Financial Statements and Report of Independent
Certified Public Accountants
University of Nevada, Reno Foundation
June 30, 2013
Contents
Page
Report of Independent Certified Public Accountants
3
Management’s Discussion and Analysis
6
Basic Financial Statements
Statement of Net Position
12
Statement of Support and Revenue, Expenses and Changes in Net Position
13
Statement of Cash Flows
14
Notes to Financial Statements
16
Supplemental Information
Unrestricted Fund – Alumni and University Program Expenses
27
Unrestricted Fund – Administrative and Fundraising Expenses
28
Compliance Section
Report of Independent Certified Public Accountants on Internal Control
over Financial Reporting and on Compliance and Other Matters Required
by Government Auditing Standards
30
Audit  Tax  Advisory
Report of Independent Certified Public Accountants
Board of Trustees
University of Nevada, Reno Foundation
Grant Thornton LLP
100 W Liberty Street, Suite 770
Reno, NV 89501-1965
T 775.786.1520
F 775.786.7091
www.GrantThornton.com
Report on the financial statements
We have audited the accompanying financial statements of the University of Nevada, Reno Foundation (a
nonprofit organization) (the “Foundation”), which comprise the statement of net position as of June 30,
2013, and the related statements of support and revenues, expenses and changes in net position, and cash
flows for the year 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 and the standards applicable to financial audits contained in Government Auditing Standards issued
by the Comptroller General of the United States. 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
Foundation’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 Foundation’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.
Opinion
In our opinion, the financial statements referred to above present fairly, in all material respects, the
financial position of University of Nevada, Reno Foundation as of June 30, 2013, and the changes in its
Grant Thornton LLP
U.S. member firm of Grant Thornton International Ltd
net position and its cash flows for the year then ended in accordance with accounting principles generally
accepted in the United States of America.
Required supplementary information
Accounting principles generally accepted in the United States of America require that the management’s
discussion and analysis on pages 6 through 10, respectively, be presented to supplement the basic
financial statements. Such information, although not a required part of the basic financial statements, is
required by the Governmental Accounting Standards Board who considers it to be an essential part of
financial reporting for placing the basic financial statements in an appropriate operational, economic, or
historical context. This required supplementary information is the responsibility of management. We have
applied certain limited procedures to the required supplementary information in accordance with auditing
standards generally accepted in the United States of America. These limited procedures consisted of
inquiries of management about the methods of preparing the information and comparing the information
for consistency with management’s responses to our inquiries, the basic financial statements, and other
knowledge we obtained during our audit of the basic financial statements. We do not express an opinion
or provide any assurance on the information because the limited procedures do not provide us with
sufficient evidence to express an opinion or provide any assurance.
Supplementary information
Our audit was conducted for the purpose of forming an opinion on the financial statements as a whole.
The Unrestricted Fund-Alumni and University Program Expenses and Unrestricted Fund-Administrative
and Fundraising Expenses on pages 27 and 28, respectively, are presented for purposes of additional
analysis and are not a required part of the financial statements. Such supplementary information is the
responsibility of management and was derived from and relates directly to the underlying accounting and
other records used to prepare the financial statements. The information has been subjected to the
auditing procedures applied in the audit of the financial statements and certain additional procedures.
These additional procedures included comparing and reconciling the information directly to the
underlying accounting and other records used to prepare the financial statements or to the financial
statements themselves, and other additional procedures in accordance with auditing standards generally
accepted in the United States of America. In our opinion, the supplementary information is fairly stated,
in all material respects, in relation to the financial statements as a whole.
Report on 2012 summarized comparative information
We have previously audited the Foundation’s 2012 financial statements (not presented herein), and we
expressed an unmodified audit opinion on those audited financial statements in our report dated
September 21, 2012. In our opinion, the accompanying summarized comparative information as of and
for the year ended June 30, 2012 is consistent, in all material respects, with the audited financial
statements from which it has been derived.
Other reporting required by Government Auditing Standards
In accordance with Government Auditing Standards, we have also issued our report, dated September 12,
2013, on our consideration of the Foundation’s internal control over financial reporting and on our tests
of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other
matters. The purpose of that report is to describe the scope of our testing of internal control over
financial reporting and compliance and the results of that testing, and not to provide an opinion on the
effectiveness of internal control over financial reporting or on compliance. That report is an integral part
of an audit performed in accordance with Government Auditing Standards in considering the Foundation’s
internal control over financial reporting and compliance.
Reno, Nevada
September 12, 2013
Grant Thornton LLP
U.S. member firm of Grant Thornton International Ltd
MANAGEMENT’S DISCUSSION AND ANALYSIS
University of Nevada, Reno Foundation
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the year ended June 30, 2013
This section of the University of Nevada, Reno Foundation’s (“the Foundation”) annual financial report
presents management’s discussion and analysis of the financial performance of the Foundation for the fiscal
year ended June 30, 2013. This discussion and analysis has been prepared by management along with the
accompanying financial statements and footnotes and should be read in conjunction with the accompanying
financial statements and footnotes.
Reporting Entity
The University of Nevada, Reno Foundation is a nonprofit corporation whose mission is to facilitate the
solicitation and management of gift revenues and endowments on behalf of the University of Nevada
(“University”). The Foundation was established by the Nevada System of Higher Education (“NSHE”),
which is the sole owner of the Foundation. Additionally, the appointment to the Foundation Board of
Trustees is the responsibility of the NSHE. As such, the Foundation is considered to be a component of both
the University and NSHE. Transactions with the University relate primarily to the disbursement of gift funds
to the University and receipt of support from the University to fund administrative expenses of the
Foundation.
Financial Statements
The basic financial statements of the Foundation are the Statement of Net Position; Statement of Support
and Revenue, Expenses and Changes in Net Position; and the Statement of Cash Flows. The Statement of
Net Position presents the financial position of the Foundation as of June 30, 2013. The Statement of Support
and Revenue, Expenses and Changes in Net Position summarizes the Foundation’s financial activity for the
year ended June 30, 2013. The Statement of Cash Flows reflects the effects on cash that result from the
Foundation’s operating activities, investing activities, and capital and non-capital financing activities for the
year ended June 30, 2013. The schedules that follow the notes to the financial statements are prepared from
the Foundation’s basic financial statements.
Statement of Net Position
This statement is presented with three major categories; assets, liabilities and net position. The assets are
classified between current and non-current. The current assets include cash and cash equivalents, investments,
due from University of Nevada, due from endowment fund, other current assets, and the current portion of
net pledges receivable and notes receivable. The non-current assets include investments, net pledges
receivable, notes receivable, real property held for investment, residual interests in irrevocable trusts, other
assets and equipment, less accumulated depreciation.
Liabilities are also classified between current and non-current. Current liabilities include the amount due to
the University of Nevada, due to unrestricted fund and accounts payable. Non-current liabilities consist of
deferred compensation and unearned revenue.
Total assets increased by $20.3 million during the year ended June 30, 2013. This increase in total assets is due
to an increase both in donor contributions and in the fair market value of the Foundation’s investments
during the year ended June 30, 2013.
6
University of Nevada, Reno Foundation
MANAGEMENT’S DISCUSSION AND ANALYSIS - CONTINUED
For the year ended June 30, 2013
Statement of Net Position – Continued
Current liabilities increased by $2.5 million and are attributable to the amount owed to the University of
Nevada at June 30, 2013 versus June 30, 2012. Net position increased by $17.9 million for the year ended
June 30, 2013. The following is a comparison of the Statement of Net Position at June 30, 2013 and 2012.
Statement of Net Position
Assets
Current assets
Non-current assets
Total assets
Liabilities
Current liabilities
Non-current liabilities
Total liabilities
2013
2012
$ 151,378,253
43,322,065
$ 116,224,752
58,162,289
$ 194,700,318
$ 174,387,041
$
$
6,065,052
1,879,700
3,588,822
1,943,726
7,944,752
5,532,548
Net position
Invested in capital assets
Unrestricted
Restricted – expendable
Restricted – nonexpendable
21,795
15,200,621
60,626,822
110,906,328
32,565
13,460,108
48,183,205
107,178,615
Total net position
186,755,566
168,854,493
$ 194,700,318
$ 174,387,041
Total liabilities and net position
7
University of Nevada, Reno Foundation
MANAGEMENT’S DISCUSSION AND ANALYSIS - CONTINUED
For the year ended June 30, 2013
Net Position
Total net position was $186.8 million at June 30, 2013, of which $15.2 million is available for the unrestricted
purposes of the Foundation. Included in the unrestricted net position are Quasi Endowment and other
designated funds of $8.9 million. The Quasi Endowment, which is not a donor designated endowment, is a
board directed endowment which the board has set aside for specific designated purposes.
The restricted expendable endowment represents the market value of the non-expendable endowment that
exceeds its corpus. Due to Foundation spending policies, this will not be spent but invested to retain the
purchasing power of the endowment for future generations. At June 30, 2012, the market value of the assets
in the endowment fund were less than its corpus.
Components of Net Position
2013
Invested in capital assets
Unrestricted
Undesignated
Quasi Endowment and other
designated funds
Restricted – expendable
Restricted – expendable endowment
Restricted – nonexpendable endowment
$
Total net position
21,795
2012
$
32,565
6,340,939
5,913,784
8,859,682
53,743,689
6,883,133
110,906,328
7,546,324
48,183,205
107,178,615
$ 186,755,566
$ 168,854,493
Statement of Support and Revenue, Expenses and Changes in Net Position
This statement reflects the results of the Foundation’s operations on net position for the year ended June 30,
2013. The statement is broken down into three categories: Operating Support and Revenue, Operating
Expenses and Investment Income.
Operating support and revenue include donor contributions, university support, special events and other
income. These revenues increased from the prior year by $2.8 million primarily due to an increase in donor
contributions from several large contributions for the Church of Fine Arts building renovations and several
newly created endowments.
Investment income increased by $8.0 million for the year ended June 30, 2013 over the prior year. The market
values of the Foundation’s investments have continued to rebound significantly from their lows, which
generated significant income in 2013.
Operating expenses consist of alumni programs, capital projects, university programs, university scholarships,
and administrative and fundraising expenses. Operating expenses increased by $2.2 million for the year ended
June 30, 2013 when compared to prior year which was due to expenditures on capital projects, scholarships
and University programs.
8
University of Nevada, Reno Foundation
MANAGEMENT’S DISCUSSION AND ANALYSIS - CONTINUED
For the year ended June 30, 2013
Statement of Support and Revenue, Expenses and Changes in Net Position - Continued
The following is a comparison of the Results of Operations for the years ended June 30:
2013
Revenues
Donor contributions
University support
Special events and other income
$
2012
20,785,049
1,895,215
1,542,024
$ 18,368,716
2,047,401
969,053
24,222,288
21,385,170
3,492,138
(302,375)
9,281,645
3,500,732
3,326,509
(2,295,227)
633,574
1,432,164
(844,363)
377,654
1,422,702
(601,254)
Total investment income
13,692,783
5,731,116
Total revenues
37,915,071
27,116,286
348,033
4,034,783
14,326,725
2,531,563
1,513,134
1,516,445
322,206
7,380,899
9,507,558
1,683,646
1,637,715
1,552,544
24,270,683
22,084,568
4,256,685
3,542,684
Total operating support and
revenue
Investment income
Interest and dividend income
Realized (loss) gain on sale, net
Unrealized gain (loss)
Management fees earned
Foundation
Nevada System of Higher Education
Redemption and consultation fees
Expenses
Alumni programs
Capital projects
University programs
University scholarships
Administrative
Fundraising
Total expenses
Additions to permanent endowments
Net change in net position
$
9
17,901,073
$
8,574,402
University of Nevada, Reno Foundation
MANAGEMENT’S DISCUSSION AND ANALYSIS - CONTINUED
For the year ended June 30, 2013
Economic Factors
The Foundation’s primary sources of revenue are donor contributions, university support and investment
income. Comparing fiscal year ended June 30, 2013 to June 30, 2012, donor contributions increased by $2.4
million or 13.1%. As the economy in northern Nevada continues to rebound, we are seeing an increase in
donor contributions. The Foundation adopted a new investment policy that will reduce the spending from
6% of the average investment market value to 5.25%. The change in policy goes into effect for the fiscal year
ending June 30, 2014. We continue to budget conservatively and monitor our expenditures on a regular basis.
Requests for Information
This report is designed to provide a general overview of the University of Nevada, Reno Foundation’s
finances for all interested parties. For additional information or questions concerning the information
contained in this report, please call the Foundation Treasurer at (775) 784-1587.
10
BASIC FINANCIAL STATEMENTS
University of Nevada, Reno Foundation
STATEMENT OF NET POSITION
June 30, 2013
(With comparative totals as of June 30, 2012)
ASSETS
CURRENT ASSETS
Cash and cash equivalents
Investments
Due from University of Nevada
Due from endowment fund
Other current assets
Current portion of pledges receivable, net
Current portion of notes receivable
Total current assets
Unrestricted
$
NON-CURRENT ASSETS
Investments
Pledges receivable, net
Notes receivable
Real property held for investment
Residual interest-irrevocable trusts
Other assets
Equipment, at cost, less accumulated depreciation of $23,962
Total non-current assets
Total assets
8,730,084
5,131,862
387,015
487,524
95,328
11,746
14,843,559
Restricted
$
5,156,298
35,388,372
21,225
3,713,037
44,278,932
2013
Endowment
$
129,768
92,117,999
5,943
2,052
92,255,762
2012
Total
Total
$
14,016,150
132,638,233
408,240
487,524
101,271
3,713,037
13,798
151,378,253
$
23,618,429
86,519,078
595,223
56,477
5,424,279
11,266
116,224,752
75,261
303,500
181,685
21,795
582,241
12,938,479
932,351
976,158
259,891
15,106,879
25,975,333
45,900
1,611,712
27,632,945
25,975,333
12,938,479
75,261
1,281,751
2,587,870
441,576
21,795
43,322,065
41,440,741
13,245,993
94,134
446,751
2,472,443
429,662
32,565
58,162,289
$ 15,425,800
$ 59,385,811
$ 119,888,707
$ 194,700,318
$ 174,387,041
$
$
$
$
$
LIABILITIES AND NET POSITION
CURRENT LIABILITIES
Due to University of Nevada
Due to unrestricted fund
Accounts payable
Total current liabilities
NON-CURRENT LIABILITIES
Deferred compensation
Unearned revenue
Total non-current liabilities
Total liabilities
NET POSITION
Invested in capital assets
Unrestricted
Restricted - expendable
Restricted - nonexpendable
Total net position
Total liabilities and net position
The accompanying notes are an integral part of this statement.
127,390
272
127,662
5,446,489
3,367
5,449,856
487,524
10
487,534
5,573,879
487,524
3,649
6,065,052
3,557,975
30,847
3,588,822
59,722
16,000
75,722
192,266
192,266
1,611,712
1,611,712
59,722
1,819,978
1,879,700
9,722
1,934,004
1,943,726
203,384
5,642,122
2,099,246
7,944,752
5,532,548
21,795
15,200,621
15,222,416
53,743,689
53,743,689
6,883,133
110,906,328
117,789,461
21,795
15,200,621
60,626,822
110,906,328
186,755,566
32,565
13,460,108
48,183,205
107,178,615
168,854,493
$ 15,425,800
$ 59,385,811
$ 119,888,707
$ 194,700,318
$ 174,387,041
12
University of Nevada, Reno Foundation
STATEMENT OF SUPPORT AND REVENUE, EXPENSES
AND CHANGES IN NET POSITION
Year ended June 30, 2013
(With comparative totals for the year ended June 30, 2012)
Operating support and revenue
Donor contributions
University support
Special events and other income
Unrestricted
Endowment
$ 20,059,791
1,323,956
2,838,541
21,383,747
-
24,222,288
21,385,170
348,033
417,397
-
4,034,783
13,909,328
2,531,563
-
348,033
4,034,783
14,326,725
2,531,563
322,206
7,380,899
9,507,558
1,683,646
765,430
20,475,674
-
21,241,104
18,894,309
1,513,134
1,516,445
-
-
1,513,134
1,516,445
1,637,715
1,552,544
Total administrative and fundraising expenses
3,029,579
-
-
3,029,579
3,190,259
Total operating expenses
3,795,009
20,475,674
-
24,270,683
22,084,568
(956,468)
908,073
-
(48,395)
(699,398)
2,697,881
959,131
10,035,771
13,692,783
5,731,116
-
-
4,256,685
4,256,685
3,542,684
(11,670)
3,790,183
(96,903)
(3,790,183)
108,573
-
-
(11,670)
3,693,280
(3,681,610)
-
-
1,729,743
5,560,484
10,610,846
17,901,073
8,574,402
13,492,673
48,183,205
107,178,615
168,854,493
160,280,091
$ 15,222,416
$ 53,743,689
$ 117,789,461
$ 186,755,566
$ 168,854,493
Operating expenses
Program expenses
Alumni programs
Capital projects
University programs
University scholarships
Total program expenses
Administrative and fundraising expenses
Administrative
Fundraising
OPERATING INCOME (LOSS)
Investment income
Additions to permanent endowments
Transfers between funds
Distribution of expendable endowment
Other
Total transfers between funds
CHANGE IN NET POSITION
Net position at beginning of year
Net position at end of year
The accompanying notes are an integral part of this statement.
13
$
-
2012
Total
Total
725,258
1,895,215
218,068
Total operating support and revenue
$
2013
Restricted
$
20,785,049
1,895,215
1,542,024
$
18,368,716
2,047,401
969,053
University of Nevada, Reno Foundation
STATEMENT OF CASH FLOWS
Year ended June 30, 2013
(With comparative totals for the year ended June 30, 2012)
Cash flows from operating activities:
Donor contributions
University support
Special events and other income
Cash paid to University of Nevada
Cash paid to employees for services
Cash paid to suppliers
Unrestricted
$
2013
Restricted
Endowment
367,054
2,049,139
218,068
(747,136)
(2,311,332)
(790,249)
$ 20,347,734
1,323,956
(18,285,299)
(13,689)
(1,214,456)
3,372,702
-
2,158,246
(2,901,722)
(11,670)
3,693,280
3,563,705
(3,681,610)
3,563,705
-
3,354,235
-
Net cash provided by (used in) non-capital
financing activities
(11,670)
3,693,280
(117,905)
3,563,705
3,354,235
Cash flows from capital and related financing activities:
Purchase of equipment
-
-
-
-
(2,005)
-
-
-
-
(2,005)
1,753,865
38,990
(40,694)
14,552
238,077
1,267,012
(17,545,256)
-
2,584,590
42,667,723
(46,304,878)
1,789
4,576,532
43,973,725
(63,890,828)
16,341
5,014,522
96,165,665
(104,955,824)
32,496
1,766,713
(16,040,167)
(1,050,776)
(15,324,230)
(3,743,141)
540,587
(8,974,185)
(1,168,681)
(9,602,279)
(3,292,633)
8,189,497
14,130,483
1,298,449
23,618,429
26,911,062
Net cash provided by (used in) operating activities
Cash flows from non-capital financing activities:
Additions to permanent endowments
Transfer between funds
Net cash (used in) capital and related financing activities
Cash flows from investing activities:
Investment income
Proceeds from sale of investments
Purchase of investments
Principal payments received on notes receivable
Net cash provided by (used in) investing activities
NET INCREASE (DECREASE) IN
CASH AND CASH EQUIVALENTS
Cash and cash equivalents, beginning of year
Cash and cash equivalents, end of year
$
8,730,084
14
$
5,156,298
$
$
-
2012
Total
Total
129,768
$
$
20,714,788
2,049,139
1,542,024
(19,032,435)
(2,311,332)
(803,938)
14,016,150
$
$
17,272,604
1,953,486
969,053
(19,928,936)
(2,325,071)
(842,858)
23,618,429
University of Nevada, Reno Foundation
STATEMENT OF CASH FLOWS - CONTINUED
Year ended June 30, 2013
(With comparative totals for the year ended June 30, 2012)
Reconciliation of operating income (loss) to net cash used in
operating activities:
Operating income (loss)
Adjustments to reconcile operating income (loss) to net cash
provided by (used in) operating activities:
Depreciation
Gifts of stocks and bonds
Gifts of property
Gift of property to University of Nevada
Changes in:
Other current assets
Pledges receivable
Other assets
Due to University of Nevada
Accounts payable
Unearned revenue
Net cash provided by (used in) operating activities
Non-cash investing activity:
Increase in cash surrender value of life insurance
The accompanying notes are an integral part of this statement.
Unrestricted
$
(956,468)
Restricted
$
908,073
2013
Endowment
$
-
2012
Total
Total
$
(48,395)
$
(699,398)
10,770
(18,201)
(300,000)
-
(1,060,474)
(600,000)
65,000
-
10,770
(1,078,675)
(900,000)
65,000
13,490
(101,839)
-
114,618
(17,633)
(11,142)
(36,400)
33,059
2,018,756
(11,914)
2,033,537
(1,775)
(11,560)
-
147,677
2,018,756
(11,914)
2,015,904
(12,917)
(47,960)
308,950
(834,569)
(11,693)
(1,542,012)
(2,115)
(32,536)
$
(1,214,456)
$
3,372,702
$
-
$
2,158,246
$
(2,901,722)
$
-
$
11,914
$
-
$
11,914
$
11,693
15
University of Nevada, Reno Foundation
NOTES TO FINANCIAL STATEMENTS
June 30, 2013
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The University of Nevada, Reno Foundation (the “Foundation”) is a nonprofit corporation. The
Foundation’s mission is to serve as an innovative, flexible and efficient organization to facilitate the
solicitation and management of gifts, grants, bequests and other revenues for the benefit of the
University of Nevada (“University”) or any organizations that are affiliated with the University of
Nevada and are exempt from Federal income taxation.
The Foundation is considered to be a component unit and will be included in the basic financial
statements of the University and the Nevada System of Higher Education (“NSHE”).
A summary of the Foundation’s significant accounting policies applied in the preparation of the
accompanying financial statements follows.
1.
Financial Reporting
The financial statements of the Foundation have been prepared in accordance with generally accepted
accounting principles (“GAAP”) as applied to governmental units. The Governmental Accounting
Standards Board (“GASB”) is the accepted standard-setting body for establishing governmental
accounting and financial reporting principles.
Since the Foundation’s funds are considered to be enterprise funds for financial reporting purposes, the
Foundation follows the accrual basis of accounting, wherein revenues are recorded as earned and
expenses are recorded as incurred.
In order to ensure observance of limitations and restrictions placed on the use of resources available to
the Foundation, its accounts are maintained in accordance with the principles of fund accounting.
Resources for various purposes are classified for accounting and reporting purposes into funds
established according to their nature and purpose. Separate accounts are maintained for each fund.
Accordingly, all financial transactions have been recorded and reported by fund group as follows:
Unrestricted Fund - Represents funds that are not restricted and are available for the general operations
and programs of the Foundation.
Restricted Fund - Represents funds that are restricted by the donor and may only be utilized in accordance
with purposes established by such donors. These funds are primarily restricted for scholarships, capital
projects and University programs.
Endowment Fund - Represents funds that are subject to restrictions of gift instruments requiring that the
principal be invested and only the income be utilized for their established purposes. Endowment income
is primarily restricted for scholarships and University programs.
16
University of Nevada, Reno Foundation
NOTES TO FINANCIAL STATEMENTS - CONTINUED
June 30, 2013
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
1.
- Continued
Financial Reporting – Continued
Because Endowment investment funds include funds derived originally from permanently restricted
gifts, the management of these funds is subject to Nevada law (NRS 164.640), The Uniform Prudent
Management of Institutional Funds. The Board of Trustees has a separate Investment Committee that
reviews the performance and makes recommendations on the investments.
The Foundation has adopted an investment policy that establishes an annual spendable objective, which
is to provide funds for operating and capital expenses, and is calculated as 6% of the average market
value of assets over the 12-quarter period ending on June 30th of each previous year. Earnings in excess
of 6% are reinvested into the corpus and are reported as Restricted – Expendable on the Statement of
Net Position. The spending objective is to be met through the use of interest, dividends, and, to the
extent appropriate, accumulated capital gains and corpus. As of June 30, 2013, the Foundation has
calculated the current spending objective and has distributed the funds, which are reported as a transfer
between the restricted and endowment funds on the Statement of Support and Revenue, Expenses and
Changes in Net Position. The Foundation adopted a new spending policy that will go into effect for the
fiscal year ending June 30, 2014 that will reduce the spending from 6% of the average market value to
5.25%. The Foundation’s policy is to withhold distributions of income on endowments that are 10% or
more under their historic gift value.
2.
Recognition of Support and Revenue
Donations, gifts and pledges received are recognized as income when all eligibility requirements are met,
provided that the promise is verifiable, the resources are measurable and the collection is probable.
Pledges receivable are recorded at net present value using the appropriate discount rate. Pledges are
examined on an annual basis to determine their collectability based upon the Foundation’s collection
history; an allowance is recorded for amounts where collection is uncertain. Donations, gifts and pledges
received are recorded as unrestricted, restricted or endowed support depending on the existence and/or
nature of any donor restrictions.
3.
Cash and Cash Equivalents
The Foundation considers all highly liquid short-term interest bearing investments purchased with an
original maturity of three months or less and money market funds to be cash equivalents. Cash from all
accounts are pooled for investment purposes.
4.
Investments
Investments in equity and debt securities with readily determinable fair values are stated at fair value. In
such cases, fair value is determined based on quoted market prices. Investments that do not have readily
available market values are stated at fair value as reported by the Foundation’s Investment Manager.
These investments include a diverse range of investment vehicles (“commingled funds”), including
private equity, real estate and commodity funds. The valuation of these investments is based on the most
recent value provided by the Investment Manager, with a June 30 “as of” date for most investments and
a March 31 “as of” date for private equity and limited partnerships. To evaluate the overall
reasonableness of the valuation and resulting carrying value, management obtains and considers the
audited financial statements of such investments. Management believes this method provides a
reasonable estimate of fair value. However, the recorded value may differ from the market value had a
readily available market existed for such investments, and those differences could be material.
17
University of Nevada, Reno Foundation
NOTES TO FINANCIAL STATEMENTS - CONTINUED
June 30, 2013
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
4.
- Continued
Investments - Continued
Investments are stated at fair value, and realized and unrealized gains and losses are reflected in the
Statement of Support and Revenue, Expenses and Changes in Net Position. The cost of investments
sold is based on the average cost and/or first-in, first-out basis of all the shares of each investment held
at the time of sale. Dividend and interest income are recognized when earned.
5.
Depreciation
Depreciation is provided for in amounts sufficient to relate the cost of depreciable assets to operations
over their estimated service lives on a straight-line basis.
6.
Income Taxes
The Foundation is a nonprofit corporation, exempt from income tax under Internal Revenue Code
Section 501(c)(3), qualified for the charitable contribution deduction. Accordingly, no liability for
Federal income taxes has been provided in the Foundation’s financial statements.
7.
Donated Assets and Services
Donated assets are reflected as contributions in the accompanying statements at their estimated fair
market value at the date of receipt. No amount for donated services has been reflected in the
Foundation’s financial statements, since no objective basis is available to measure the value of such
services. Nevertheless, a substantial number of volunteers have donated significant amounts of their
time to the Foundation’s program services and its fundraising efforts.
8.
Use of Estimates
In preparing financial statements in conformity with generally accepted accounting principles,
management is required to make estimates and assumptions that affect the reported amounts of assets
and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements,
and the reported amounts of revenues and expenses during the reporting period. Actual results could
differ from those estimates. Significant accounting estimates made by management include the amount
of net pledges receivable, the amount of expendable endowment income, and the fair value of
investments.
9.
Comparative Information
The basic financial statements and the notes to the financial statements include certain prior-year
summarized comparative information in total, but not by fund. Such information does not include
sufficient detail to constitute a presentation in conformity with generally accepted accounting principles.
Accordingly, such information should be read in conjunction with the Foundation’s basic financial
statements for the year ended June 30, 2012 from which the summarized information was derived.
18
University of Nevada, Reno Foundation
NOTES TO FINANCIAL STATEMENTS - CONTINUED
June 30, 2013
NOTE B - CASH AND INVESTMENTS
Cash and cash equivalents consist of the following as of June 30:
2013
Cash
Money market funds
Commingled funds
Certificates of deposit
U.S. Government securities
2012
$
1,099,270
1,097,458
11,569,422
250,000
-
$
1,526,775
1,986,429
8,153,920
350,036
11,601,269
$
14,016,150
$ 23,618,429
The fair value of investments consists of the following as of June 30:
2013
Equity investments
Bonds
Commingled funds
Certificates of deposit
U.S. Government securities
$
2012
762,626
129,665,987
3,639,387
24,545,566
$
$ 158,613,566
471,338
13,547,081
94,161,922
3,460,989
16,318,489
$ 127,959,819
At June 30, 2013, the Foundation’s investments had the following maturities:
Investment Maturities (in years)
Less than 1
1–5
Fair Value
Equity investments
Commingled funds
Certificates of deposit
U.S. Government securities
$
762,626
129,665,987
3,639,387
24,545,566
$
$ 158,613,566
762,626
105,025,069
2,904,892
23,945,646
$ 132,638,233
19
$
18,616,563
734,495
599,920
$19,950,978
6 – 10
$
6,024,355
-
$ 6,024,355
University of Nevada, Reno Foundation
NOTES TO FINANCIAL STATEMENTS - CONTINUED
June 30, 2013
NOTE B - CASH AND INVESTMENTS
- Continued
Investments are recorded in the following funds at June 30:
2013
Unrestricted Fund
Restricted Fund
Endowment Fund
$
5,131,862
35,388,372
118,093,332
$ 158,613,566
2012
$
4,655,465
17,460,093
105,844,261
$ 127,959,819
The cumulative net appreciation (depreciation) of investments is as follows for the years ended June 30:
2013
Unrestricted Fund
Restricted Fund
Endowment Fund
2012
$
520,613
999,206
6,883,133
$
63,402
518,907
(1,461,002)
$
8,402,952
$
(878,693)
The Foundation’s investment policy for cash and cash equivalents is to exercise sufficient due diligence
to minimize investing cash and cash equivalents in instruments that will lack liquidity. The Foundation,
through its Investment Managers, considers the cash and cash equivalents to consist of two discrete
pools of funds: a short term pool and an intermediate term pool. The short-term pool shall be funded in
an amount sufficient to meet the expected daily cash requirements of the Foundation. The goals of the
investments are to maintain the principal in the account while maximizing the return on the investments.
The short-term pool is staggered in 30, 60 and 90 day investments. Appropriate types of investments are
money market funds, certificates of deposit, commercial paper, U.S. Treasury bills and notes, mortgage
backed securities (U.S. Government) and internal loans to the University secured by a promissory note
with an appropriate interest rate. The intermediate term pool is invested in fixed income securities
generally having an average maturity of three years or less in order to take advantage of higher yields.
It is the policy of the investment program to invest according to an asset allocation strategy that is
designed to meet the goals of the Endowment Investment Objective. The strategy will be based on a
number of factors, including:




The projected spending needs;
The maintenance of sufficient liquidity to meet spending payments;
Historical and expected long-term capital market risk and return behaviors;
The relationship between current and projected assets of the Endowment and its spending
requirements.
20
University of Nevada, Reno Foundation
NOTES TO FINANCIAL STATEMENTS - CONTINUED
June 30, 2013
NOTE B - CASH AND INVESTMENTS
- Continued
This policy provides for diversification of assets in an effort to maximize the investment return and
manage the risk of the Endowment consistent with market conditions. Asset allocation modeling
identifies asset classes the Endowment will use and the percentage each class represents in the total
fund. Due to the fluctuation of market values, positioning within a specified range is acceptable and
constitutes compliance with the policy. It is anticipated that an extended period of time may be required
to fully implement the asset allocation policy, and that periodic revisions will occur.
Investment Program Strategy
As a result of the above process, the Board has adopted the following asset allocation targets and ranges,
exclusive of amounts transferred to the Endowment’s operating account:
Asset Allocation Targets and Ranges
Min
Wt.
Target
Wt.
Max
Wt.
Equities
Global Equities
Private Markets
30%
25%
5%
40%
30%
10%
50%
35%
15%
Fixed Income
Core US Fixed Income
High Yield Fixed Income
Alternative Debt
32%
12%
10%
5%
40%
15%
15%
10%
48%
18%
20%
15%
Alternatives
Real Estate
Real Assets
12%
0%
7%
20%
10%
10%
28%
15%
13%
0%
0%
5%
Cash
Investment Risk Factors
There are many factors that can affect the fair value of investments. Some factors, such as credit risk and
concentrations of credit risk may affect fixed income securities, which are particularly sensitive to credit
risks and changes in interest rates. The Investment Committee meets quarterly to review the investments
and has policies regarding acceptable levels of risk.
Concentration of Credit Risk
Concentration of credit risk is the risk of loss attributed to the magnitude of an organization’s
investment in a single issuer. The Foundation restricts investment of cash and cash equivalents and
investments to financial institutions with high credit standing, and the Foundation currently purchases
certificates of deposit of less than $250,000 per bank or institution. Commercial paper is limited to a
maximum of 10% of the total cash and cash equivalents available. The Foundation has not experienced
any losses in such accounts and believes it is not exposed to any significant credit risk on cash and cash
equivalents and investments.
21
University of Nevada, Reno Foundation
NOTES TO FINANCIAL STATEMENTS - CONTINUED
June 30, 2013
NOTE B - CASH AND INVESTMENTS
- Continued
Credit Risk
Generally, credit risk is the risk that an issuer of an investment will not fulfill its obligation to the holder
of the investment. This is measured by the assignment of a rating by a nationally recognized statistical
rating organization. None of the investments held by the Foundation are rated by a nationally
recognized statistical rating organization.
Fixed income securities or obligations of the U.S. Government are not considered to have credit risk.
Interest Rate Risk
Interest rate risk is the risk that changes in interest rates will adversely affect the fair value of an
investment. As a means of limiting its exposure to fair value losses arising from rising interest rates, the
Foundation’s investment policy limits the maturities of U.S. Treasury instruments and certificates of
deposit to no more than 90 days unless the rate justifies the return and the current liquidity requirements
are met.
Foreign Currency Risk
Foreign currency risk is the risk that changes in exchange rates will adversely affect the fair value of an
investment or a deposit. Foreign investments are monitored by the Investment Manager, and the
Foundation has policies in place to address foreign currency risk.
Custodial Credit Risk – Deposits
In the case of deposits, this is the risk that in the event of a bank failure, the Foundation’s deposits
exceed FDIC limits and as a result may not be insured and returned to the Foundation. All cash deposits
are primarily on deposit with two financial institutions and several investment companies. The
Foundation does not have a deposit policy for custodial credit risk. As of June 30, 2013, the
Foundation’s bank balances totaled $13,811,336. Of this balance, $825,495 was covered by depository
insurance and/or collateralized and $11,462,485 is held by State Street Government Securities and
subject to their investment policies. The remaining $1,523,356 was uninsured and uncollaterized and, as
a result, was subject to custodial credit risk at June 30, 2013.
Custodial Credit Risk – Investments
For an investment, this is the risk that, in the event of the failure of the counterparty, the Foundation
will not be able to recover the value of its investments or collateral securities that are in the possession
of an outside party. Investments consist primarily of commingled funds. Debt and equity securities other
than open-end mutual funds are uncollateralized.
Commitments
As of June 30, 2013, the Foundation has committed to acquire approximately $8.5 million in new
commingled funds.
22
University of Nevada, Reno Foundation
NOTES TO FINANCIAL STATEMENTS - CONTINUED
June 30, 2013
NOTE C - UNEARNED REVENUE
Unearned revenue is directly related to assets held in irrevocable trusts, of which the Foundation is the
residual beneficiary, and from royalties and special events. The support and revenue from these
irrevocable trusts will be recognized when the Foundation receives its residual interest in the trusts.
Distributions to beneficiaries of these irrevocable trusts are made based on rates set forth in the trust
documents. Upon death of the income beneficiaries, the trusts will be distributed, and the Foundation
will receive its residual interest in the trusts. The assets held in the irrevocable trusts are recorded at fair
value. Unearned revenue is comprised of the following as of June 30:
2013
Residual interest in trust
Royalties and special events
2012
$
1,772,278
47,700
$
1,768,929
165,075
$
1,819,978
$
1,934,004
NOTE D - RELATED PARTY TRANSACTIONS
The University of Nevada provided the Foundation with administrative and support services for the
years ended June 30, 2013 and 2012 in the amounts of $1,895,215 and $2,047,401, respectively. The
Foundation expended $20,893,071 and $18,572,103 for capital projects, programs and scholarships for
the University of Nevada for the years ended June 30, 2013 and 2012, respectively. Amounts due to the
University of Nevada at June 30, 2013 and 2012 are $5,573,879 and $3,557,975, respectively. Amounts
due from the University of Nevada at June 30, 2013 and 2012 are $408,240 and $595,223, respectively.
The Foundation received $1,432,164 and $1,422,702 from the Nevada System of Higher Education
during the years ended June 30, 2013 and 2012, respectively, for management fees related to
endowments held on the University’s behalf. These amounts are included in investment income on the
Statement of Support and Revenue, Expenses and Changes in Net Position.
23
University of Nevada, Reno Foundation
NOTES TO FINANCIAL STATEMENTS - CONTINUED
June 30, 2013
NOTE E - PLEDGES RECEIVABLE, NET
Pledges receivable are recorded as revenue at the pledge date. The net present value is calculated based
upon the pledge date, the Internal Revenue Service Applicable Federal Rates (AFR) and the pledge
payment schedule. The AFR currently varies from 1.0% to 4.2% depending on the term or duration of
the pledge. Pledges receivable consist of the following as of June 30:
2013
Athletics
College of Liberal Arts
College of Business
College of Education
College of Engineering
College of Science
KUNR
Library
Scholarships
School of Journalism
School of Medicine
$
Present value discount
Net present value of pledges receivable
Less: Current portion of pledges receivable, net
Less: Allowance for uncollectable pledges
Pledges receivable, net
963,592
1,715,000
246,000
1,500,000
290,160
576,800
56,500
19,000
395,885
13,751,500
19,514,437
(1,986,525)
17,527,912
(3,713,037)
(876,396)
$ 12,938,479
24
2012
$
2,723,717
60,000
15,000
1,485,000
615,967
857,800
607,185
667,218
14,952,500
21,984,387
(2,331,467)
19,652,920
(5,424,279)
(982,648)
$ 13,245,993
University of Nevada, Reno Foundation
NOTES TO FINANCIAL STATEMENTS - CONTINUED
June 30, 2013
NOTE F - NOTES RECEIVABLE
Notes receivable consist of the following as of June 30:
Installment note receivable requiring monthly payments of
principal and interest of $1,391 and secured by a first deed
of trust. The original note had a balloon payment due on
November 7, 2008. The Foundation extended the note and
reduced the interest rate on the note from 6.5% to 6%.
The note matures on November 7, 2015.
2013
$
Installment note receivable requiring monthly payments of
principal and interest of $200 and secured by a first deed of
trust. The note bears interest at a rate of 6% per annum.
$
2,052
89,059
(13,798)
Less: Current portion of notes receivable
$
25
87,007
2012
75,261
101,559
3,841
105,400
(11,266)
$
94,134
SUPPLEMENTAL INFORMATION
University of Nevada, Reno Foundation
UNRESTRICTED FUND
ALUMNI AND UNIVERSITY PROGRAM EXPENSES
Year ended June 30, 2013
(With comparative totals for the year ended June 30, 2012)
2013
Alumni programs
Alumni college
Homecoming
Membership fund
Outreach
Student recruitment
Student support
Staff and office expense
$
55,494
49,047
111,700
69,221
36,410
26,161
2012
$
3,364
59,212
45,828
94,519
68,810
29,483
20,990
Total alumni programs
348,033
322,206
University programs
Program support
Faculty and staff enrichment
Painting of President Glick
Presidential Supplemental Salary
Provost support
Reynolds School of Journalism support
Teacher award
250,000
45,591
114,306
7,500
44,042
40,000
84,473
213,247
7,500
417,397
389,262
Total university programs
Total alumni and university
program expenses
$
27
765,430
$
711,468
University of Nevada, Reno Foundation
UNRESTRICTED FUND
ADMINISTRATIVE AND FUNDRAISING EXPENSES
Year ended June 30, 2013
(With comparative totals for the year ended June 30, 2012)
Payroll and related expenses
Salaries and wages
Fringe benefits
Administrative
2013
Fundraising
$
$
Operating
Audit and tax fees
Advertising
Appreciation, gifts and sponsorships
Books, periodicals and subscriptions
Contract services
Depreciation expense
Dues and memberships
Equipment maintenance expense
Insurance, taxes and licenses
Legal fees
Meeting and hosting expense
Office expense
Photography and audio visual
Postage and freight
Printing and duplicating
Recruitment costs
Special event and meeting supplies
Telephone
Training and registration fees
Travel expense
Total administrative and
fundraising expenses
733,673
247,290
980,963
51,940
771
8,628
2,988
13,134
10,770
1,478
74,992
15,470
12,055
11,611
79,227
2,728
55,375
139,888
14,526
3,944
17,298
6,803
8,545
532,171
$
1,513,134
28
971,941
328,428
1,300,369
$
200
2,246
17,335
10,000
1,139
16,790
631
4,244
7,932
757
4,193
23,960
80,018
9,361
1,775
35,495
216,076
$
1,516,445
2012
Total
Total
1,705,614
575,718
2,281,332
$
51,940
971
10,874
20,323
23,134
10,770
2,617
91,782
16,101
12,055
15,855
87,159
3,485
59,568
163,848
14,526
83,962
26,659
8,578
44,040
748,247
$
3,029,579
1,775,531
549,540
2,325,071
43,534
370
10,767
22,138
78,402
13,489
3,004
156,234
12,258
20,160
19,668
86,815
5,440
70,971
184,677
2,427
53,280
24,193
19,948
37,413
865,188
$
3,190,259
COMPLIANCE SECTION
Report of Independent Certified Public Accountants on
Internal Control over Financial Reporting and on Compliance
and Other Matters Required by Government Auditing Standards
Board of Trustees
University of Nevada, Reno Foundation
We have audited, in accordance with auditing standards generally accepted in the United States of
America and the standards applicable to financial audits contained in Government Auditing Standards issued
by the Comptroller General of the United States, the financial statements of University of Nevada, Reno
Foundation (the “Foundation”), which comprise the statement of net assets as of June 30, 2013, and the
related statements of support and revenues, expenses and changes in net assets and cash flows for the
year then ended, and the related notes to the financial statements, and have issued our report thereon
dated September 12, 2013.
Internal control over financial reporting
In planning and performing our audit of the financial statements, we considered the Foundation’s
internal control over financial reporting (“internal control”) to design audit procedures that are
appropriate in the circumstances for the purpose of expressing our opinion on the financial statements,
but not for the purpose of expressing an opinion on the effectiveness of internal control. Accordingly, we
do not express an opinion on the effectiveness of the Foundation’s internal control.
A deficiency in internal control exists when the design or operation of a control does not allow
management or employees, in the normal course of performing their assigned functions, to prevent, or
detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination
of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement
of the Foundation’s financial statements will not be prevented, or detected and corrected, on a timely
basis.
Our consideration of internal control was for the limited purpose described in the first paragraph of this
section and was not designed to identify all deficiencies in internal control that might be material
weaknesses. Given these limitations, during our audit we did not identify any deficiencies in the
Foundation’s internal control that we consider to be material weaknesses. However, material weaknesses
may exist that have not been identified.
Compliance and other matters
As part of obtaining reasonable assurance about whether the Foundation’s financial statements are free
from material misstatement, we performed tests of its compliance with certain provisions of laws,
regulations, contracts, and grant agreements, noncompliance with which could have a direct and material
effect on the determination of financial statement amounts. However, providing an opinion on
compliance with those provisions was not an objective of our audit, and accordingly, we do not express
such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that
are required to be reported under Government Auditing Standards.
Intended purpose
The purpose of this report is solely to describe the scope of our testing of internal control and
compliance and the results of that testing, and not to provide an opinion on the effectiveness of the
Foundation’s internal control or on compliance. This report is an integral part of an audit performed in
accordance with Government Auditing Standards in considering the Foundation’s internal control and
compliance. Accordingly, this report is not suitable for any other purpose.
Reno, Nevada
September 12, 2013
30