compensation for the years ended December 31, 2018 and 2017. Employer contributions to the plan for the years ended December 31, 2018 and 2017 amounted to $136,807 and $132,462, respectively. Participants are also permitted to make salary reduction contributions to the plan.
Note 9
Excise Taxes
The Foundation is exempt from federal income taxes under Section 501(c)(3) of the IRC, but is subject to a 2% (1% if certain criteria are met) federal excise tax on net investment income, including net realized gains, as defined by the IRC.
Deferred federal excise taxes are provided on the unrealized appreciation or depreciation of investments and interest, and dividend income and certain expenses being reported for financial statement purposes in different periods than for tax purposes.
Current excise taxes were provided at 1% (qualified for reduced excise tax rate) for 2018 and 2017, and deferred excise taxes were provided at 2% for both 2018 and 2017. The current and deferred portions of the excise tax provision (benefit) were $662,680 and ($1,419,000) respectively, for a total net benefit of ($756,320) in 2018. The current and deferred portions of the excise tax provisions were $296,739 and $1,024,948 respectively, for a total expense of $1,321,687 in 2017.
The Foundation follows the provisions of FASB ASC 740-10, Income Taxes, which provides guidance on the recognition threshold that a tax position is required to meet before being recognized in the financial statements and provides guidance on derecognition, measurement, classification, interest and penalties, accounting in interim periods, disclosure, and transition issues. Management has evaluated and concluded that there were no material uncertain tax positions requiring recognition in the accompanying financial statements.
Accrued interest relating to uncertain tax positions would be recorded as a component of interest expense, and penalties relating to uncertain tax positions would be recorded as a component of general and administrative expenses.
Note 10
Functional Expenses
The table below presents expenses by both their nature and function for the year ending December 31, 2018:
| Grants | Program Support | Management & General | Program Support and Management and General Totals | |
|---|---|---|---|---|
| Salaries and benefits | $— | $1,690,270 | $359,534 | $2,049,804 |
| Grants to other organizations | 38,623,243 | — | — | — |
| Office and occupancy | — | 266,686 | 56,726 | 323,412 |
| Services and professional fees | — | 49,661 | 313,777 | 363,438 |
| Travel, meetings, other | — | 147,580 | 48,558 | 196,138 |
| Depreciation and amortization | — | 38,995 | 8,294 | 47,289 |
| $38,623,243 | $2,193,192 | $786,889 | $2,980,081 |
Expenses are recorded as attributable to either grant support or administrative functions wherever possible; however, the financial statements report certain categories of expenses that are attributable to more than one function. Therefore, these expenses require allocation on a reasonable basis that is consistently applied. The allocations above are primarily based on management’s estimates of percentage of staffing costs attributable by function.
Note 11
Liquidity and Funds Available
As part of its liquidity management, the Foundation structures its financial assets to be available as its grants and general expenditures come due. The Foundation has a goal to maintain approximately $20 million in cash and liquid short-term investments on hand to cover normal operating expenses for a one-year period. To achieve this, the Foundation forecasts its future cash flows and monitors its liquidity on at least a monthly basis.
At December 31, 2018, the Foundation has approximately $402,393,000 of financial assets available to meet cash needs for general expenditures within one year of the balance sheet date, which assets consist of cash and cash equivalents of $13,431,000, interest and dividends receivable of $354,000, and investments of $388,608,000. These financial assets are not subject to donor or other contractual restrictions that make them unavailable for general expenditures within one year.
Note 12
Subsequent Events
The Foundation has evaluated subsequent events from the statement of financial position date through May 16, 2019.