ARIZONA 4-H YOUTH FOUNDATION YEAR ENDED JUNE 30, 2011

ARIZONA 4-H YOUTH FOUNDATION

YEAR ENDED JUNE 30, 2011

ARIZONA 4-H YOUTH FOUNDATION

YEAR ENDED JUNE 30, 2011

Accountants’ compilation report

Financial statements:

Statement of financial position

Statement of activities

Statement of cash flows

Notes to financial statements

CONTENTS

Page

1

2

3

4

5-12

BFC

BEACHFLEISCHMAN

Accountants’ Compilation Report

To the Board of Trustees

Arizona 4-H Youth Foundation

Tucson, Arizona

We have compiled the accompanying statement of financial position of the Adzona 4-H Youth Foundation as of June 30, 2011, and the related statement of activities and cash flows for the year then ended. We have not audited or reviewed the accompanying financial statements and, accordingly, do not express an opinion or provide any assurance about whether the financial statements are in accordance with U.S.

generally accepted accounting principles.

Management is responsible for the preparation and fair presentation of the financial statements in accordance with U.S. generally accepted accounting principles and for designing, implementing, and maintaining internal control relevant to the preparation and fair presentation of the financial statements.

Our responsibility is to conduct the compilation in accordance with Statements on Standards for Accounting and Review Services issued by the American Institute of Certified Public Accountants. The objective of a compilation is to assist management in presenting financial information in the form of financial statements without undertaking to obtain or provide any assurance that there are no material modifications that should be made to the financial statements.

We are not independent with respect to the Arizona 4-H Youth Foundation.

September 12, 2011

BeachFleischman PC

1985 E River Road, Suite 201

Tucson, AZ 85718-7176

Maiting Address

PO Box 64130

Tucson, AZ 85728-4130

T 520,321,4600

F 520.321.4040

beachfleischman.com


STATEMENT OF FINANCIAL POSITION

JUNE 30, 2011

(See Accountants’ Compilation Report)

ASSETS

Unrestricted

Temporarily restricted

Permanently restri~ed Total

Current assets:

Cash and cash equivalents

Pledges receivable, net

Total current assets

Other assets:

Cash surrender value of life insurance

Single premium annuity

Restricted marketable securities held for long-term purposes

Interfund receivables

$ 171,715

11,500

183,215

$ 64,559 $ 236,274

64,559

11,500

247,774

$ 13,743

$

95,766

13,743

95,766

42,117

8,665

13 743 $_i.~233,997

1,807,709 1,849,826

8,665

$ 1,968,034 .$ 2,215,774

LIABILITIES AND NET ASSETS

Current liabilities:

Accounts payable

Interfund payables

Total current liabilities

Commitment

Net assets

23,942

8,665

32,60~ ....

(18,864) $ 233,997 $ 1,968,034

13,743_ .$ 233,997.

~ 1,968,034

$ 23,942

8,665.

32,607.

2,183,167.

$ 2,215,774

See notes to financial statements.

2


STATEMENT OF ACTIVITIES



Temporarily Permanently

Unrestricted restricted restricted

Revenues and support:

Contributions

Interest and dividends

Other income

Change in value of life insurance

Change in value of single premium annuity

Net realized gains on marketable securities

Net unrealized gains on marketable securities

Satisfaction of program restrictions

$ 58,163 $ 450

2,932 178

556

49

8,293

23,278

58,519

29,500

78,298

(58,519)

3,426

36,560

98,262

Total

$ 25,625 $ 84,238

3,110

556

49

3,426

74,353

199,838

Total revenues and support 151,790 49,907 163,873 365,570

Expenses:

Program:

Leadership development programs

Citizenship/International programs

Statewide support programs

National contest and events

Scholarships and awards

Total program expenses

Support:

Administrative

Fundraising

Total support expenses

Total expenses

Increase in net assets

Net assets, beginning

Net assets, ending

$

15,674

4,278

12,567

8,954

26,000

67,473

41,798

8,584

50,382

117,855

33,935 49,907

(52,799) 184,090

(18,864) ~ 233,997

163,873

1,804,161

$ 1,968,034

15,674

4,278

12,567

8,954

26,000

67,473

41,798

8,584

50,382

117,855

247,715

1,935,452

$ 2,183,16~


3


STATEMENT OF CASH FLOWS



Cash flows from operating activities:

Increase in net assets

Adjustments to reconcile increase in net assets to net cash used in operating activities:



Change in value of life insurance


Changes in operating assets and liabilities:

Pledges receivable

Accounts payable

Net adjustments

Net cash used in operating activities

Cash flows from investing activities:

Purchases of marketable securities

Proceeds from sale of marketable securities

Net cash provided by investing activities

Net increase in cash and cash equivalents

Cash and cash equivalents, beginning

Cash and cash equivalents, ending

247,715.

(74,353)

(199,838)

(805)

(3,426)

(450)

(3,293),

(282,165)

(34,450)

$

(1,653,484)

1,706,602

53,118

18,668

217,606

236,274


4


NOTES TO FINANCIAL STATEMENTS



1~

Description of organization and summary of significant accounting policies:

Organization:

The Arizona 4-H Youth Foundation (the Foundation) is a not-for-profit organization that incorporated in Arizona in 1970. The Foundation exists to encourage and administer private gifts for the Arizona 4-H Youth Program, which helps young people become self-directing, productive and contributing members of society. The Foundation relies on public support for funding and also generates substantial income through investments and fund-raising activities.

Estimates:

The preparation of financial statements in conformity with U.S. generally accepted accounting principles (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Financial statement presentation:

The Foundation reports 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.

Unrestricted net assets are available for the various programs and administration of the

Foundation.

Temporarily restricted net assets are subject to donor-imposed restrictions that can be fulfilled by actions of the Foundation pursuant to those stipulations or that expire by the passage of time.

Permanently restricted net assets are those which are subject to the restrictions of gift instruments requiring that the principal be invested in perpetuity to provide a permanent source of income for

Foundation operations: Certain donors have stipulated that five percent of net assets will be spent for the intended purposes of the gift and one percent spent for management costs. Any remaining increase in permanently restricted net assets is to be invested back into the principal balance.

Restricted revenue and support:

Donor-restricted support is reported as an increase in temporarily or permanently restricted net assets, depending on the nature of the restriction. When a 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 in the statement of activities as satisfaction of program restrictions.

Any restrictions satisfied within the accounting year are recorded as unrestricted support.

5


NOTES TO FINANCIAL STATEMENTS (CONTINUED)



Description of organization and summary of significant accounting policies (continued):

Cash and cash equivalents:

All highly liquid debt instruments purchased with a maturity of three months or less are considered to be cash equivalents.

All cash and cash equivalents are placed with various credit institutions. At times, such amounts may be in excess of the FDIC and SIPC insurance limits; however, management does not believe they are exposed to any significant credit risk on cash and cash equivalents.

Pledges receivable:

Unconditional pledges receivable are recognized as revenues or gains at their estimated net realizable value in the period received and as assets, decreases of liabilities or expense depending on the form of the benefits received. Conditional pledges receivable are recognized only when the conditions on which they depend are substantially met and the pledges become unconditional. Pledges receivable that are collectible over future periods are discounted to their net present value. The provision for uncollectible pledges is based on management’s estimate of currer~t economic factors. Pledges are periodically reviewed for collectibility and written off to the provision at the time of such determination.

Marketable securities:

Marketable securities with readily determinable fair values and all investments in debt securities are reported at their fair value in the statement of financial position determined by quoted market prices. Donated investments are recorded at fair value at the date of gift. Investment gains and losses are included in the changes in net assets in the accompanying statement of activities as increases or decreases in unrestricted net assets unless their use is temporarily or permanently restricted by explicit donor-imposed stipulations or legal requirements.

Fair value measurements:

Under GAAP, the provisions of fair value is defined as the price to sell an asset or transfer a liability between market participants as of the measurement date. Fair value measurements assume the asset or liability is exchanged in an orderly manner; the exchange is in the principal market for that asset or liability (or in the most advantageous market when no principal market exists); and that the market participants are independent, knowledgeable and able and willing to transact an exchange. GAAP also clarifies that the reporting entity’s nonperformance risk (credit risk) should be considered in valuing liabilities.

GAAP establishes a framework for measuring fair value by creating a hierarchy for observable independent market inputs and unobservable market assumptions and expands disclosures about fair value measurements. Considerable judgment is required in interpreting market data used to develop the estimates of fair value. Accordingly, the estimates presented in the financial statements are not necessarily indicative of the amounts that could be realized in a current market exchange. The use of different market assumptions and estimation methodologies may have a material effect on the estimated fair value.

6





Description of organization and summary of significant accounting policies (continued):

Donated services:

It is the policy of the Foundation not to record on its financial statements the value of donations of personal services unless they enhance nonfinancial assets or do specialized services performed by individuals who possess the required specialized skills.

Program expense allocations:

Expenses that can be identified with a specific program or supporting service are charged directly according to their natural expense classification. Costs incurred that share a common purpose are allocated based upon services benefited.

Tax exempt status:

The Foundation is exempt from federal income taxes under Section 501(c)(3) of the Internal

Revenue Code. The Foundation is also exempt from state income taxes. Accordingly, no provision is made for income taxes in the financial statements. Management is not aware of any matters which would cause the Foundation to jeopardize its tax-exempt status.

GAAP requires management to perform an evaluation of all tax positions taken or expected to be taken in the course of preparing the Organization’s tax returns to determine whether the tax positions meet a "more likely than not" standard of being sustained under examination by the applicable taxing authorities. This evaluation is required to be performed for all open tax years, as defined by the various statutes of limitations, for federal and state purposes.

The Organization is only subject to income taxes on unrelated business taxable income

As a result, the Organization is required to file informational returns for federal and state purposes and, if it has UBTI, federal and state income tax returns. With limited exceptions, the

Organization is no longer subject to tax examination for any years eadier than 2008 for federal and 2007 for state. Management has performed its evaluation of tax positions taken on all open tax returns and has determined that there were no positions taken that do not meet the "more likely than not" standard.

From time to time, the Organization may be subject to penalties and interest assessed by various taxing authorities, which will be classified as management and general expenses when they

Occur.

Subsequent events:

The Foundation’s management has evaluated the events that have occurred subsequent to June

30, 2011 through September 12, 2011, the date that the financial statements were available to be issued. Management has determined that no events have occurred during this period that require adjustment to or disclosure in the financial statements. Management has no responsibility to update these financial statements for events and circumstances occurring after this date.

7





Marketable securities:

Marketable securities consist of a guaranteed investment contract with determinable fair values. The cost and fair value of marketable securities at June 30, 2011 are as follows:

Guaranteed investment contract (GIC)

Cost Fair value

$ 1,650,000 .$ 1,849,826

Net investment income for the year ended June 30, 2011 is as follows:

Interest and dividend income



$ 3,110

74,353

199,838

$ 277,301

3.

Fair value measurements:

At June 30, 2011, the fair value of assets measured on a recurring basis is as follows:

GIC

Fair value

Quoted prices

(level 1)

Significant other observable inputs

(level 2)

$ 1,849,826

Significant unobservable inputs

(level 3)

__

The preceding table is based on the following hierarchy of observable independent market inputs and unobservable market assumptions:

Level 1 - Inputs represent unadjusted quoted prices for identical assets or liabilities exchanged in active markets.

Level 2 - Inputs include directly or indirectly observable inputs other than Level 1 inputs such as quoted prices for similar assets or liabilities exchanged in active or inactive markets; quoted prices for identical assets or liabilities exchanged in inactive markets; other inputs that are considered in fair value determinations of the assets or liabilities, such as interest rates and yield curves that are observable at commonly quoted intervals, volatilities, prepayment speeds, loss severities, credit risks and default rates; and inputs that are derived principally from or corroborated by observable market data.

8



YEAR ENDED JUNE 30, 20tl


Fair value measurements (continued):

Level 3 - Inputs include unobservable inputs used in the measurement of assets and liabilities.

The Foundation is required to use its own assumptions regarding unobservable inputs because there is little, if any, market activity in the assets or liabilities or related observable inputs that can be corroborated at the measurement date. Measurements of nonexchange traded derivative contract assets and liabilities are primarily based on valuation models, discounted cash flow models or other valuation techniques that are believed to be used by market participants.

Unobservable inputs require the Foundation to make certain projections and assumptions about the information that would be used by market participants in pricing assets or liabilities.

The investment’s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs.

Investment contracts with insurance company are fair valued by discounting the related cash flows based on observable current yields of similar instruments with comparable durations considering the credit-worthiness of the issuer.

Pledges receivable:

Pledges receivable consists of pledges from corporations and individual donors. At June 30, 2011, pledges receivable are as follows:

Pledges receivable in less than one year

Less allowance for uncollectible pledges

Net pledges receivable

$ 13,000

.....

(1,500)

.$ 11,50~0

5.

Cash surrender value of life insurance:

The Foundation has received three life insurance policies as donations. These policies have a face value totaling $300,000 and a cash value of $13,743 at June 30, 2011. Under terms of the policies, the Foundation will receive the cash surrender value of the policy upon termination or all of the associated benefits payable upon the death of the insured parties.

9



YEAR ENDED JUNE 30, 20tl


Single premium annuity:

The Foundation is a beneficiary of a paid-up single premium annuity with a current value of $95,766.

The annuity has no set payment date and the start date cannot be determined. The amount has not been discounted since payments could reasonably begin in the near-term.

County 4-H accounts:

In prior years, the Foundation acted as a trustee for certain County 4-H funds under a management agreement. Currently, the majority of the County 4-H groups agreed to an operating agreement in which the Foundation actively pursues grants and temporarily restricted gifts for the counties, reviews and approves disbursements of funds, and has variance power in the decision of investments and account distributions.

Endowment:

The Foundation’s endowment consists of one fund established for a variety of purposes. Its endowment includes the donor-restricted funds and as required by GAAP, net assets associated with endowment funds are classified and reported based on the existence or absence of donorimposed restrictions.

Changes in endowment net assets for the year ended June 30, 2011 are as follows:

Donor temporarily restricted

Donor permanently restricted Total

$ 184,090 $ 1,804,161 $ 1,988,251 Endowment net assets, beginning

Investment return:

Interest and dividends

Net realized gains

Net unrealized gains

Total investment return

Contributions


Appropriation of endowment assets for expenditures

Endowment net assets, ending

178

29,500

78,298

107,976

450

(58,519)

233,997

36,560

98,262

134,822

25,625

3,426

$ 1,968,034

178

66,060

176,560

242,798

26,075

3,426

(58,519)

$ 2,202,031

10





Endowment (continued):

Interpretation of relevant law:

The Board of Trustees of the Foundation has interpreted Arizona’s version (titled the

"Management of Charitable Funds Act" (the Act)) of the Uniform Prudent Management of

Institutional Funds Act (UPMIFA) as requiring 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 Foundation 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, if any, 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

Foundation in a manner consistent with the standard of prudence prescribed by the Act.

Funds with deficiencies:

From time to time, the fair value of assets associated with individual donor restricted endowment funds may fall below the level that the donor or the Act requires to retain as a fund of perpetual duration. In accordance with GAAP, cumulative deficiencies of this nature that are reported in permanently restricted net assets were $57,858 as of June 30, 2011. These deficiencies resulted from unfavorable market fluctuations that occurred after the investment of permanently restricted contributions.

Return objectives and risk parameters:

The Foundation has an investment policy for endowment assets that attempt to provide a predictable stream of funding to programs supported by its endowment while seeking to maintain the purchasing power of the endowment assets. Endowment assets include those assets of donor-restricted funds that the Foundation must hold in perpetuity or for a donor-specified period(s). Under this policy, the endowment assets are invested in a manner that is intended to produce results that assume a moderate level of investment risk. The Foundation expects its endowment funds, over time, to provide an average rate of return of approximately 5% annually.

Actual returns in any given year may vary from this amount.

Spending policy and how the investment objectives relate to spending policy:

The Foundation’s spending policy allows for annual distributions to scholarships and continuing programs as determined by the Board of Trustees. In establishing this policy, the Foundation considered the long-term expected return on its endowment. Accordingly, over the long term, the

Foundation expects the current spending policy to allow its endowment to grow. This is consistent with the Foundation’s objective to maintain the purchasing power of the endowment assets held in perpetuity or for a specified term as well as to provide additional real growth through new gifts and investment return.

11





Temporarily restricted net assets:

Temporarily restricted net assets consist of the following:

Citizenship programs

County programs

Leadership/development

Pledges receivable

Scholarships/awards

Specific grant programs

Statewide support

Beginning ba___Jlanc~e

Investment income/ gains

$ 35,414 $ 9,234

48,682 35,658

7,423 3,724

11,050

42,784

12,899

43,703

25 838 15,657

~ $ 107,976 $ 450 ~

Contributions

$ 450

Releases

$ (4,278)

(15,674)

(26,000)

~

Ending balance

$ 40,370

84,340

(4,527)

11,500

60,487

12,899

28 928

10.

Permanently restricted net assets:

Permanently restricted net assets consist of the following:

General operations

Scholarship

County awards and various other programs

792,521

640,578

534,935

1,968,034

11.

Related party transactions:

The services of the Foundation’s office manager are shared with the University of Arizona. The

Foundation reimburses the University for their pro-rata share of time spent on Foundation business.

Payments to the University of Arizona totaled $29,640 for the year ended June 30, 2011.

Since the Foundation has no full-time employees, shared employees perform office functions. No provision for rent has been provided since management believes that the value of the contributed facilities on a part-time basis, with no set schedule of usage, is undeterminable and immaterial.

12

ARIZONA 4-H YOUTH FOUNDATION YEAR ENDED JUNE 30, 2011

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