Tarleton State University Foundation, Inc

TARLETONSTATEUNIVERSITYFOUNDATION,INC.

FINANCIALSTATEMENTSWITH

INDEPENDENTAUDITOR’SREPORT

August31,2019and2018

TARLETON STATE UNIVERSITY FOUNDATION, INC. August 31, 2019 and 2018

TABLE OF CONTENTS

Page Independent Auditor’s Report 1 – 2 Financial Statements Statements of Financial Position 3 Statements of Activities 4 Statement of Cash Flows 5 Notes to Financial Statements 6 – 16

George, Morgan & Sneed, P.C. 1849 Wall Street | Weatherford, TX 76086 | Phone 817.594.2704 | Fax 817.599.7389

www.gms‐cpa.com

INDEPENDENT AUDITOR’S REPORT

To the Board of Directors Tarleton State University Foundation, Inc. Stephenville, Texas

We have audited the accompanying financial statements of Tarleton State University Foundation, Inc. (a nonprofit organization), which comprise the statements of financial position as of August 31, 2019 and 2018, and the related statements of activities and cash flows for the years then ended, and the related notes to the financial statements.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility

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

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

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

1

2

Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Tarleton State University Foundation, Inc. as of August 31, 2019 and 2018, and the changes in its net assets and its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America.

Weatherford, Texas November 14, 2019

2019 2018ASSETS

CURRENT ASSETSCash $ 34,008 $ 159,683 Restricted cash 183,919 96,552 Investments 730,148 494,393 Miscellaneous receivable 1,600 800

TOTAL CURRENT ASSETS 949,675 751,428

PROPERTY AND EQUIPMENT 7 119

OTHER ASSETSRestricted investments 164,024 226,377 Endowment investments 19,652,381 19,434,066 Split interest investments 659,565 689,403 Loan fund receivable 4,408 8,875 Bequests receivable 582,816 - Real Estate - 86,400 Mineral Interest - 1

TOTAL ASSETS $ 22,012,876 $ 21,196,669

LIABILITIES AND NET ASSETSCURRENT LIABILITIES

Accounts payable and accrued expenses $ 3,756 $ 29,502 Current portion of annuity payable 34,587 34,587

TOTAL CURRENT LIABILITIES 38,343 64,089

LONG-TERM LIABILITIESAnnuity payable, less current portion 273,490 269,432

TOTAL LIABILITIES 311,833 333,521

NET ASSETSWithout Donor Restrictions 3,339,071 3,248,910 With Donor Restrictions 18,361,972 17,614,238

TOTAL NET ASSETS 21,701,043 20,863,148

TOTAL LIABILITIES AND NET ASSETS $ 22,012,876 $ 21,196,669

AUGUST 31, 2019 and 2018STATEMENTS OF FINANCIAL POSITION

TARLETON STATE UNIVERSITY FOUNDATION, INC.

The accompanying notes are an integral part of these financial statements. 3

Without Donor With Donor Without Donor With DonorRestrictions Restrictions Total Restrictions Restrictions Total

REVENUES, GAINS, AND OTHER SUPPORT:Contributions 6,324$ 1,303,699$ 1,310,023$ 3,910$ 644,043$ 647,953$ Miscellaneous 6,150 - 6,150 6,388 - 6,388 Interest and dividends 82,957 367,506 450,463 62,504 312,828 375,332 Administrative fees 107,989 - 107,989 145,301 - 145,301 Realized and unrealized gains and (losses)

on investments 246,870 (73,725) 173,145 178,410 950,246 1,128,656 Net assets released from restrictions

Restrictions satisfied by payments 849,746 (849,746) - 759,652 (759,652) - TOTAL REVENUES, GAINS,AND OTHER SUPPORT 1,300,036 747,734 2,047,770 1,156,165 1,147,465 2,303,630

EXPENSES:Program Services:

Educational Scholarships 647,031 - 647,031 632,630 - 632,630 University Support 168,837 - 168,837 121,064 - 121,064

Total program services 815,868 - 815,868 753,694 - 753,694 Supporting Services:

Management and GeneralAdvertising 1,500 - 1,500 - - - Travel and meetings 902 - 902 19 - 19 Conferences, conventions, and meetings 7,336 - 7,336 2,888 - 2,888 Facility rental 7,400 - 7,400 7,400 - 7,400 Board meeting expenses 2,745 - 2,745 678 - 678 Investment fees 58,487 - 58,487 56,812 - 56,812 Bank charges 111 - 111 70 - 70 Administrative fees 107,989 - 107,989 145,301 - 145,301 Accounting and auditing 18,719 - 18,719 20,902 - 20,902 Legal fees 37,359 - 37,359 41,031 - 41,031 Office supplies 2,392 - 2,392 4,260 - 4,260 Phones 1,305 - 1,305 390 - 390 Software expense - - - 2,732 - 2,732 Postage 862 - 862 839 - 839 Property maintenace - - - 8,500 - 8,500 Salary 72,749 - 72,749 65,622 - 65,622 Student payroll 3,218 - 3,218 730 - 730 Payroll tax 5,523 - 5,523 5,211 - 5,211 Awards, plaques and flowers 59 - 59 1,093 - 1,093 Insurance 6,880 - 6,880 4,314 - 4,314 Memberships and subscriptions 630 - 630 575 - 575 Foundation enhancement 7,064 - 7,064 6,211 - 6,211 Travel 689 - 689 - - - Miscellaneous 660 - 660 169 - 169 Charitable annuity expense 49,315 - 49,315 (8,719) - (8,719) Uncollectible student loans - - - (942) - (942) Depreciation 113 - 113 90 - 90

Total supporting services 394,007 - 394,007 366,176 - 366,176

TOTAL EXPENSES 1,209,875 - 1,209,875 1,119,870 - 1,119,870

Total Change in Net Assets 90,161 747,734 837,895 36,295 1,147,465 1,183,760

Net Assets at Beginning of Year 3,248,910 17,614,238 20,863,148 3,212,615 16,466,773 19,679,388

Net Assets at End of Year 3,339,071$ 18,361,972$ 21,701,043$ 3,248,910$ 17,614,238$ 20,863,148$

TARLETON STATE UNIVERSITY FOUNDATION, INC.STATEMENTS OF ACTIVITIES

FOR THE YEARS ENDED AUGUST 31, 2019 and 2018

2019 2018

The accompanying notes are an integral part of these financial statements.4

2019 2018

CASH FLOWS FROM OPERATING ACTIVITIES

Increase (decrease) in net assets 837,895$ 1,183,760$

Adjustments to reconcile increase in net assets

to net cash provided by operating activities:

Depreciation 113 90

Noncash donations (24,384) (117,208)

Realized and unrealized gains and (losses) on investments (173,145) (1,128,656)

Cash contributions to permanent endowments (1,113,604) (210,251)

Interest and dividends restricted for investment in permanent endowments (92,041) (96,432)

(Increase) decrease in loan fund receivable 4,467 3,971

(Increase) decrease in miscellaneous receivable (800) 10,000

Increase (decrease) in liabilities (21,688) 227,272

NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES (583,187) (127,454)

CASH FLOWS FROM INVESTING ACTIVITIES

Purchase of investments (3,393,741) (6,158,785)

Proceeds from sale of investments 2,972,831 5,908,873

Proceeds from sale of assets 342,960 -

NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES (77,950) (249,912)

CASH FLOWS FROM FINANCING ACTIVITIES

Contributions restricted for investment in permanent endowment 1,113,604 210,251

(Increase) decrease in receivables of contributions to the endowment (582,816) -

Interest and dividends restricted for investment in permanent endowments 92,041 96,432

NET CASH PROVIDED BY FINANCING ACTIVITIES 622,829 306,683

INCREASE (DECREASE) IN CASH

AND CASH EQUIVALENTS (38,308) (70,683)

BEGINNING CASH AND EQUIVALENTS 256,235 326,918

ENDING CASH AND EQUIVALENTS 217,927$ 256,235$

SUPPLEMENTAL DISCLOSURES

Noncash investing and financing transaction:

Stock Donations 24,384$ 117,208$

FOR THE YEARS ENDED AUGUST 31, 2019 and 2018

TARLETON STATE UNIVERSITY FOUNDATION, INC.

STATEMENTS OF CASH FLOWS

The accompanying notes are an integral part of these financial statements. 5

TARLETON STATE UNIVERSITY FOUNDATION, INC. NOTES TO FINANCIAL STATEMENTS

August 31, 2019 and 2018

6

NOTE A – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Nature of Activities

Tarleton State University Foundation, Inc. (the “Foundation”) is a not-for-profit organization that provides financial support to Tarleton State University located in Stephenville, Texas and scholarships for students attending the University. These programs are funded with contributions from donors and investment income earned on endowments. Basis of Accounting and Presentation

The financial statements of the Foundation have been prepared in accordance with generally accepted accounting principles applicable to nonprofit organizations, which involves the application of the accrual basis of accounting. The financial statements of the Foundation have been prepared in accordance with U.S. generally accepted accounting principles (“US GAAP”), which require the Foundation to report information regarding its financial position and activities according to the following net asset classifications:

Net assets without donor restrictions – Net assets that are not subject to donor-imposed restrictions and may be expended for any purpose in performing the primary objectives of the organization. These net assets may be used at the discretion of the Foundation’s management and the board of directors.

Net assets with donor restrictions – Net assets subject to stipulations imposed by donors and grantors. Some donor restrictions are temporary in nature; those restrictions will be met by actions of the Foundation or the passage of time. Other donor restrictions are perpetual in nature, whereby the donor has stipulated the funds be maintained in perpetuity.

Donor restricted contributions are reported as increases in net assets with donor restrictions. When a restriction expires, net assets are reclassified from net assets with donor restrictions to net assets without donor restrictions in the statements of activities. Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates.


August 31, 2019 and 2018

7

NOTE A – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Income Taxes The Organization is a not-for-profit organization that is exempt from income taxes under Section 501(c)(3) of the Internal Revenue Code. The Organization’s federal Return of Organization Exempt from Income Tax (Form 990) for 2016, 2017, and 2018 are subject to examination by the IRS, generally for three years after they were filed.

Contributions Contributions received are recorded as net assets without donor restrictions or net assets with donor restrictions, depending on the existence and/or nature of any donor-imposed restrictions. Contributions that are restricted by the donor are reported as an increase in net assets without donor restrictions if the restriction expires in the reporting period in which the contributions are recognized. All other donor restricted contributions are reported as an increase in net assets with donor restrictions, depending on the nature of the restriction. When a restriction expires (that is, when a stipulated time restriction ends or purpose restriction is accomplished), net assets with donor restrictions are reclassified to net assets without donor restrictions and reported in the statement of activities as net assets released from restrictions. Promises to Give Unconditional promises to give are recognized as contribution revenue in the period received and as assets, decreases of liabilities, or expenses depending on the form of the benefits received. Promises to give are recorded at net realizable value if expected to be collected in one year and at fair value if expected to be collected in more than one year. Conditional promises to give are recognized when the conditions on which they depend are substantially met. Unconditional promises to give consist of bequests where the estates are legally required to make distributions to the Foundation. Donated Services A significant portion of the Foundation’s functions are conducted by unpaid volunteer officers and committee members. The value of this contributed time is not reflected in the accompanying financial statements since the volunteers’ time does not meet the criteria for recognition under generally accepted accounting principles.


August 31, 2019 and 2018

8

NOTE A – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Loan Fund Receivable The Foundation received a donation to establish a permanent endowment fund to provide loans for student tuition at Tarleton State University. The Foundation entered into an agreement with Tarleton State University for the making and administration of the loans. The Foundation transfers funds to the loan fund from the endowment when necessary. The fund and principal of each student loan are the property of the Foundation. The University retains all interest and fees accrued and collected on the loans as an administrative fee. The University provides an annual report to the Foundation by November 30 of each year of the status of the student loans made from this fund. Management has estimated the allowance based on the previous fiscal year report from the University. The allowance for August 31, 2019 and 2018 are $32,324 and $32,324 respectively. The Foundation received a judgment that changes the purpose of this endowment. As a result the University stopped making loans from the fund after the fall 2016 semester. The funds at the University were returned to the Foundation and added to the Endowment. The University will continue to administer the outstanding loans and will transfer the amounts repaid back to the Foundation.

Cash and Cash Equivalents

For purposes of the statement of cash flows, the Foundation considers all highly liquid investments with an original maturity of three months or less at the time of purchase to be cash equivalents. Restricted cash is limited in use to payment of scholarships and other university support. Cash and money market accounts in the endowment brokerage accounts are reported as investments instead of cash because the Foundation holds those funds as an endowment. Property and Equipment

Purchased property and equipment is capitalized at cost. Donations of property and equipment are recorded as contributions at their estimated fair value. Such donations are reported as unrestricted contributions unless the donor has restricted the donated asset to a specific purpose. Depreciation and amortization is provided on the straight-line method over the estimated useful lives as follows: Office Equipment 3 - 5 years Depreciation expense for the year ended August 31, 2019 and 2018 were $113 and $90 respectively.


August 31, 2019 and 2018

9

NOTE A – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Concentration of Credit Risk Financial instruments that potentially subject the Foundation to concentrations of credit risk are primarily cash and cash equivalents and marketable securities. The Foundation maintains its cash balances at two financial institutions in Stephenville, Texas. Accounts at the institutions are insured by Federal Deposit Insurance. At August 31, 2019 the balances at one financial institution exceeded FDIC by $13,532. At August 31, 2018 100% of the Foundation’s cash balances were covered by FDIC insurance. The Foundation invests with a Trust Company that is regulated by the Texas Department of Banking. The Foundation’s investment accounts are not covered by FDIC or Securities Investor Protection Corporation (SIPC). Functional Allocation of Expenses

The costs of providing various programs and activities have been grouped on a functional basis in the statement of activities. Costs have been allocated among programs and supporting services and such allocations are determined by management on an equitable basis. The costs specifically identifiable to program services are included in program services. All other costs not directly identifiable with the programs are included in support services. Reclassifications Certain reclassifications have been made to the 2018 financial statement presentation to correspond to the current year’s format. See Note J for additional information regarding changes to net assets.

NOTE B – FAIR VALUE OF FINANCIAL INSTRUMENTS

The Foundation's significant financial instruments are cash, investments, loan fund receivable and bequests receivable. The carrying amounts of cash, the loan fund receivable and bequests receivable approximate fair value. Investments in equity securities and all investments in debt securities are reported at fair value, as determined by independent published sources, with the related gains and losses included in the statement of activities. Investment income and gains restricted by a donor are reported as an increase in net assets with donor restrictions or net assets without donor restrictions depending on the donor’s intensions. Fair values of investments are measured on a recurring basis. Fair values for investments are determined by reference to quoted market prices and other relevant information generated by market transactions (Level 1 inputs).


August 31, 2019 and 2018

10

NOTE B – FAIR VALUE OF FINANCIAL INSTRUMENTS (continued)

Investments are summarized as follows:

(Level 1) (Level 1)Market Unrealized Market Unrealized

Cost Value Gain/(Loss) Cost Value Gain/(Loss)Unrestricted

Cash 404,423$ 404,423$ -$ 117,044$ 117,044$ -$ Mutual Funds 273,878 325,725 51,847 322,718 377,349 54,631 Total Unrestricted 678,301 730,148 51,847 439,762 494,393 54,631

Restricted

Cash 138,877 138,877 - 196,737 196,737 - Mutual Funds 653,339 657,319 3,980 666,358 686,974 20,616

Common Stocks 6,175 27,392 21,217 6,175 32,068 25,893 Total Temporarily Restricted 798,391 823,588 25,197 869,270 915,779 46,509

Endowments

Cash 244,470 244,470 - 54,772 54,772 - Mutuals Funds 15,891,145 19,407,911 3,516,766 15,907,975 19,379,294 3,471,319 Total Endowments 16,135,615 19,652,381 3,516,766 15,962,747 19,434,066 3,471,319

Total 17,612,307$ 21,206,117$ 3,593,810$ 17,271,779$ 20,844,238$ 3,572,459$

August 31, 2019 August 31, 2018

Total mutual funds consist of the following types:

(Level 1) (Level 1)Market Unrealized Market Unrealized

Cost Value Gain/(Loss) Cost Value Gain/(Loss)Mutual Funds

Corporate Bond Funds 1,017,489$ 1,030,957$ 13,468$ 988,920$ 974,227$ (14,693)$ Equity Funds 725,152 765,309 40,157 - - - Income Funds 4,228,648 4,361,046 132,398 3,609,050 3,523,315 (85,735) Non-US Equity Funds 5,446,709 6,558,105 1,111,396 5,142,437 6,476,995 1,334,558 US Equity Funds 4,815,714 6,929,776 2,114,062 4,810,636 7,385,610 2,574,974

Alternative Equity Funds 584,650 745,762 161,112 2,346,008 2,083,470 (262,538)

16,818,362$ 20,390,955$ 3,572,593$ 16,897,051$ 20,443,617$ 3,546,566$

August 31, 2019 August 31, 2018


August 31, 2019 and 2018

11

NOTE C – AVIALABLITY AND LIQUIDITY

The Foundation receives significant contributions with donor restrictions to be used in accordance with the associated purpose restrictions. It also receives gifts to establish endowments that will exist in perpetuity; the income generated from such endowments is used to fund programs. The Foundation receives support without donor restrictions however such support has historically not been sufficient to fund management and general expenditures. The Foundation’s management and general expenditures are primarily funded with a fee charged to the endowments. See Note D for more information regarding this administrative fee. Program services for education scholarships and university support are primarily funded from restricted contributions and endowment funds. The following table presents financial assets available to meet management and general expenditures within one year at August 31, 2019:

2019 2018

Available financial assetsUnrestricted cash 34,008$ 159,683$ Unrestricted investments 730,148 494,393 Other receivables 1,600 800

Estimated administrative fees within next year (Note D) 196,524 145,755 Total financial assets 962,280 800,631

Less amounts reserved by the Board of Directors:Giving annuity reserve fund (104,455) (102,461)

Financial assets available to meet management & general expenditures within one year 857,825$ 698,170$

NOTE D – ENDOWMENTS

The Foundation’s endowment consists of approximately 150 individual funds established to provide tuition scholarships to students of Tarleton State University or to provide support to departments of Tarleton State University. As required by generally accepted accounting principles, net assets associated with endowment funds are classified and reported based on the existence or absence of donor-imposed restrictions.

The Board of Trustees of the Foundation has continued to require the preservation of the fair value of the original gift as of the gift date of the donor-restricted endowment funds absent explicit donor stipulations to the contrary. As a result of this interpretation, the Organization classifies as permanently restricted net assets (a) the original value of gifts donated to the permanent endowment, (b) the original value of subsequent gifts to the permanent endowment, and (c) accumulations to the permanent endowment made in accordance with the direction of the applicable donor gift instrument at the time the accumulation is added to the fund. The remaining portion of the donor-restricted endowment fund that is not classified in permanently restricted net assets is classified as


August 31, 2019 and 2018

12

NOTE D – ENDOWMENTS (continued) temporarily restricted net assets until those amounts are appropriated for expenditure by the Foundation in a manner consistent with the standard of prudence prescribed by UPMIFA. Losses on investments that are donor-restricted for an endowment fund reduce temporarily restricted net assets up to the amount of any prior net appreciation of the investments and any remaining losses reduce unrestricted net assets. Appropriations of individual endowment funds in excess of temporarily restricted net assets reduce unrestricted net assets.

Investment and Spending Policies. Investments shall be made only in mutual funds, stocks, securities, notes, accounts, bonds, real estate or other assets recognized to be readily marketable, and of investment quality, grade and safety. Investments shall be structured to provide for current income as well as growth to provide for both current and future distribution requirements. To the maximum extent possible, distributions shall be made only from net income and not from the corpus (principal) of any endowed funds of the Foundation. The Board of Trustees has determined that appropriations for a given year from endowments shall not exceed 5.0% for the fall 2018 and spring 2019 distribution, and 5.0% for the fall 2019 and spring 2020 distribution of the fair market value of the endowment at the end of the preceding fiscal year. Distributions for the fiscal years ending August 31, 2019 and 2018 were approximately 3.9% and 3.8% of the value of the endowment at the end of the preceding fiscal year, respectively. Many of the endowment fund gift instruments specify that a percentage of the income each year is to be retained for perpetuity. These amounts range from twenty percent to fifty percent. The allocation of income is calculated quarterly.

Board Designated Endowment. The Board of Directors have created a board designated endowment, the Richard Saunders endowment. Fifty percent of the earnings from the board designated endowment will be used to support the operating budget with any excess of this fifty percent used for other purposes that support the Foundation’s mission and fifty percent will be retained in the endowment.


August 31, 2019 and 2018

13

NOTE D – ENDOWMENTS (continued)

Endowment net asset composition as of August 31, 2019 and 2018 is as follows:

Without Donor With DonorRestrictions Restrictions Total

Donor - Restricted Endowment Investments -$ 17,085,941$ 17,085,941$ Board - Designated Endowment Investments 2,566,440 - 2,566,440 Total Endowment Investments 2,566,440 17,085,941 19,652,381 Loan Fund Receivable - 4,408 4,408 Bequest Receivable - 582,816 582,816 Restricted Cash - 37,473 37,473

Endowment Net Assets, August 31, 2019 2,566,440 17,710,638 20,277,078 Net assets from sources other than endowments 772,631 651,334 1,423,965

Total Net Assets, August 31, 2019 3,339,071$ 18,361,972$ 21,701,043$


Donor - Restricted Endowment Investments -$ 16,897,709$ 16,897,709$ Board-Designated Endowment Investments 2,536,358 - 2,536,358 Total Endowment Investments 2,536,358 16,897,709 19,434,067 Loan Fund Receivable - 8,875 8,875 Restricted Cash - 40,065 40,065

Endowment Net Assets, August 31, 2018 2,536,358 16,946,649 19,483,007 Net assets from sources other than endowments 712,552 667,589 1,380,141

Total Net Assets, August 31, 2018 3,248,910$ 17,614,238$ 20,863,148$

Changes in endowment net assets as of August 31, 2019 and 2018 are as follows:


Endowment Net Assets, beginning of year 2,536,358$ 16,946,649$ 19,483,007$ Contributions - 1,132,987 1,132,987 Transferred from temporarily restricted - 18,600 18,600 Interest and dividends 54,499 362,419 416,918 Realized and unrealized gains

and (losses) on investments (10,555) (69,049) (79,604) Amounts appropriated for expenditure (13,862) (680,968) (694,830)

August 31, 2019 2,566,440$ 17,710,638$ 20,277,078$


August 31, 2019 and 2018

14

NOTE D – ENDOWMENTS (continued)


Endowment Net Assets, beginning of year 2,411,638$ 16,175,991$ 18,587,629$ Contributions 125 211,276 211,401 Transferred from unrestricted (43,525) 200 (43,325) Transferred from temporarily restricted - 6,800 6,800 Interest and dividends 46,584 309,928 356,512 Realized and unrealized gains

and (losses) on investments 140,077 948,710 1,088,787 Amounts appropriated for expenditure (18,541) (706,256) (724,797)

August 31, 2018 2,536,358$ 16,946,649$ 19,483,007$

The Foundation assesses an administrative fee for the management of each of the endowments. The administrative fee is calculated quarterly and is equal to .75% of the ending value of the endowments. The administrative fee was increased to 1.00% by the Board of Directors in May 2019. Administrative fees reduce net assets with donor restrictions and increase net assets without donor restrictions. Administrative fees for the fiscal years ending August 31, 2019 and 2018 were $107,989 and $145,301 respectively. The timing of the administrative fees changed from the last day of the quarter to the month following quarter end therefore there were only three quarters of administrative fees transferred between net assets with donor restrictions to net assets without donor restrictions in fiscal year 2019.

NOTE E – SPLIT-INTEREST AGREEMENTS

The Foundation received contributions of stock during 2014, 2015, 2016, and 2018 as charitable gift annuities. The Foundation has segregated these assets as separate and distinct funds, independent from other funds and not to be applied to payment of the debts and obligations of the Foundation or any other purpose other than annuity benefits specified in the agreements. In addition, this portfolio of assets meets all requirements concerning permissible investments and mandated reserves required by law. The Foundation agrees to pay a stated return annually to the beneficiaries as long as they live, at which time the remaining assets are available for restricted use of the Foundation. At August 31, 2019 and 2018, the total assets held under split-interest agreements were $659,565 and $689,403, respectively, at fair value. Legally mandated reserves at August 31, 2019 and 2018 were $104,455 and $102,461, respectively. The actuarial present value of the Foundation’s interest in the gift annuities was $308,077 at August 31, 2019 and $304,019 at August 31, 2018 and was calculated using an interest rate of 2.2% and was recorded as a related liability.


August 31, 2019 and 2018

15

NOTE F – RESTRICTIONS/LIMITATIONS ON NET ASSETS

The Organization’s Board of Directors has chosen to place the following limitations on net assets without donor restrictions:

2019 2018Board designated endowment 2,566,440$ 2,536,358$ Giving annuity reserve fund 104,455 102,461

2,670,895$ 2,638,819$

Net assets with donor restrictions are available for the following purposes:

2019 2018Scholarships and university support 299,847$ 283,230$ Endowments for scholarships and university support Spendable portion of endowments 4,351,927 4,835,034 Permanent portion of endowments 13,358,710 12,110,590 Charitable gift annuities 351,488 385,384

18,361,972$ 17,614,238$

Net assets were released from donor restrictions by incurring expenses satisfying the purpose or time restrictions specified by donors as follows:

2019 2018Scholarships and universtiy support 756,959$ 633,271$ Administrative fees 92,787 126,381

849,746$ 759,652$

NOTE G – OPERATING LEASE

The Foundation has negotiated an annual lease with Tarleton State University, for the use of 2 offices, equipment and furniture and fixtures. Rent expense was $7,400 and $7,400 for the fiscal years ending August 31, 2019 and 2018 respectively.

NOTE H - SCHOLARSHIPS At August 31, 2019, the Foundation has approved endowed scholarships of $236,895 for the spring 2020 semester. This amount has not been accrued as a liability in the financial statements because the payment of the scholarships is conditional on the students meeting certain academic requirements and registering for the spring semester.


August 31, 2019 and 2018

16

NOTE I – SUBSEQUENT EVENTS The Foundation has evaluated subsequent events through November 14, 2019, the date which the financial statements were available to be issued.

NOTE J – NEW ACCOUNTING PRONOUNCEMENTS

The Foundation implemented FASB Accounting Standards Update (ASU) 2016-14, Not-for-Profit Entities (Topic 958), Presentation of Financial Statements for Not-for-Profit Entities. The Foundation has adjusted the presentation of these statements accordingly. The ASU has been applied retrospectively to all periods presented. The new standards change the following aspects of the Foundation’s financial statements.

The unrestricted net asset class has been renamed net assets without restrictions. The temporarily restricted and permanently restricted net asset classes have been

renamed net assets with donor restrictions. The financial statements include a new disclosure about liquidity and availability

of resources (Note C). NOTE K – FUTURE ACCOUNTING PRONOUNCEMENTS

The Financial Accounting Standards Board (FASB) has issued several standards that will be effective for future years. The Foundation has not yet determined the effect these new standards will have on its financial reporting.

Accounting Standards Update (ASU) 2015-14, Revenue from Contracts with Customers. The new revenue standard aims to improve accounting for contracts with customers. This new standard is effective for fiscal years beginning after December 15, 2018. Accounting Standards Update (ASU) 2016-02, Leases. The new standard introduces the recognition of lease assets and lease liabilities by lessees for those leases classified as operating leases. This new standard is effective for fiscal years beginning after December 15, 2019.

Documents

Tarleton State University Foundation, Inc