filestore.scouting.org · Web viewTo ensure observance of limitations and restrictions placed on the use of available resources, the accounts of the Organization are maintained in

Sample Notes to the Financial StatementsNote: Most of the following sample disclosures will apply to all local councils. Some will not. Please ensure that your council’s footnote disclosures are clearly representative of its unique financial situation.

LOCAL COUNCIL INC., BOY SCOUTS OF AMERICANOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2012 and 2011

NOTE 1—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Organization

The Local Council, Boy Scouts of America (the “Council”) operates in XXXXXXX, Texas, including the counties of XXXXX, XXXX, XXXXXXX, and XXXXXXXXX XXXXX. The Council has five camping facilities. The Trust Fund was established for the benefit of the Council. The Council is a not-for-profit organization devoted to promoting, within the territory covered by the charter from time to time granted it by the Boy Scouts of America and in accordance with the Bylaws, and Rules and Regulations of the Boy Scouts of America, the Scouting program of promoting the ability of boys and young men and women to do things for themselves and others, training them in Scoutcraft, and teaching them patriotism, courage, self-reliance, and kindred virtues, using the methods which are now in common use by the Boy Scouts of America.

The Council’s programs are classified as follows:

Tiger Cubs—One-year, family-oriented program for a group of teams, each consisting of a first-grade (or 7-year-old) boy and an adult partner (usually a parent). A Tiger Cub den is part of the Cub Scout pack.

Cub Scouts—Family- and community-centered approach to learning citizenship, compassion, and courage through service projects, ceremonies, games, and other activities promoting character development and physical fitness.

Boy Scouting—With the Scout Oath and Scout Law as guides, and the support of parents and religious and neighborhood organizations, Scouts develop an awareness and appreciation of their role in their community and become well-rounded young men through the advancement of the program. Scouts progress in rank through achievements, gain additional knowledge and responsibilities, and earn merit badges that introduce a lifelong hobby or a rewarding career.

Varsity Scouting—Program for young men ages 14–17 that provides options for those who are looking for rugged high adventure or challenging sporting activities and still want to be a part of a Scouting program that offers the advancement opportunities and values of the Boy Scouts of America. There are five fields of emphasis, including advancement, high-adventure sports, personal development, service, and special programs and events.

Venturing—Provides experiences to help young men and women, ages 14—or 13 with completion of the eighth grade—through 20, become mature, responsible, caring adults. Young teens learn leadership skills and participate in challenging outdoor activities, including having access to Boy Scout camping properties, a recognition program, and Youth Protection training.

LOCAL COUNCIL INC., BOY SCOUTS OF AMERICANOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


NOTE 1—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Learning for Life—Program to enable young people to become responsible individuals by teaching positive character traits, career development, leadership, and life skills so they can make ethical choices and achieve their full potential.

The Council’s website address is ____________________________.

Principles of Consolidation

The Council has voting control over and an economic interest in the Trust Fund, which results in the accounts of the Trust Fund being consolidated with those of the Council in the accompanying consolidated financial statements. All intercompany balances and transactions have been eliminated in the consolidation. The Council and the Trust Fund are hereinafter collectively referred to as the “Organization.”

Fund Accounting

To ensure observance of limitations and restrictions placed on the use of available resources, the accounts of the Organization are maintained in accordance with the principles of fund accounting. Under such principles, resources for various purposes are classified for accounting and reporting purposes into funds that are in accordance with specified activities or objectives.

The Organization also prepares financial statements in accordance with the Financial Accounting Standards Board (FASB) standards for not-for-profit organizations (ASC 958-205 and subsections). Under these standards, the Organization is required to report information regarding its financial position and activities according to three classes of net assets: unrestricted net assets, temporarily restricted net assets, and permanently restricted net assets. In addition, the Organization is required to present a statement of cash flows.

Contributions

Contributions receivable are recognized upon notification of a donor’s unconditional promise to give to the Organization. Unconditional promises to give that are expected to be collected in less than one year are measured at net realizable value because that amount results in a reasonable estimate of fair value in accordance with the Contributions Received section of the FASB ASC. Contributions that are restricted by the donor are reported as increases in unrestricted net assets if the restrictions expire in the fiscal year in which the contributions are recognized. All other donor-restricted contributions are reported as increases in temporarily or permanently restricted net assets, depending on the nature of the restrictions. When a donor restriction expires, that is, when a stipulated time restriction ends or purpose restriction is accomplished, temporarily restricted net assets are reclassified to unrestricted net assets and are reported in the consolidated statement of changes in net assets as assets released from restrictions.




Donated Materials and Services

Donated land, buildings, equipment, investments, and other noncash donations are recorded as contributions at their fair market value at their date of donation. The Organization reports the donations as unrestricted support, unless explicit donor stipulations specify how the donated assets must be used. Gifts of long-lived assets with explicit restrictions that specify how the assets must be used, and gifts of cash or other assets that must be used to acquire long-lived assets are reported as restricted support. Absent explicit donor stipulations about how long those long-lived assets must be maintained, the Organization reports expirations of donor restrictions when the donated or acquired long-lived assets are placed in service.

Donated services that do not require specialized skills or enhance nonfinancial assets are not recorded in the accompanying consolidated financial statements because no objective basis is available to measure the value of such services. A substantial number of volunteers have donated significant amounts of their time to the Organization’s program services and its fundraising campaigns, the value of which is not recorded in the accompanying consolidated financial statements.

Advertising

Advertising costs are charged to operations in the period in which the advertisement is placed. Advertising for 2012 and 2011 amounted to approximately $XXX and $XXX, respectively. Advertising costs for 2012 include a contribution totaling approximately $XXX for advertising services performed for the Organization.

Investments

Investments consist primarily of assets invested in marketable equity and debt securities, alternative investments, commodities, and money-market accounts. The Organization accounts for investments in accordance with the FASB standard for investments held by not-for-profit organizations (ASC 958-320 and subsections). This standard requires that investments in equity securities with readily determinable fair values and all investments in debt securities be measured at fair value in the consolidated Statement of Financial Position. Fair value of marketable equity and debt securities is based on quoted market prices. Alternative investments are stated at the fair value of their underlying assets and allocated to the investors in proportion to the investor’s ownership percentage. The realized and unrealized gain or loss on investments is reflected in the consolidated Statement of Changes in Net Assets.

Investments are exposed to various risks such as significant world events, interest rate, credit, and overall market volatility risks. Due to the level of risk associated with certain investment securities, it is reasonably possible that changes in the fair value of investments will occur in the near term and that such changes could materially affect the amounts reported in the consolidated Statement of Financial Position. See also Notes 6 and 7.




Investment Policy

The Council’s investment policy intends for the Council to invest in assets that would produce results exceeding the investment’s purchase price and incur a significant yield of return, while assuming a moderate level of investment risk. The Council expects its Endowment Fund, over time, to provide a reasonable rate of return. To satisfy the long-term rate-of-return objective, the Council relies on a total return strategy in which investment returns are achieved through both capital appreciation (realized and unrealized) and current yield (interest and dividends). The Council targets a diversified asset allocation that places a greater emphasis on marketable equity and debt securities and money-market accounts to achieve its long-term return objectives within prudent risk constraints.

Spending Policy

On September 15, 2010, the board of directors (through the executive committee) approved an endowment spending policy. The policy defines the total funds available from the Endowment Fund in a given year (the distributable income) as up to 5 percent of the Endowment Fund’s average market value over the preceding three years. The Endowment Fund is to have returns greater than the proposed distribution plus management and trustee fees. If the market value of the Endowment Fund falls to or below the amount of the fund’s donor-restricted gifts, then the spending policy will be amended in accordance with the guidelines not to exceed the actual earnings of the fund. The executive committee (subject to the board of directors’ approval) may amend this spending policy.

Accounts Receivable

Accounts receivable are recorded primarily for product sales and are reported at net realizable value if the amounts are due within one year. An allowance for doubtful accounts is based on an analysis of expected collection rates determined from experience. No allowance for doubtful accounts was considered necessary as of December 31, 2012, and 2011.

Interfund Loans

The interfund loans at December 31, 2012, result from the Operating Fund making advances of surplus cash funds to the Capital Fund for operating purposes. In March 2013, the amounts due from the Capital Fund were relieved by the Operating Fund, thus satisfying the obligation.

Inventory

Inventory consists of Scouting and other items available for resale and is stated at the lower of cost or market. Cost is determined using the average method.




Land, Buildings, and Equipment

Land, buildings, and equipment acquired prior to January 1, 1973, are stated at appraised values as established by officials of the Council. Land, buildings, and equipment purchased subsequent to January 1, 1973, are recorded at cost. Donated land, buildings, and equipment are recorded at the approximate fair market value of the asset on the date of donation. Improvements or betterments of a permanent nature are capitalized. Expenditures for maintenance and repairs are charged to expense as incurred. The costs of assets retired or otherwise disposed of, and the related accumulated depreciation, are eliminated from the accounts in the year of disposal. Gains or losses resulting from property disposals are credited or charged to operations currently. Land, buildings, and equipment are depreciated using the straight-line method over the estimated useful lives of the assets.

Construction-in-progress represents costs incurred on the construction of assets that have not been completed or placed in service as of the end of the year.

Estimates

The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Management believes that these estimates and assumptions provide a reasonable basis for the fair presentation of the consolidated financial statements.

Functional Allocation of Expenses

The costs of providing the various programs and supporting services have been summarized on a functional basis in the consolidated statement of functional expenses. Costs that are not directly associated with providing specific services have been allocated based upon the relative time spent by employees of the Council providing those services. In accordance with the policy of the National Council of the Boy Scouts of America (the “National Council”), the payments of the charter and national service fees to the National Council are not allocated as functional expenses.

Reclassifications

Certain reclassifications have been made to the 2011 summarized financial statement information to conform to the current-year presentation. These reclassifications had no effect on the increase in net assets for 2011.




Income Taxes

The Council is a not-for-profit organization that is exempt from income taxes under Section 501(c)(3) of the Internal Revenue Code and comparable state law as a charitable organization, whereby only unrelated business income, as defined by Section 509(a)(1) of the Code is subject to federal income tax. The Council currently has no unrelated business income. Accordingly, no provision for income taxes has been recorded. The Council has adopted the provisions of the FASB standard on Accounting for Uncertainty in Income Taxes (ASC 740-10-25). The Council does not believe there are any material uncertain tax positions and, accordingly, it will not recognize any liability for unrecognized tax benefits. For the year ended December 31, 2012, there were no interest or penalties recorded or included in its consolidated financial statements.

Recent Accounting Pronouncements

New accounting standards are now issued by the Financial Accounting Standards Board (FASB) through Accounting Standards Updates (ASUs) to the FASB Accounting Standards Codification (ASC). The FASB does not consider the updates authoritative on a standalone basis; they become authoritative when incorporated into the ASC. The ASUs will be in a six-digit, two-segment format (20YY-XX) where YY is the year issued and XX is the sequential number of each update. So, ASU 2012-01 would be the first update issued in 2012, and so forth.

Compensation—Retirement Benefits—Multiemployer Plans (Subtopic 715—80), Disclosures about an Employer’s Participation in a Multiemployer Plan (“ASU 2011-09”)—Issued in September 2011, this ASU requires expanded disclosures for certain defined benefit pension and other postretirement plans. ASU 2011-09 is effective for local councils in 2012 with early adoption permitted. The Council adopted the provisions of this ASU on October 1, 2011, which did not materially affect the Council’s financial statements (see Note 11).

Fair Value Measurement (Topic 820), Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs (“ASU 2011-04”)—In May 2011, the FASB issued ASU No. 2011-04, which amended ASC 820, Fair Value Measurement, to change the wording used to describe many of the requirements in U.S. GAAP for measuring fair value and for disclosing information about fair value measurements. The adoption of ASU 2011-04 became effective for local councils starting in 2012 and had no material effect on the Council’s financial statements (see Note 7).

Improving Disclosures about Fair Value Measurements (“ASU 2010-06”) —In January 2010, the FASB issued ASU No. 2010-06, which amended ASC 820 to require new disclosures related to transfers in and out of Level 1 and Level 2 fair value measurements, including reasons for the transfers, and to require new disclosures related to activity in Level 3 fair value measurements. The new disclosures and clarifications of existing disclosures were effective for interim and annual reporting periods beginning after December 15, 2009, except for the disclosures about purchases, sales, issuances, and settlements in the roll forward of activity in Level 3 fair value measurements. Those disclosures were effective for the Council starting in 2011(see Note 7).



NOTE 2—ENDOWMENT FUND

The Council’s Endowment Fund includes donor-restricted endowment funds. As required by accounting principles generally accepted in the United States, net assets associated with endowment funds are classified and reported based on the existence or absence of donor-imposed restrictions. Unrestricted net assets, identified by the Council’s board of directors to be used for future investment and growth, are included in unrestricted net assets—board-designated.

The Council has interpreted the State Prudent Management of Institutional Funds Act (“SPMIFA”) as requiring the preservation of the original gift amount of the donor-restricted endowment funds absent explicit donor stipulations to the contrary. As a result of this interpretation, the Council 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 temporarily restricted net assets until those amounts are appropriated for expenditure by the Council in a manner consistent with the standard of prudence prescribed by SPMIFA. In accordance with SPMIFA, the Council considers the following factors in making a determination to appropriate or accumulate donor-restricted endowment funds:

(1) The duration and preservation of the fund(2) The purposes of the Council and the donor-restricted endowment fund(3) General economic conditions(4) The possible effect of inflation and deflation(5) The expected total return from income and the appreciation of investments(6) Other resources of the Council(7) The investment policies of the Council



NOTE 2—ENDOWMENT FUND (CONTINUED)

Changes in the endowment net assets (deficit) for the years ended December 31, 2012 and 2011, are as follows:

Unrestricted— Unrestricted—Non-Board- Board- Temporarily PermanentlyDesignated Designated Restricted Restricted Total

Endowment Fund net assets, December 31, 2010 $ XXX $ XXX $ XXX $ XXX $ XXX

Net asset reclassification based on change in law XXX XXX XXX XXX XXX

Endowment Fund, after reclassification XXX XXX XXX XXX XXX

Investment return XXX XXX XXX XXX XXX

Contributions XXX XXX XXX XXX XXX

Other revenue XXX XXX XXX XXX XXX

Appropriation of endowment assets for expenditure $ XXX $ XXX $ XXX $ XXX $ XXX

Endowment Fund net assets, December 31, 2011 XXX XXX XXX XXX XXX

Investment return XXX XXX XXX XXX XXX

Contributions XXX XXX XXX XXX XXXAppropriation of endowment assets for expenditure XXX XXX XXX XXX XXX

Endowment Fund net assets (deficit), December 31, 2012 $ XXX $ XXX $ XXX $ XXX $ XXX



NOTE 2—ENDOWMENT FUND (CONTINUED)

From time to time, the fair value of assets associated with individual donor-restricted endowment funds may fall below the level the donor or SPMIFA requires the Council to retain as permanently restricted. Deficiencies of this nature result from unfavorable market fluctuations and would be included in unrestricted net assets. As of December 31, 2012, total deficiencies are $XXX. There were no deficiencies at December 31, 2011.

NOTE 3—NET ASSETS AND RESTRICTIONS

Substantially all of the restrictions on net assets at the end of 2012 are related to funds raised through the ongoing capital and endowment campaigns to help prepare the Council for future Scouting needs, charitable trusts of which the Council is a beneficiary, and United Way Services funding for the next year.

Temporarily restricted net assets are available for the following purposes at December 31, 2012 and 2011:

2012 2011

Endowment funds subject to a time restriction by explicit donor stipulation or by SPMIFA:

With purpose restrictions: gift $ XXX $ XXXWith purpose restrictions: Other XXX XXX

Capital campaign XXX XXXUnited Way XXX XXXGeneral operations XXX XXX

$ XXX $ XXX

Permanently restricted net assets consist of the following at December 31, 2012 and 2011:

2012 2011

Permanently restricted endowment gifts required to be retained either by explicit donor stipulations or by SPMIFA:

General endowments $ XXX $ XXXCharitable lead and remainder trusts (see Note 8) XXX XXXCash surrender value of life insurance XXX XXX

$ XXX $ XXX



NOTE 4—NET ASSETS RELEASED FROM RESTRICTIONS

Net assets were released from donor restrictions during 2012 and 2011 by incurring expenses satisfying the restricted purposes or by the occurrence of other events specified by donors. Net assets released were donated by the following:

2012 2011

Capital campaign $ XXX $ XXXUnited Way XXX XXXFriends of Scouting XXX XXXFoundations XXX XXXCamperships XXX XXXOther direct contributions XXX XXX

$ XXX $ XXX

NOTE 5—CONTRIBUTIONS RECEIVABLE

Contributions receivable at December 31, 2012 and 2011, consist of the following:

2012 2011

United Way $ XXX $ XXXFriends of Scouting XXX XXXFoundations XXX XXXOther unrestricted promises XXX XXXRestricted to capital campaign XXX XXXRestricted to Endowment Fund XXX XXX

Total $ XXX $ XXXContributions receivable, due in:

Less than one year $ XXX $ XXX

LOCAL COUNCIL INC., BOY SCOUTS OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


NOTE 5—CONTRIBUTIONS RECEIVABLE (CONTINUED)

Allocations from United Way of $XXX and $XXX (designated for general operating purposes for the first three months of 2012 and 2011, respectively) have been recorded in the consolidated financial statements since the amounts were pledged in 2012 and 2011, respectively. The Council has been notified of an additional allocation from United Way in 2013 of approximately $XXX. The revenue from the additional allocation will be recorded in 2013 when the firm commitment is received.

NOTE 6—INVESTMENTS

Investments at December 31, 2012 and 2011 are composed of the following:

2012 2011 Fair Fair

Cost Value Cost Value

Corporate common and preferred stocks $ XXX $ XXX $ XXX $ XXXCorporate and other bonds XXX XXX XXX XXXU.S. government obligations XXX XXX XXX XXXCommodities XXX XXX XXX XXXHedge funds XXX XXX XXX XXXMoney market XXX XXX XXX XXX

$ XXX $ XXX $ XXX $ XXX

The following schedule summarizes the investment return in the consolidated statement of changes in net assets for the years ended December 31, 2012 and 2011:

2012 2011

Interest and dividend income $ XXX $ XXXNet realized and unrealized gains (losses) XXX XXXInvestment expenses (XXX) (XXX)

$ XXX $ XXX

The above investment return is classified in the 2012 and 2011 consolidated statement of changes in net assets as follows:

2012 2011

Unrestricted $ XXX $ XXXTemporarily restricted XXX XXX

$ XXX $ XXX



NOTE 6—INVESTMENTS (CONTINUED)

Income from interest and dividends on investments and realized and unrealized gains and losses on the sales of investments (“Investment Income, Gains, and Losses”) are recorded initially in the Endowment Fund. Distributions of Investment Income, Gains, and Losses from the Endowment Fund are recorded as income by the Operating and Capital Funds in the period in which the distributions are made in accordance with the Council’s spending policy (Note 1). For 2012 and 2011, investment expenses were $XXX and $XXX and are netted against investment return in the consolidated statement of functional expenses (see schedule on previous page).

NOTE 7—SUMMARY OF FAIR VALUE EXPOSURE

The FASB Fair Value Measurement standard clarifies the definition of fair value for financial reporting, establishes a framework for measuring fair value, and requires additional disclosure about the use of fair value measurements in an effort to make the measurement of fair value more consistent and comparable. The Council has adopted this standard for its financial assets and liabilities measured on a recurring and nonrecurring basis (ASC 820-10).

Fair Value Measurement defines fair value as the amount that would be received from the sale of an asset or paid for the transfer of a liability in an orderly transaction between market participants, i.e., an exit price. To estimate an exit price, a three-tier hierarchy is used to prioritize the inputs:

Level 1: Quoted prices in active markets for identical securities.

Corporate common and preferred stocks—Valued at the closing market price on the stock exchange where they are traded (primarily the New York Stock Exchange).

Money market and savings accounts—Composed of funds invested in savings accounts at various financial institutions and a money market mutual fund. Funds invested in savings accounts are valued based on the value of deposited funds and net investment earnings less withdrawals and fees. The money market mutual fund consists primarily of domestic commercial paper and other cash management instruments, such as repurchase agreements and master notes, U.S. government and corporate obligations and other securities of foreign issuers. The fund seeks to maintain a stable net asset value ("NAV") of $1.

Level 2: Other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment spreads, credit risk, etc.).

The Investment Fund for Foundations ("TIFF") Multi-Asset Fund ("MAF")—Managed by TIFF Advisory Services, Inc., who serves as the MAF's investment adviser, and is responsible for the selection of money managers and other vendors, and for the MAF's asset allocation. The fund seeks to achieve a total return that exceeds inflation plus 5 percent per year by employing a globally diversified portfolio.



NOTE 7—SUMMARY OF FAIR VALUE EXPOSURE (CONTINUED)

Level 2 (continued): At December 31, 2012 and 2011, the MAF held the following investments:

2012 2011Common stocks XX% XX%U.S. Treasuries XX% XX%Private investment funds XX% XX%Repurchase agreements XX% XX%

100% 100%

Securities listed on a securities exchange or traded on the National Association of Securities Dealers National Market System ("NASDAQ”) are valued at their closing price or at the most recently quoted bid price if there is not a closing price. Debt securities and over-the-counter stocks not listed on the NASDAQ are valued at prices that reflect a broker/dealer-supplied valuation or are obtained from independent pricing services. If the available prices are deemed unreliable, the valuation is based on fundamental valuation methods, which may include the analysis of the effect of any restrictions on the resale of the security, industry analysis and trends, significant changes in the issuer's financial position, and any other event that could have a significant effect on the value of the security. Short-term debt securities with a maturity of 60 days or less are valued at amortized cost, and those with a maturity of over 60 days are valued at market value. Repurchase agreements are valued at cost. Private investment funds are valued either by management of the private investment fund or is based on the most recent estimated value provided by the management of the private investment fund plus all other relevant information reasonably available at the time of valuation, including total returns of indices or exchange-traded funds that track markets to which the private investment fund may be exposed. At December 31, 2012 and 2011, all MAF investments were determined by its management to be Level 1 or 2, with the exception of the private investment funds, which were determined to be Level 3. The NAV per share of the MAF is determined by dividing the assets of MAF, less its liabilities, by the number of outstanding shares of the MAF. At December 31, 2012 and 2011, the NAV is $XX.XX and $XX.XX, respectively.

BSA Commingled Endowment Fund, LP ("BSA Fund'')—Investments held by the BSA Fund are valued at fair value based on the closing price for securities listed on a securities exchange, the closing bid or ask price for over-the-counter securities not listed on a securities exchange, or at cost or obtained from an independent pricing service for securities not listed or traded on any exchange or on the over-the-counter market. Thecustodian of the investments in the BSA Fund also has the ability to determine the fair value of securities not listed or traded on any exchange or on the over-the-counter market based on available information. The BSA Fund is valued at the number of units held by the Council and the Fund's unit value.




Level 3: Significant unobservable inputs (including the Council’s own assumptions in determining the fair value of investments).

XYZ Asset Allocation, LP (“XYZ Fund”)—Investments held by the XYZ Fund are in private equity investments and valued at fair value based on the best information available. Securities listed on a securities exchange are valued at the closing price less a discount to reflect legal restrictions associated with the securities, if any. Private interests are valued based on a methodology that begins with the most recent information available from the general partner of the underlying fund or the lead investor of a direct co-investment and considers subsequent transactions, such as drawdowns or distributions, as well as other reliable information that reports or indicates valuation changes, including realizations and other portfolio company events. Generally, the private equity fund investments have a defined term with no right to withdraw. The XYZ Fund’s private equity investments are diversified in large-cap buyout, mid-cap buyout, special situations, venture capital, secondary holding, and investment holding. The XYZ Fund is valued at the Council’s ownership percentage in the Fund's underlying net assets

Alternative investments—Composed of pooled investment funds. Acme Offshore Long/Short Fund, Ltd., invests in hedge funds. The individual funds are valued at the NAV of shares held by the Council. NAV is based on the value of the underlying assets owned by the fund, minus its liabilities, and then divided by the number of shares outstanding. The NAV is determined by the trust company of the individual investment.

The inputs and methodology used for valuing the Council’s financial assets and liabilities are not indicators of the risks associated with those assets and liabilities.

The following tables provide fair value measurement information for financial assets and liabilities measured at fair value on a recurring basis as of December 31, 2012 and 2011:

2012Description Level 1 Level 2 Level 3 TotalCorporate common stocks

$ XXX $ $ $ XXXTIFF Multi-Asset Fund XXX XXXBSA Commingled Fund XXXXYZ Asset Allocation Fund

XXX XXXPooled investment funds XXX XXXMoney market accounts XXX XXX Total investments $ XXX $ XXX $ XXX $ XXX

LOCAL COUNCIL INC., BOY SCOUTS OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)



Fair value measurement information for financial assets and liabilities measured at fair value on a recurring basis as of December 31, 2012 and 2011 (continued):

2011Description Level 1 Level 2 Level 3 TotalCorporate common stocks

$ XXX $ $ $ XXXTIFF Multi-Asset Fund XXX XXXBSA Commingled Fund XXXXYZ Asset Allocation Fund

XXX XXXPooled investment funds XXX XXXMoney market accounts XXX XXX Total investments $ XXX $ XXX $ XXX $ XXX

Effective for 2011, the FASB Accounting Standards Update, Improving Disclosures about Fair Value Measurements, requires that, in the reconciliation for fair value measurements using significant unobservable inputs (Level 3), a reporting entity should present separately information about purchases, sales, issuances, and settlements on a gross basis rather than as one net number (ASU 2010-06). The following table reconciles the Council’s assets and liabilities classified as Level 3 measurements during the years ended December 31, 2012 and 2011, on such a basis:

Investments2012 2011

Balance, beginning of year $XXX $XXXPurchases, issuances, and settlements (XXX) (XXX)Net realized and unrealized losses included in earnings XXX XXXBalance, end of year $XXX $XXX

Net unrealized gains (losses) on Level 3 securitiesHeld at end of year $(XX,XXX) $XX,XXX



NOTE 8—LAND, BUILDINGS, AND EQUIPMENT

Land, buildings, and equipment at December 31, 2012 and 2011, consist of the following:

Useful Lives 2012 2011

Land $ XXX $ XXXBuilding, structures, and land improvements 5-30 years XXX XXXFurniture, fixtures, and equipment 2-10 years XXX XXXConstruction in progress XXX XXX

XXX XXXLess: Accumulated depreciation XXX XXX

$ XXX $ XXX

NOTE 9—LINE OF CREDIT

In December 2010, the Council entered into a $XXX line of credit agreement with a bank. The line includes interest payable quarterly at prime less 1 percent, principal due in September 2013. At December 31, 2012 and 2011, there were no outstanding balances on the line.

NOTE 10—CREDIT RISK

Financial instruments that potentially subject the Council to credit risk consist principally of cash at financial institutions and investments. At times, the balances in cash accounts may be in excess of FDIC insurance limits. Management continuously monitors the Council’s balances at financial institutions and invests excess operating cash in short-term investments.

NOTE 11—EMPLOYEE BENEFIT PLANS

Retirement Plan

The National Council has a qualified defined benefit pension plan (the “Plan”) administered at the national office that covers employees of the National Council and local councils, including the Local Council, Inc. The plan name is the Boy Scouts of America Master Pension Trust - Boy Scouts of America Retirement Plan for Employees and covers all employees who have completed one year of service and who have agreed to make contributions. Eligible employees contribute 2 percent of compensation, and the council contributes an additional 7 percent to the plan. Pension expense (excluding the contributions made by employees) was approximately $XXX and $XXX in 2012 and 2011, respectively, and covered current service cost. The actuarial information for the plan as of February 1, 2012, indicates that it is in compliance with ERISA regulations regarding funding.



NOTE 11—EMPLOYEE BENEFIT PLANS (CONTINUED)

Retirement Plan (continued)

Thrift Plan

The Council has established a Thrift Plan covering substantially all of the employees of the Council. Participants in the Thrift Plan may elect to make voluntary before-tax contributions based on a percentage of their pay, subject to certain limitations set forth in the Internal Revenue Code of 1986, as amended. The Council has elected to match employee contributions to the Thrift Plan up to 50 percent of contributions from each participant, limited to 3 percent of each employee’s gross pay. The Council contributed approximately $XXX and $XXX, respectively, to the Thrift Plan in 2012 and 2011, respectively.

Health Care Plan

The Council’s employees participate in a health care plan provided by the National Council. The Council pays a portion of the cost for the employees, and the employees pay the remaining portion and the cost for any of their dependents participating in the plan. During the years ended December 31, 2012 and 2011, the Council remitted approximately $XXX and $XXX, respectively, on behalf of its employees to the National Council related to the health care plan.

NOTE 13—SCOUT SHOP (If your council has a national Scout shop)

The National Council operates a Scout shop within the XXXXXX area. The National Council manages the Scout shop and pays the Council an 8 percent commission on gross sales up to $XXX, and 13 percent on sales in excess of $XXX. The commissions earned (before expenses) by the Council during 2012 and 2011 amounted to approximately $XXX and $XXX, respectively, which are included in other revenue in the consolidated statement of changes in net assets.

NOTE 14—LEASE COMMITMENTS

The Council accounts for the lease of office equipment and a Scout shop as operating leases. Total rental expense amounted to approximately $XXX and $XXX in 2012 and 2011. These leases will expire on various dates through 2014. The following is a schedule of future minimum lease payments under these leases:

For the Year Ending December 31:2013 $ XXX2014 XXX

$ XXX



NOTE 15—RELATED-PARTY TRANSACTIONS

A Council officer is employed as president of a local bank where the Council maintains significant account balances. As of December 31, 2012 and 2011, total Council deposits with the bank were $X,XXX,XXX and $X,XXX,XXX, respectively.

NOTE 16— PRIOR-PERIOD INFORMATION

The consolidated financial statements include certain prior-year summarized comparative information in total. Such information does not include sufficient detail to constitute a presentation in conformity with accounting principles generally accepted in the United States. Accordingly, such information should be read in conjunction with the Council’s consolidated financial statements for the year ended December 31, 2011, from which the summarized information was derived.

NOTE 17— SUBSEQUENT EVENTS

These consolidated financial statements considered subsequent events through May 19, 2013, the date the financial statements were available to be issued.

Documents

filestore.scouting.org · Web viewTo ensure observance of limitations and restrictions placed on the use of available resources, the accounts of the Organization are maintained in