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Kalamazoo Community FoundationCombined Financial Statements andSupplementary InformationYears Ended December 31, 2020 and 2019The report accompanying these financial statements was issued by BDO USA, LLP, aDelaware limited liability partnership and the U.S. member of BDO InternationalLimited, a UK company limited by guarantee.
Kalamazoo Community FoundationCombined Financial Statements and Supplementary InformationYears Ended December 31, 2020 and 2019
Kalamazoo Community FoundationContentsIndependent Auditor’s Report3-4Combined Financial StatementsCombined Statements of Financial Positionas of December 31, 2020 and 20196Combined Statements of Activities and Changes in Net Assetsfor the Years Ended December 31, 2020 and 20197Combined Statements of Functional Expensesfor the Years Ended December 31, 2020 and 20198-9Combined Statements of Cash Flowsfor the Years Ended December 31, 2020 and 201910Notes to Combined Financial Statements11-26Supplementary InformationIndependent Auditor’s Report on Supplementary Information28Combining Statement of Financial Positionas of December 31, 2020 (with Comparative Totals as of December 31, 2019)29Combining Statement of Activities and Changes in Net Assetsfor the Year Ended December 31, 2020 (with Comparative Totalsfor the Year Ended December 31, 2019)302
Tel: 269-382-0170Fax: 269-345-1666www.bdo.com211 East Water Street, Suite 300Kalamazoo, MI 49007Independent Auditor’s ReportKalamazoo Community FoundationKalamazoo, MichiganWe have audited the combined financial statements of the Kalamazoo Community Foundation andKalamazoo Community Foundation Real Estate Holdings, Inc. (the Foundation), which comprisethe combined statements of financial position as of December 31, 2020 and 2019, and the relatedcombined statements of activities and changes in net assets, functional expenses, and cash flowsfor the years then ended, and the related notes to the combined financial statements.In our opinion, the accompanying combined financial statements present fairly, in all materialrespects, the financial position of the Foundation as of December 31, 2020 and 2019, and thechanges in its net assets and its cash flows for the years then ended, in accordance withaccounting principles generally accepted in the United States of America.Basis for OpinionWe conducted our audits in accordance with auditing standards generally accepted in the UnitedStates of America (GAAS). Our responsibilities under those standards are further described in theAuditor’s Responsibilities for the Audit of the Financial Statements section of our report. We arerequired to be independent of the Foundation and to meet our other ethical responsibilities, inaccordance with the relevant ethical requirements relating to our audits. We believe that theaudit evidence we have obtained is sufficient and appropriate to provide a basis for our auditopinion.Responsibilities of Management for the Financial StatementsManagement is responsible for the preparation and fair presentation of the combined financialstatements in accordance with accounting principles generally accepted in the United States ofAmerica, and for the design, implementation, and maintenance of internal control relevant tothe preparation and fair presentation of combined financial statements that are free frommaterial misstatement, whether due to fraud or error.In preparing the combined financial statements, management is required to evaluate whetherthere are conditions or events, considered in the aggregate, that raise substantial doubt aboutthe Foundation’s ability to continue as a going concern within one year after the date that thecombined financial statements are issued or available to be issued.BDO USA, LLP, a Delaware limited liability partnership, is the U.S. member of BDO International Limited, a UK company limited by guarantee, and forms part ofthe international BDO network of independent member firms.BDO is the brand name for the BDO network and for each of the BDO Member Firms.3
Auditor’s Responsibilities for the Audit of the Financial StatementsOur objectives are to obtain reasonable assurance about whether the combined financialstatements as a whole are free from material misstatement, whether due to fraud or error, andto issue an auditor’s report that includes our opinion. Reasonable assurance is a high level ofassurance but is not absolute assurance and therefore is not a guarantee that an audit conductedin accordance with GAAS will always detect a material misstatement when it exists. The risk ofnot detecting a material misstatement resulting from fraud is higher than for one resulting fromerror, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or theoverride of internal control. Misstatements are considered material if there is a substantiallikelihood that, individually or in the aggregate, they would influence the judgment made by areasonable user based on the combined financial statements.In performing an audit in accordance with GAAS, we: Exercise professional judgment and maintain professional skepticism throughout the audit. Identify and assess the risks of material misstatement of the combined financialstatements, whether due to fraud or error, and design and perform audit proceduresresponsive to those risks. Such procedures include examining, on a test basis, evidenceregarding the amounts and disclosures in the combined financial statements. Obtain an understanding of internal control relevant to the audit in order to design auditprocedures that are appropriate in the circumstances, but not for the purpose ofexpressing an opinion on the effectiveness of the Foundation’s internal control.Accordingly, no such opinion is expressed. Evaluate the appropriateness of accounting policies used and the reasonableness ofsignificant accounting estimates made by management, as well as evaluate the overallpresentation of the combined financial statements. Conclude whether, in our judgment, there are conditions or events, considered in theaggregate, that raise substantial doubt about the Foundation’s ability to continue as agoing concern for a reasonable period of time.We are required to communicate with those charged with governance regarding, among othermatters, the planned scope and timing of the audit, significant audit findings, and certain internalcontrol-related matters that we identified during the audit.June 24, 20214
Combined Financial Statements
Kalamazoo Community FoundationCombined Statements of Financial PositionDecember 31,20202019AssetsCurrent AssetsCash and cash equivalentsInvestmentsProgram related investments, netLoan receivableContributions and pledges receivable, netPrepaid scholarshipsAccrued investment incomeBeneficial interest in charitable perpetual trustsOther assets Total Current AssetsProperty and EquipmentBuilding and improvementsSoftwareEquipmentLess: accumulated depreciationNet Property and EquipmentTotal 517578,797752,47512,580,5071,185,107 6131,779,3871,711,6302,766,1313,820,983 598,904,597 561,061,212 30,460,9382,849,085476,535155,000997,308 ies and Net AssetsLiabilitiesFunds held as agency endowmentsAnnuities payableGrants payableLoan payableOtherTotal Liabilities34,938,86633,277,492Net AssetsWithout donor restrictions:UndesignatedDesignated by the Board for operatingDesignated by the Board for endowment or a determined 32,4038,439,289Total Net Assets Without Donor 507-454,178,79611,846,91819,489,362Total Net Assets With Donor Restrictions518,818,185485,515,076Total Net Assets563,965,731527,783,720With donor restrictions:Perpetual in natureCharitable perpetual trustsPurpose restrictionsTotal Liabilities and Net Assets 598,904,597 561,061,212See accompanying notes to combined financial statements.6
Kalamazoo Community FoundationCombined Statements of Activities and Changes in Net AssetsYear Ended December 31, 2020Without DonorRestrictionsSupport, Revenue, and GainsPublic support:Gifts and bequestsContribution of propertyLess: gifts and bequests received for agency endowments Total Gifts and Bequests9,193,140-With DonorRestrictions 4,674,693210,462Year Ended December 31, 2019Total 13,867,833210,462Without DonorRestrictions 2,466,547380,000-With DonorRestrictions 6,568,161132,061Total 7,91610,264,772Net gain from investment transactionsLess: net gain from investment transactionsfor agency 64,317Total net realized and unrealized gains on 342,60087,868,55993,211,159Investment Income, NetDividends and interestLess: dividends and interest received for agency endowmentsTotal dividends and interestTotal Investment Income, NetOther income (loss):Change in value of perpetual trustsOther income (loss)Gain (loss) on sale of propertyPlus: income from agency endowments(768,575)-Total Other Income 97Net Assets Released from Restrictions19,426,839(19,426,839)Total Support, Revenue, and Gains32,041,779ExpensesProgram services:GrantsPrograms and grants administrationSupport services:FundraisingManagement and generalTotal ExpensesIncrease in Net AssetsNet Assets, beginning of yearNet Assets, end of year 5,147,546 518,818,185 563,965,731 -38,699,019415,897,011454,596,03042,268,644 485,515,076 527,783,720See accompanying notes to combined financial statements.7
Kalamazoo Community FoundationCombined Statements of Functional ExpensesYear ended December 31, 2020Program ServicesProgramsand GrantsAdministrationGrantsGrants and other assistance to governments, organizations, and individualsSalariesCompensation of officers, directors,trustees, key employeesBenefitsInformation technologyConsultantsConferences, conventions, and meetingsOccupancyDepreciationPayroll taxesTravelStipendOffice expensesAdvertising and promotion401k plan contributionsMiscellaneous expenseHuman resourceRepairs and maintenanceProperty t expenseLegalTotal Expenses 23,612,948-Support Services 577,55223,612,948 17,226 1,600,977Managementand GeneralFundraising480,628 ,133 1,185,434878,414Total 3547,10921,04521,47811,33910,6251014,483 47821,23710,6253237,842 29,162,877See accompanying notes to combined financial statements.8
Kalamazoo Community FoundationCombined Statements of Functional ExpensesYear ended December 31, 2019Program ServicesProgramsand GrantsAdministrationGrantsGrants and other assistance to governments, organizations, and individualsSalariesCompensation of officers, directors,trustees, key employeesBenefitsInformation technologyConsultantsConferences, conventions, and meetingsOccupancyDepreciationPayroll taxesTravelStipendOffice expensesAdvertising and promotion401k plan contributionsMiscellaneous expenseHuman resourceRepairs and maintenanceProperty taxesAccountingInsuranceMembershipsLegalTotal Expenses 16,746,530-Support Services 589,72116,746,530 1,1061,196 1,568,612Managementand GeneralFundraising656,124 ,129 1,462,497484,888Total 56,78316,98412,64212,6505,496 ,85419,90711,821 21,807,845See accompanying notes to combined financial statements.9
Kalamazoo Community FoundationCombined Statements of Cash FlowsYear ended December 31,2020Cash Flows from Operating ActivitiesIncrease in net assets 36,182,011Adjustments to reconcile increase in net assets to net cashprovided by operating activities:Depreciation161,346Net gain on investment transactions(41,971,154)(Gain) loss from sale of property(844,199)Contribution of propertyChange in value of collective fund12,214,892Change in value of perpetual trusts(733,589)Noncash contributions(5,012,932)Program related investments reserve adjustmentChanges in operating assets and liabilities:Contributions and pledges receivable2,427,431Prepaid scholarships(31,167)Accrued investment income170,799Other current assets(201,114)Funds held as agency endowments1,865,941Annuities payable(136,008)Grants payable(536,517)Other liabilities512,958Net Cash Provided by Operating Activities2019 ,498)3,856,691(130,623)223,35268,9024,068,698Cash Flows from Investing ActivitiesPurchase of investmentsProceeds from sale and maturity of investmentsIssuance of loan receivableProceeds from program-related investmentsPurchase of property and equipmentProceeds from sale of propertyDistributions from limited 0,808)384,683,919421,509834,80552,516Net Cash Used in Investing Activities(2,277,634)(878,059)Cash Flows from Financing ActivitiesPayments on loan payable(45,000)(60,000)Increase in Cash and Cash EquivalentsCash and Cash Equivalents, beginning of year Cash and Cash Equivalents, end of year1,746,064417,561769,537351,9762,515,601 769,537See accompanying notes to combined financial statements.10
Kalamazoo Community FoundationNotes to Combined Financial Statements1. Nature of Business and Summary of Accounting PoliciesKalamazoo Community Foundation (the Foundation) is a public charity founded in 1925, created tomake Kalamazoo County the most equitable place to live by mobilizing people, resources, andexpertise to advance racial, social, and economic justice. The Foundation administers charitablegifts, including endowments, from which grants are made to non-profit organizations for communitybetterment. The Foundation’s activities are conducted by the Board of Trustees, the Chief ExecutiveOfficer, and supporting staff.A nonprofit corporation, Kalamazoo Community Foundation Real Estate Holdings, Inc. has beenestablished as a supporting organization to the Foundation. Its purpose is primarily to accept giftsof real estate and other personal property.The accompanying combined financial statements include the accounts of the Foundation andKalamazoo Community Foundation Real Estate Holdings, Inc., which are under common control.Intercompany transactions and balances have been eliminated in combination.The Foundation has 1,091 component funds that have been combined for presentation purposes.The component funds are of various types reflecting the distribution restrictions of the donors whohave established or contributed to them:Discretionary Funds - These funds have no suggested distribution restrictions. The board allocatesthese funds in making distributions for charitable purposes to meet community needs.Field-of-Interest Funds – These funds establish support in a particular area of interest.Advised Funds – These funds provide the donor or others with the ability to make suggestions as torecipients of grants. Such suggestions are not binding on the Foundation.Agency Endowments and Designated Funds – These funds provide support to specific nonprofitorganizations or programs based on the donors’ wishes and subject to the Foundation board’sdiscretion and approval.Gift Annuity Funds - The Foundation operates a charitable gift annuity program whereby donorsreceive a life income in exchange for assets conveyed to the Foundation under an annuity contract.Operating Funds – These funds are used to support the operational expenses of the Foundation.Supporting Organization Funds – These funds will be transferred to the Foundation upon sale of thegifted asset. A supporting organization is organized and operated exclusively for the benefit of apublic charity such as the Foundation. It provides all of the benefits of a public charity and most ofthe benefits of a private foundation.Basis of PresentationThe accompanying combined financial statements have been prepared on the accrual basis ofaccounting which recognizes revenue and support when earned and expenses when incurred inaccordance with accounting principles generally accepted in the United States of America. Forfinancial statement purposes, the Foundation distinguishes between contributions without donorrestrictions and contributions with donor restrictions.11
Kalamazoo Community FoundationNotes to Combined Financial StatementsNet Asset ClassificationNet assets, revenues, gains, and losses are classified based on the existence or absence of donor orgrantor-imposed restrictions. Accordingly, net assets and changes therein are classified andreported as follows:Net Assets Without Donor Restrictions – Net assets available for use in general operations and notsubject to donor (or certain grantor) restrictions. The governing board has designated, from net assetswithout donor restrictions, net assets for an operating reserve and board-designated endowment.Net Assets with Donor Restrictions – Net assets subject to donor (or certain grantor)-imposed restrictions.Some donor-imposed restrictions are temporary in nature, such as those that will be met by thepassage of time or other events specified by the donor. Other donor-imposed restrictions are perpetualin nature, where the donor stipulates that resources be maintained in perpetuity. Donor-imposedrestrictions are released when a restriction expires—that is, when the stipulated time has elapsed,when the stipulated purpose for which the resource was restricted has been fulfilled, or both.The Board of Trustees, on the advice of legal counsel, has determined that the majority of theFoundation’s net assets meet the definition of endowment funds under Uniform PrudentManagement of Institutional Funds Act (UPMIFA). The Foundation is governed subject to the Articlesof Incorporation and by-laws and most contributions are received subject to the terms of thegoverning documents. Certain contributions are received subject to other gift instruments, or aresubject to specific agreements with the Foundation.Under the terms of the governing documents, the Board of Trustees has the ability to distribute theamount of income from any trust or separate gift, devise, bequest, or fund as the board in its solediscretion shall determine. It also has the ability to modify any restriction or condition on thedistribution of funds for any specified charitable purpose or purposes or to a specified charitableorganization or organizations if, in the sole judgment of the board (without the necessity of theapproval of any participating trustee, custodian or agent), such restriction or condition becomes, ineffect, unnecessary, incapable of fulfillment or inconsistent with the charitable needs of thecommunity or area served.The Foundation classifies net assets with donor restrictions (a) the original gift value of gifts donatedto the permanent endowment, (b) the original value of subsequent gifts donated to the permanentendowment, and (c) accumulations to the permanent endowment made in accordance with thedirection of the applicable donor gift instrument at the time the accumulation is added to the fund.Endowment Investment and Spending PoliciesThe Foundation has adopted investment and spending policies for endowment assets that attemptto provide a predictable stream of funding to programs supported by its endowment while seekingto maintain the purchasing power of the endowment assets. The Foundation’s spending andinvestment policies work together to achieve this objective. The investment policy establishes anachievable return strategy to receive the maximum long-term, risk-adjusted cumulative returnthrough diversification of asset classes. The current long-term return objective is to return 7% netof investment fees. Actual returns in any given year may vary from this amount.To satisfy its long-term rate-of-return objectives, the Foundation relies on a total return strategyin which investment returns are achieved through both capital appreciation (realized and12
Kalamazoo Community FoundationNotes to Combined Financial Statementsunrealized) and current yield (interest and dividends). The Foundation targets a diversified assetallocation that places an emphasis on equity-based investments to achieve its long-term returnobjectives within prudent risk parameters.The spending policy calculates the amount of money annually distributed from the Foundation’svarious endowed funds, for grant making and administration. The overall spending policy goal is tospend 4.5% over rolling 20-year time frames. This is consistent with the Foundation’s objective tomaintain the purchasing power of endowment assets, as well as to provide additional real growththrough new gifts and investment return.Spending for each calendar year is calculated based upon the prior year’s spending factored up ordown by the one-year Bureau of Labor Statistics CPI-U Spending as of the previous March 31st . Thespending will never be less than 4% or greater than 5% of the 20 quarter rolling average (QRA) marketvalue. In situations when the ensuing year’s spending is calculated to be less than prior year’sspending, the Board of Trustees could consider modifications to the spending rate calculations.In accordance with UPMIFA, the Foundation considers the following factors in making a determinationto invest or appropriate donor-restricted endowment funds: The duration and preservation of the fund The purposes of the Foundation and the donor-restricted endowment fund General economic conditions The possible effect of inflation and deflation The expected total return from income and appreciation of investments Other resources of the Foundation The investment policies of the FoundationCash and Cash EquivalentsCash and cash equivalents consist of cash on hand, cash on deposit with banks, and other highly liquidinvestments with an original maturity of three months or less. At December 31, 2020, approximately 508,000 of the Foundation’s cash on hand or cash on deposit was FDIC insured, approximately 3,098,000 was uninsured. At December 31, 2019, approximately 251,000 of the Foundation’s cashon hand or cash on deposit was FDIC insured, approximately 2,594,000 was uninsured.InvestmentsInvestments in securities are stated at quoted market values if available, and if not available, otherfair value inputs (see Note 4). Realized gains and losses on sales of investments are determinedusing the specific identification cost method.Program-Related InvestmentsProgram-related investments are loans to other nonprofit organizations at below-market interestrates or that are interest free. The loans are used to fund specific projects. The loans are to berepaid at various dates through 2030. The loans are recorded equal to the amount borrowed, less areserve.13
Kalamazoo Community FoundationNotes to Combined Financial StatementsContributions and Pledges ReceivableContributions and pledges receivable consist of unconditional promises to give and are recognizedas revenues in the period received. Conditional promises to give are not recognized until theybecome unconditional—that is, when the conditions on which they depend are substantially met.Prepaid ScholarshipsPrepaid scholarships consist of payments of students’ enrollment in a future year.Beneficial Interest in Charitable Perpetual TrustsThe Foundation is the income beneficiary under several charitable perpetual trusts, the corpus ofwhich is not controlled by the Foundation. The Foundation has an irrevocable right to the net incomeof the trusts. The Foundation’s interest in these trusts is recorded at fair value and is classified asnet assets with donor restrictions. Distributions received from these trusts are recorded as incomewithout donor restrictions and the change in fair value is recorded as net income with donorrestrictions in the combined statements of activities and changes in net assets.Property and EquipmentProperty and equipment consists of buildings and improvements, furniture, fixtures, equipment,leasehold improvements, capitalized software, and real estate and are recorded at cost at the dateof acquisition or fair value at the date of donation and depreciated over their estimated useful liveson the straight-line method. Useful lives range from three to 40 years. Leasehold improvements aredepreciated over the life of the improvement or the term of the lease, whichever is shorter.Funds Held as Agency EndowmentsIn accordance with generally accepted accounting principles (GAAP), if a not-for-profit organizationestablishes a fund at a community foundation with its own funds and specifies itself as thebeneficiary of that fund, the community foundation must account for the transfer of such assets asan agency transaction. The Foundation refers to such funds as agency funds.The Foundation maintains legal ownership of agency funds and, as such, continues to report thefunds as assets of the Foundation. However, in accordance with GAAP, a liability has beenestablished for the fair value of the funds.Annuities PayableCharitable gift annuities represent gifts which are given to the Foundation with the condition thata specified payment be made to an income beneficiary over his or her life. A liability is establishedbased on the present value of the payments to be made. This liability is recalculated annually,based on changes in the life expectancy assumptions and payments made. Changes in the liabilityare recorded as an increase or decrease to the current year’s revenue.ContributionsContributions of cash and other assets are reported as revenue as they occur and are measured atfair value. Subsequent gains or losses on the sale and reinvestment of assets received are recognizedas they occur.14
Kalamazoo Community FoundationNotes to Combined Financial StatementsContributed ServicesDuring the years ended December 31, 2020 and 2019, the value of contributed services meeting therequirements for recognition in the financial statements was not material and has not beenrecorded. In addition, many individuals volunteer their time and perform a variety of tasks thatassist the Foundation in various capacities.Functional ExpensesExpenses pertaining to more than one functional purpose are allocated among program services,administration and general, and donor relations and development. Expenses that can be identifiedwith a specific funding source, program or support service are allocated directly. Although methodsused are considered reasonable, methods could be used that would produce different results.Use of EstimatesThe preparation of financial statements in conformity with accounting principles generally acceptedin the United States of America requires management to make estimates and assumptions that affectthe reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities atthe date of the financial statements, and the reported amounts of revenues and expenses duringthe reporting period. Actual results could differ from these estimates.Federal Income TaxesThe Foundation is exempt from federal income tax under the provisions of Section 501(c)(3) of theInternal Revenue Code (IRC) of 1986. It has been classified as an organization which is not a privatefoundation as defined in Sections 509(a)(I) and 170(b)(A)(vi) of the IRC. Kalamazoo CommunityFoundation Real Estate Holdings, Inc. is exempt from federal income tax under the same provisions.The Foundation applies a more-likely-than-not recognition threshold for all tax uncertainties. Taxbenefits that have a greater than 50% likelihood of being sustained upon examination by the taxingauthorities are recognized.Based on its evaluation, the Foundation has concluded there are no significant uncertain taxpositions requiring recognition in its combined financial statements.Fair Value MeasurementsGAAP defines fair value as the price that would be received to sell an asset or paid to transfer aliability in an orderly transaction between market participants. A fair value measurement assumesthat the transaction to sell the asset or transfer the liability occurs in the principal market for theasset or liability, or in the absence of a principal market, the most adv
Kalamazoo Community Foundation Kalamazoo, Michigan We have audited the combined financial statemen ts of the Kalamazoo Community Foundation and Kalamazoo Community Foundation Real Estate Holdings, Inc. (the Foundation), which comprise the combined statements of financial position as of December 31, 2020 and 2019, and the related
