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CLARE BOOTHE LUCE POLICY INSTITUTEAUDITED FINANCIAL STATEMENTS ANDOTHER FINANCIAL INFORMATIONYEARS ENDED DECEMBER 31, 2009 AND 2008Preparing and Promoting Cor;servar:se Women teadees
Clare Boothe Luce Policy InstituteTable of ContentsPageIndependent Auditor's ReportAudited Financial StatementsStatements of Financial Position2Statements of Activities and Changes in Net Assets3Statements of Cash Flows4Notes to Financial Statements5 - 15Other Financial InformationIndependent Auditor's Report on Other Financial InformationSchedules of Functional Expenses1617 - 18
805 King Farm BoulevardSuite 300Rockville, Maryland 20850301.231.6200 Main301.231.7630 t Auditor's ReportBoard of DirectorsClare Boothe Luce Policy InstituteHerndon, VirginiaWe have audited the accompanying Statements of Financial Position of Clare Boothe Luce PolicyInstitute (the "Institute") as of December 31, 2009 and 2008, and the related Statements of Activities andChanges in Net Assets, and Cash Flows for the years then ended. These financial statements are theresponsibility of the Institute's management.Our responsibility is to express an opinion on thesefinancial statements based on our audits.We conducted our audits in accordance with auditing standards generally accepted in the United States ofAmerica. Those standards require that we plan and perform the audit to obtain reasonable assuranceabout whether the financial statements are free of material misstatement. An audit includes examining,on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit alsoincludes assessing the accounting principles used and significant estimates made by management, as wellas evaluating the overall financial statement presentation. We believe that our audits provide a reasonablebasis for our opinion.In our opinion, the financial statements referred to above present fairly, in all material respects, thefinancial position of Clare Boothe Luce Policy Institute as of December 31, 2009 and 2008, and thechange in its net assets and cash flows for the years then ended in conformity with accounting principlesgenerally accepted in the United States of America.Rockville, MarylandApril 22, 201 0- 1CERTIFIED PUBLIC ACCOUNTANTSAND MANAGEMENTCONSULTANTSPraxiij(::MEMBER "GLOBALALLIANCEOFINDEPENDENTFIRMS
Clare Boothe Luce Policy InstituteStatementsDecember 31,of Financial2009Position2008AssetsCurrent assetsCash and cash equivalentsInvestmentsCurrent portion of receivablesTotal current assets Receivables, net of current portionProperty, building and equipment, netOther assetsInvestments330,021152,83052,000534,851 43,324659,048742120,000Total 3240,000 1,357,965 1,234,844 10,08816,87412,48939,451 9,4782,44812,03823,964Liabilities and Net AssetsCurrent liabilitiesCurrent portion of notes payableAccounts payable and accrued expensesCurrent portion of gift annuities payableTotal current liabilitiesGift annuities payable, net of current portion45,32157,812Notes payable, net of current portion187,592197,542Total ,601643,954127,993183,579955,526Net assetsUnrestrictedTemporarily restrictedPermanently restrictedTotal net assetsTotal liabilities and net assets 1,357,965 1,234,844The accompanying Notes to Financial Statements are an integral part of these financial statements.-2 -
Clare Boothe Luce Policy InstituteStatementsYears Ended December 31,Unrestricted 2,012,65952,000Contributed investmentsList rental income27,69317,488Honorarium contributionsInterest incomeNet gain (loss) on marketable securitiesOther income2,41422,6572,792Net assets released from restrictionsRestricted PermanentlyRestricted 11,74545,00015,050912114,9032,252,606Total support and revenue8,205TotalUnrestricted 2,032,60997,000 503,32622,6572,792TemporarilyRestrictedPermanently in Net Assets Total nd Changes20082009TemporarilySupport and revenueContributionsGrantsGift annuitiesof 533,0831,313,178295,811ExpensesProgram servicesPublic information1,076,7231,076,723Special projectsTotal program ement and 749Supporting servicesTotal expenses2,085,985Change in net assets from 555)Change in value of annuities49,686(416,093)132,6301,5521,552Change in net et assets, beginning of ,324 1,085,601Net assets, end of year 808,020 82,257 (366,407) 643,954 127,993The accompanying Notes to Financial Statements are an integral part of these financial statements.-3-(364,855)183,579 183,5791,320,381 955,526
Clare Boothe Luce Policy InstituteStatements of Cash FlowsYears Ended December 31,Cash flows from operating activitiesChange in net assetsAdjustments to reconcile change in net assets to net cashprovided (used) by operating activitiesDepreciation and amortizationContributed investmentsUnrealized and realized (gains) losses on marketable securitiesChange in value of annuity liabilityChange in unamortized discount on contributions receivable(Increase) decrease inReceivablesOther assets20082009 130,075 ,000(7,941)ODecrease) increase inAccounts payable and accrued expensesNet cash provided (used) by operating activitiesCash flows from investing activitiesSale of investmentsPurchase of investmentsPurchase of property, building and equipmentNet cash used by investing activitiesCash flows from financing activitiesPayments on notes payableReceipt of permanently restricted receivablesProceeds from gift annuities receivedPayments on gift annuities(14,595)39,102(10,334)Net cash provided by financing activities56,06520,827Net change in cash and cash equivalents172,743(400,861)Cash and cash equivalents, beginning of year157,278558,l39Cash and cash equivalents, end of year 330,021 157,278Supplemental disclosuresInterest paid during the year 12,848 l3,696The accompanying Notes to Financial Statements are an integral part of these financial statements.- 4-
Clare Boothe Luce Policy InstituteNotes to Financial Statements1.Organizationand summaryof significantaccountingpoliciesOrganization:Clare Boothe Luce Policy Institute (the "Institute") is a not-forprofit organization established in May 1993. The Institute prepares youngwomen for effective conservative leadership and promotes school choiceopportunities for all kindergarten through twelfth grade children in America. TheInstitute is located in Herndon, Virginia.The Institute's two main programs are public information and special projects. Thepublic information program focuses on the Institute's media and communicationactivities such as the Institute's web site, radio and TV appearances, policy papers,articles, publication of Great American Conservative Women, media directories,periodicals and quarterly mailings.The special projects program focuses onlectures and other research activities including the college campus speakerprogram, seminars, conferences, mentoring lunches, Conservative Women'sNetwork lunches and the Institute's internship program.Basis of accounting: The accompanying financial statements have been preparedon the accrual basis of accounting, in accordance with accounting principlesgenerally accepted in the United States of America applicable to not-for-profitorganizations.Financial statement presentation:Net assets and revenues are classified basedon the existence or absence of donor-imposed restrictions and reported as follows:Unrestrictedstipulations.net assets:Net assets that are not subject to donor-imposedTemporarilyrestricted net assets:Net assets subject to donor-imposedstipulations that will be met either by actions of the Institute and/or the passageof time.Permanentlyrestricted net assets:Net assets subject to donor-imposedstipulations that they be maintained permanently by the Institute. The Institutemay use all or part of the income earned on these assets for general or specificpurpose. At December 31, 2009 and 2008, the Institute had 195,324 and 183,579, respectively, in permanently restricted net assets of which theproceeds earned are restricted for the internship program. This donation was apledge given in 2007 to be paid over six years. Only 120,000 of the pledgehas been paid. The remaining pledge has been discounted to net present value.Cash and cash equivalents: For purposes of financial statement presentation, theInstitute considers all highly liquid debt instruments purchased with an originalmaturity of ninety days or less to be cash equivalents. The Institute maintains cashbalances which may exceed Federally insured limits. Management does notbelieve that this results in any significant credit risk.-5-
Clare Boothe Luce Policy InstituteNotes to Financial Statements1.Organizationand summaryof s: Investments consist of certificates of deposit issued by financialinstitutions and equity securities. The equity securities are stated at fair value asdetermined by quoted market prices. For the certificates of deposit, the carryingamount represents estimated fair value developed by discounting the futurepayments using current interest rates for similar maturity dates.Property and equipment: Property and equipment are recorded at the originalcost and are being depreciated on a straight-line basis over estimated lives of threeto forty years. Property and equipment additions and improvements acquired at acost greater than 500 are capitalized. Costs incurred for maintenance and repairsare charged to expense as incurred.Gift annuities: Gift annuities are contracts between the Institute and a donor inwhich the Institute agrees to pay the donor (or other person named by the donor) alifetime annuity in return for a gift of cash or marketable securities. The assetsreceived by the Institute are recorded at fair market value at the date of thedonation. A liability is recorded for the amount due to an income beneficiary of agift annuity based on the present value of the estimated future payments to bedistributed during the income beneficiary's expected life. Each year, the liability isre-measured and changes in the liability due to factors other than cash payments,such as changing life expectancies, are recorded as an increase or decrease torevenue and support. The discount rate ranges from 3% to 6% depending on thediscount rate in effect at the time of the gift.Revenue recognition:Contributions and grants: The Institute recognizes all contributions andgrants received as income in the period received or pledged. Contributions andgrants are reported as unrestricted, temporarily restricted, or permanentlyrestricted depending on the absence or existence of donor stipulations that limitthe use of the contributions. When a donor restriction expires, that is, when astipulated time restriction ends or purpose restriction is accomplished,temporarily restricted net assets are reclassified to unrestricted net assets andare reported in the Statement of Activities and Changes in Net Assets as netassets released from restrictions.Contributed investments: Contributions of marketable securities are recordedat their fair market value at the date of donation.List rental income: The Institute recognizes list rental mcome as incomewhen the list is delivered.-6 -
Clare Boothe Luce Policy InstituteNotes to Financial Statements1. Organizationand summaryof gcosts: The Institute expenses advertising costs as incurred.Advertising expense for the years ended December 31, 2009 and 2008, was 10,072 and 63,966, respectively.Allocation of functional expenses: The costs of providing the various programsand other activities have been summarized on a functional basis in the Statement ofActivities and Changes in Net Assets. Accordingly, certain costs have beenallocated among the programs and supporting services benefited.Costs of joint activities: The Institute accounts for costs of joint activities whichare part fundraising and have elements of one or more other functions, such asprogram or management and general according to certain criteria of purpose,audience and content in order to allocate any portion of the costs of joint activitiesto a functional area other than fundraising.Income taxes: The Institute is exempt from Federal income tax under Section501(c)(3) of the Internal Revenue Code, and therefore has made no provision forFederal income taxes. The Organization has no unrelated business income.The Institute evaluates uncertainty in income tax positions based on a more-likelythan-not recognition standard, effective January 1, 2009. If that threshold is met,the tax position is then measured at the largest amount that is greater than 50%likely of being realized upon ultimate settlement. Prior to January 1, 2009, theInstitute evaluated uncertain tax positions such that the effects of tax positionswere generally recognized in the financial statements consistent with amountsreflected in returns filed, or expected to be filed, with taxing authorities. There wasno impact on the financial statements caused by the adoption of the revisedstandard for uncertain tax positions. As of December 31, 2009, there are noaccruals for uncertain tax positions. If applicable, the Institute records interest andpenalty as a component of income tax expense. Tax years from 2006 through thecurrent year remain open for examination by tax authorities.Estimates: The preparation of financial statements in conformity with accountingprinciples generally accepted in the United States of America requires managementto make estimates and assumptions that affect the reported amounts of assets andliabilities and disclosure of contingent assets and liabilities at the date of thefinancial statements and the reported amounts of revenues and expenses during thereporting period. Actual results could differ from those estimates.Subsequent events: Management has evaluated subsequent events for disclosurein these fmancial statements through April 22, 2010, which is the date the financialstatements are available to be issued.-7-
Clare Boothe Luce Policy InstituteNotes to Financial Statements2.InvestmentsInvestments at December 31,2009 and 2008, consisted of the following:20082009Certificate of depositEquity securities 124,093148,737 43,182135,592Total 272,830 178,774For the years ended December 31, 2009 and 2008, net realized and unrealizedgains and (losses) related to investment activity were 22,657 and ( 28,867),respecti vel y.3.Fair valueThe Institute values certain investments at fair value in accordance with a three-tierfair value hierarchy, which prioritizes the inputs used in measuring fair value asfollows:Levell.Observable inputs such as quoted pncesidentical assets or liabilities;IIIactive marketsforLevel 2. Inputs, other than the quoted prices in active markets, that areobservable either directly or indirectly; andLevel 3. Unobservable inputs in which there is little or no market data, whichrequire the reporting entity to develop its own assumptions.The fair value of investments is as follows:Fair Value Measurements atReporting Data UsingQuoted PricesSignificantin ActiveMarkets forOtherObservableIdenticalInputsAsset(Level 2)Total(Levell)December 31, 2009Certificates of depositEquity securities Total -8-124,093148,737 272,830 124,093 124,093148,737148,737
Clare Boothe Luce Policy InstituteNotes to Financial Statements3. Fair value(continued)December 31, 20084. ReceivablesTotalCertificates of depositEquity securities Total Quoted Pricesin ActiveMarkets forIdenticalAsset(Levell)43,182135,592 178,774 SignificantOtherObservableInputs(Level 2) 43,182 43,182135,592135,592Receivables. at December 31,2009 and 2008, consisted of the following:20082009Contributions receivableLess: Discount on contributions receivable 100,000(4,676) 208,000(19,036)Total receivables 95,324 188,964Contributions receivable as of December 31, 2009, are as follows:Due in less than one yearDue in one to five years 52,00048,000100,000(4,676) 95,324Less: Discount on contributions receivableTotalThe discount on contributions receivable has been calculated using discount ratesof 2.31 % to 4.5%. Since uncollectible contributions receivable are considered tobe insignificant, an allowance is not considered necessary.-9-
Clare Boothe Luce Policy InstituteNotes to Financial Statements5. Property,building andequipmentThe following is a summary of property, building and equipment, and accumulateddepreciation as of December 31 :20092008LandBuildings and improvementsEquipmentFurniture and fixturesSoftwareTotalLess: Accumulated depreciation ) )Total 659;048 707,696Depreciation and amortization expense for the years ended December 31, 2009 and2008, was 53,712 and 56,049, respectively.6.Notes payableOutstanding notes payable are as follows at December 31 :20082009 250,000 construction note payable commencingon September 6, 2002. The note was refinancedon March 4, 2008, for 214,304. The new termsare monthly installments of principal and interestof 1,849 for 180 months at an interest rate of6.25%. The note matures on March 6,2023.Less: Current portionTotal 197,680(10,088) 207,020(9,478) 187,592 197,542The following are maturities of the note payable for the next five years:Year ending December 31 :20092010201120122013Thereafter 10,08810,73711,42712,16212,945140,321Total 197,680- 10 -
Clare Boothe Luce Policy InstituteNotes to Financial Statements7.Temporarilyrestricted netassetsAs of December 31, temporarily restricted net assets were as follows:20082009InternshipsMentoringMid-America conferenceSchlafly luncheonSense and sexuality printingTime restricted Total 14,33634,7248,6362,8171,74420,000 82,257 22,04546,9888,6362,32448,000127,993Net assets are released from donor restrictions when expenses are incurred thatsatisfy the donor restricted purpose or through the occurrence of donor specifiedevents. The net assets released from restrictions are as follows for the years endedDecember 31 :20082009Choice scholarships/school choiceHonorariumsInternshipsJournalism ScholarMentoringMid-America conferenceSchlafly luncheonSense and sexuality printingTechnologyTime restricted Total - 11 -3515,0508,621 028,000114,9037,676 99,478
Clare Boothe Luce Policy InstituteNotes to Financial Statements8.EndowmentfundsThe Institute's endowment consists of one fund established to provide funding foran annual internship. The endowment consists of donor-restricted endowmentfunds. Net assets associated with endowment funds are classified and reportedbased on the existence or absence of donor-imposed restrictions.Interpretationof Relevant LawManagement of the Institute has interpreted the Virginia Uniform PrudentManagement of Institutional Funds Act (UPMIF A) as requiring the preservation ofthe fair value of the original gift as of the gift date of the donor-restrictedendowment funds absent explicit donor stipulations to the contrary. As a result ofthis interpretation, the Institute classifies as permanently restricted net assets (a) theoriginal value of gifts donated to the permanent endowment, (b) the original valueof subsequent gifts to the permanent endowment, and (c) accumulations to thepermanent endowment made in accordance with the direction of the applicabledonor gift instrument at the time the accumulation is added to the fund. Theremaining portion of the donor-restricted endowment fund that is not classified inpermanently restricted net assets is classified as temporarily restricted net assetsuntil those amounts are appropriated for expenditure by the organization in amanner consistent with the standard of prudence prescribed by UPMIF A. Inaccordance with UPMIF A, the Institute considers the following factors in making adetermination to appropriate or accumulate donor-restricted endowment funds:(l)(2)(3)(4)(5)(6)(7)The duration and preservation of the fundThe purposes of the organization and the donor-restricted endowment fundGeneral economic conditionsThe possible effect of inflation and deflationThe expected total return from income and the appreciation of investmentsOther resources of the organizationThe investment policies of the organization.EndowmentNet Assets Compositionby Type of Fund as of December 31:2009PermanentlyRestrictedDonor-restricted endowment funds- 12 - 195,3242008PermanentlyRestricted 183,579
Clare Boothe Luce Policy InstituteNotes to Financial Statements8.Endowmentfunds(continued)Changes in EndowmentNet Assets For the Year Ended December 31,2009:Endowment net assets,beginning of yearTemporarilyRestrictedPermanentlyRestricted Change in present valuediscount on pledge183,579 Appropriation of endowmentassets for expenditureEndowment net assets,end of year11,745912912(912)(912) 195,324 Endowment net assets,beginning of yearAppropriation of endowmentassets for expenditureEndowment net assets,end of yearPermanentlyRestricted Investment incomeTotal183,579 183,5791,6111,611(1,611)(1,611) Description of Amounts Classified as Permanently(Endowment Only) 183,579Restricted 183,579Net Assets20082009restricted195,324Net Assets For the Year Ended December 745Investment incomeChanges in EndowmentTotalnet assetsThe portion of perpetual endowment funds that isrequired to be retained permanently either byexplicit donor stipulation or by UPMIFA- 13 - 195,324 183,579
Clare Boothe Luce Policy InstituteNotes to Financial Statements8.Endowmentfunds(continued)Funds with DeficienciesFrom time to time, the fair value of assets associated with individual donorrestricted endowment funds may fall below the level that the donor or UPMIF Arequires the Organization to retain as a fund of perpetual duration. There were nosuch deficiencies as of December 31, 2009 and 2008.Return Objectives and Risk ParametersThe Institute has adopted investment and spending policies for endowment assetsthat attempt to provide a predictable stream of funding to programs supported byits endowment while seeking to preserve the endowment assets. Endowment assetsinclude those assets of donor-restricted funds that the organization must hold for adonor-specified period. Under this policy, as approved by Management, theendowment assets are invested in a manner that is intended to protect the principalinvestment while at the same time attaining a competitive rate of return. TheInstitute expects its endowment funds, over time, to provide an average rate ofreturn of approximately 5% annually. Actual returns in any given year may varyfrom this amount.Strategies Employed for Achieving ObjectivesTo satisfy its long-term rate-of-return objectives, the Institute relies on a returnstrategy in which investment returns are achieved through current yield (interestand dividends).SpendingPolicyPolicy and How the InvestmentObjectivesRelate to SpendingThe Institute has a policy of appropriating for distribution each year the incomeearned on the endowment funds.In establishing this policy, the Instituteconsidered the long-term expected return on its endowment. Accordingly, over thelong term, Institute expects the current spending policy to remain consistent. Thisis consistent with Institute's objective to preserve the endowment assets held inperpetuity or for a specified term as well as to provide additional real growththrough new gifts and investment return.9.Pension planThe Institute offers a tax-sheltered Section 403(b) annuity plan to its employees,allowing them to defer a portion of their compensation on a pre-tax basis. All fulltime employees are eligible for participation six months after employment begins.No contributions are made by the Institute to the plan.- 14 -
Clare Boothe Luce Policy InstituteNotes to Financial Statements10. Allocation ofjoint costsDuring 2009 and 2008, the Institute incurred joint costs of 1,063,885 and 424,972, respectively for informational materials primarily related to direct mail,house file mailings and newsletters that included fundraising appeals. Pursuant tothe joint cost rules (see Note 1), these costs were allocated to the functional areasas follows for the years ended December 31 :20092008ProgramFundraising 697,656366,229 287,941l37,031Total 1,063,885 424,97211. Concentrationof credit riskReceivables at December 31, 2009, are comprised of two receivables totaling100% of total receivables.Two receivables comprised 96% of the total atDecember 31, 2008.12. CommitmentsThe Institute has entered into agreements to lease office equipment. These leasesare treated as operating leases in the financial statements. The future minimumlease payments required under these leases as of December 31, 2009, are asfollows:201020112012 14,02814,0287,352Total 35,408Rent expense for 2009 and 2008 was 7,203 and zero, respectively.- 15 -
805 King Farm BoulevardSuite 300Rockville, Maryland 20850301.231.6200 Main301.231.7630 FaxAronson&Company\\ \\ \\ .arousoncompany.comIndependent Auditor's Report on Other Financial InformationBoard of DirectorsClare Boothe Luce Policy InstituteHerndon, VirginiaOur audits of the financial statements of Clare Boothe Luce Policy Institute for the years endedDecember 31, 2009 and 2008, were conducted for the purpose of forming an opinion on the basicfinancial statements taken as a whole. The accompanying schedules of functional expenses are presentedfor the purpose of additional analysis and are not a required part of the basic financial statements. Suchinformation has been subjected to the procedures applied in the audit of the basic financial statementsand, in our opinion, is fairly stated in all material respects in relation to the basic financial statementstaken as a whole.Rockville, MarylandApril 22, 20 I 0- 16 -.Prexitx:MEMBERCERTIFIED PUBLIC ACCOUNTANTS ANO MANAGEMENT CONSULTANTS GLOBAL ALliANCEOFINDEPENOENTFIRMS
Clare Boothe Luce Policy InstituteSchedule of FunctionalExpensesYear Ended December 3J, 2009ProgramServicesPublicInformationAccounting and legalAdvertising and marketingBank chargesBoard meetingsComputer and website servicesConferencesConsultantsDepreciation and amortizationDirect mailDues and subscriptionsEquipmentFeesFilms, books an literatureHonorariumsHouse file rollPayroll taxesPersonal property taxPhotographyPostagePrintingPublic relationsReal estate taxRent and occupancyScholarshipsShipping and deliverySoftwareSupplies and miscellaneousTelecommunicationsTravelTotal SupportingTotalProgramServicesSpecialProjects ,155sRefer to 085825,355 4,294Fundraising portingServices 92,2825,581461,150Report on Other Financial- 17-ServicesManagementandGeneral 34,33992,8876,282453 Information.177,063 638,213TotalExpenses 26,1075,0001,6055598,0184,55719,828 2,085,985
Clare Boothe Luce Policy InstituteSchedule of Functional ExpensesYear Ended December 31, nAccounting and legalAdvertisingBank chargesBoard meetingsComputer and website servicesConferencesConsultantsDepreciation and amortizationDirect mailDues and subscriptionsEquipmentFeesFilms, books an literatureHonorariumsHouse file ro11Payroll taxesPersonal property taxPhotographyPostagePrintingPublic relationsReal estate taxRent and occupancyScholarshipsShipping and deliverySoftwareSupplies and miscellaneousTelecommunicationsTravelTotal SupportingTotalProgramServices ,382 9275,2849,259 Refer to Independent533,083Auditor'sTotalSupportingServices 1,642 10,320FundraisingServicesManagementandGeneral 26,142 1,313,1781,5797,2942358,96897,47610910531322 Report on Other Financial- 18 7,4764085772,8991081,1368,4072994722,5868635,
Clare Boothe Luce Policy Institute Notes to Financial Statements 1. Organization and summary of significant accounting policies Organization: Clare Boothe Luce Policy Institute (the "Institute") is a not-for profit organization established in May 1993. The Institute prepares young women for effective conservative leadership and promotes school .
