Independent Auditors’ Report
Board of Trustees
Turrell Fund
We have audited the accompanying financial statements (modified cash basis) of the Turrell
Fund (the “Fund”) which comprise the statements of assets and net assets (modified cash
basis) as of December 31, 2014 and 2013 and the related statements of revenue, expenses
and change in net assets (modified cash basis) and cash flows (modified cash basis) for the
years then ended, and the related notes to the financial statements.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial
statements in accordance with the modified cash basis of accounting described in Note 2;
this includes determining that the modified cash basis of accounting is an acceptable basis
for the preparation of the financial statements in the circumstances. Management is also
responsible for 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.
Auditors’ Responsibility
Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the
United States of America. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free from material
misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and
disclosures in the financial statements. The procedures selected depend on the auditors’
judgment, including the assessment of the risks of material misstatement of the financial
statements, whether due to fraud or error. In making those risk assessments, the auditor
considers internal control relevant to the entity’s preparation and fair presentation of
the financial statements in order to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the
entity’s internal control. Accordingly, we express no such opinion. An audit also includes
evaluating the appropriateness of accounting policies used and the reasonableness of
significant accounting estimates made by management, as well as evaluating the overall
presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide
a basis for our audit opinion.
13
Board of Trustees
Turrell Fund
We have audited the accompanying statements of financial position (modified
cash basis) of the Turrell Fund as of December 31, 2011 and 2010 and the related
statements of activities and cash flows (modified cash basis) for the years then ended.
Opinion
These financial statements are the responsibility of the Turrell Fund’s management.
In
ourresponsibility
opinion, the financial
statements
referredontothese
abovefinancial
present fairly,
in all based
material
Our
is to express
an opinion
statements
on
Opinion
respects,
the
statements
of
assets
and
net
assets
(modified
cash
basis)
of
the
Turrell
Fund
as
Inour
ouraudits.
opinion, the financial statements referred to above present fairly, in all material
of
December
31, 2012
2011
andTurrell
its revenue,
and 31,
charges
in its
net assets
respects,
the assets
and netand
assets
of the
Fund asexpenses
of December
2014 and
2013
(modified
cash expenses
basis) and
flows
(modified
cash
for the
years
then
in
and
revenue,
anditschanges
in its net
assets
its basis)
cashstandards
flows
for the
years
thenended
Weitsconducted
our audits
incash
accordance
with and
auditing
generally
accepted
accordance
with
the
basis
of
accounting
as
described
in
Note
2.
ended in accordance with the basis of accounting as described in Note 2.
in the United States of America. Those standards require that we plan and perform
the audit
to obtain reasonable assurance about whether the financial statements
Basis
ofAccounting
Accounting
Basis of
aredraw
freeattention
of material
misstatement.
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audit
includes
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ofofbasis
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draw
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statements,
describes
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of
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totoNote
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describes
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over
fi
nancial
reporting
as
a
basis
for
designing
audit
procedures
that are
accounting.
Thefinancial
financial
statements
are prepared
onmodified
the modified
cashofbasis
of accounting,
accounting. The
statements
are prepared
on the
cash basis
accounting,
appropriate
inofof
the
circumstances,
but
not forprinciples
the principles
purpose
of
expressing
which
basis
accounting
other
accounting
generally
accepted
in the
which
isis aabasis
accounting
other
thanthan
accounting
generally
accepted
in an
the opinion
Untied
States
America.
Our
opinion
is modified
not modified
with
respect
matter.
on theStates
effectiveness
of
the
Turrell
Fund’s
internal
control
overto
fithat
nancial
reporting.
United
ofofAmerica.
Our
opinion
is not
with respect
to that
matter.
Accordingly, we express no such opinion. An audit includes examining, on a test
Report
Supplementary
Information
Other-Matter
basis, on
evidence
supporting
the amounts and disclosures in the financial statements,
Our
audits
were
conducted
for
the
of forming
opinion
onanthe
financial
statements
Our
audit
was
conducted
for
the purpose
ofanforming
opinion
on
the financial
assessing the accounting purpose
principles
used
and
signifi
cant
estimates
made by
as
a
whole.
The
schedule
of
grants
paid
on
pages
24-36
is
presented
for
purposes
of
additional
statements
as a as
whole.
schedule ofthe
grants
paidfion
pagesstatement
24-34 is presented
for
management,
well The
as evaluating
overall
nancial
presentation.
analysis
and
is
not
a
required
part
of
the
financial
statements.
Such
information
is
the
purposes
of additional
analysis
and isa not
a required
partfor
of the
We believe
that our audits
provide
reasonable
basis
our financial
opinion. statements.
responsibility
of management
and was derivedof
from
and relates directly
to the
underlying
Such
information
is the responsibility
management
and was
derived
from and
accounting
and
other
records
used
to
prepare
the
financial
statements.
The
information
has
relates
directly in
to Note
the underlying
and otherwere
records
used to
theed
As described
2, these fiaccounting
nancial statements
prepared
onprepare
a modifi
been
subjected
to
the
auditing
procedures
applied
in
the
audit
of
the
financial
statements
financial
statements.
The
information
has
been
subjected
to
the
auditing
procedures
cash basis of accounting, which is a comprehensive basis of accounting other than
and
certain
including
comparing
reconciling
such
information
applied
inadditional
the
auditprocedures,
of generally
the financial
statements
and
certain
additional
procedures,
accounting
principles
accepted
in theand
United
States
of America.
directly
to
the
underlying
accounting
and
other
records
used
to
prepare
the
financial
including comparing and reconciling such information directly to the underlying
statements or to the financial statements themselves, and other additional procedures in
accounting
and other
to prepare
the financial
or tointhe
In our opinion,
the firecords
nancial used
statements
referred
to above statements
present fairly,
all
accordance with auditing standards generally accepted in the United States of America.
financial
themselves,
and other
accordance
material statements
respects, the
financial position
of additional
the Turrellprocedures
Fund as ofinDecember
31,
In our opinion, the information is fairly stated in all material respects in relation to the
with
auditing
standards
generally
accepted
in
the
United
States
of
America,
In
our
2011 and 2010 and the changes in its net assets and its cash flows for the years
financial statements as a whole.
opinion,
the information
is with
fairlythe
stated
material respects
in in
relation
then ended,
in conformity
basisinofallaccounting
described
Note 2totothe
the
financial
financialstatements
statements.as a whole.
May
2015New York
New12,
York,
May 9, 2012
New York, New York
O’CONNOR DAVIES, LLP
May 6, 60
2013
East 42nd Street, 36th Fl., New York, NY 10165 I Tel: 212.286.2600
I Fax: 212.286.4080 I www.odpkf.com
O’Connor Davies, LLP is a member firm of the PKF International Limited network of legally independent firms and does not
accept any responsibility or liability for the actions or inactions on the part of any other individual member firm or firms.
10
14
TURRELL FUND
Statements of Assets and Net Assets
(Modified Cash Basis)
December 31,
2014
Assets
Cash and cash equivalents
Investments, at fair value
Other assets
2013
$
303,880 $
115,025,427
4,500
87,788
119,096,533
4,500
$
115,333,807 $
119,188,821
$
115,333,807 $
119,188,821
Net Assets
Unrestricted net assets
See notes to financial statements
15
TURRELL FUND
Statements of Revenues, Expenses and Net Assets
(Modified Cash Basis)
Year Ended
December 31,
2014
2013
$ 6,303,187
9,384
(276,125)
6,036,446
(390,021)
$ 5,517,327
8,566
2,183,252
7,709,145
(380,120)
5,646,425
7,329,025
4,009,664
3,808,993
10,512
4,020,176
1,440,574
250,000
3,800,993
1,380,276
30,000
5,710,750
5,219,269
(64,325)
2,109,756
Investment Income
Dividends and interest
Other investments income
Realized (loss) gain on investments
Direct investment expenses
Net Investment Income
Expenses
Program Expenses
Grant awards, net of refunds of $70
and $25,000
Direct charitable activities
Total Program Expenses
Foundation operations and governance
Federal excise tax expense
Total Expenses
Change in Net Assets Before Unrealized
(Loss) Gain on Investments
Unrealized (loss) gain on investments
Change in Net Assets
(3,790,689)
8,070,455
(3,855,014)
10,180,211
119,188,821
109,008,610
$115,333,807
$119,188,821
Net Assets
Beginning of year
End of year
See notes to financial statements
16
TURRELL FUND
Statements of Cash Flows
(Modified Cash Basis)
Year Ended
December 31,
2014
CASH FLOWS FROM OPERATING ACTIVITIES
Change in net assets
Adjustments to reconcile change in net assets
to net cash from operating activities
Realized loss (gain) on sale of investments
Unrealized loss (gain) on investments
2013
$ (3,855,014) $ 10,180,211
276,125
3,790,689
(2,183,252)
(8,070,455)
211,800
(73,496)
Net Cash from Operating Activities
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of investments
Proceeds from sale of investments
Net Cash From Investing Activities
(21,527,535)
21,531,827
4,292
Net Change in Cash and Cash Equivalents
216,092
(26,376,763)
26,233,420
(143,343)
(216,839)
CASH AND CASH Equivalents
Beginning of year
87,788
End of year
304,627
$
303,880 $
87,788
$
250,000 $
30,000
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for Federal excise taxes
See notes to financial statements
17
TURRELL FUND
Modified Cash Basis
December 31, 2014 and 2013
1.Organization
The Turrell Fund (the “Fund”) provides grants to organizations which directly
provide or foster the creation and delivery of high quality developmental and
educational services to at-risk children in Vermont and designated areas of
New Jersey, especially the youngest and their families.
2. Summary of Significant Accounting Policies
Basis of Accounting
The financial statements are prepared on the modified cash basis. Under this
basis, revenue and the related assets are recognized when received rather
than when earned and expenses are recognized when paid rather than when
incurred, except for investments which are valued at fair value. No provision
for deferred federal excise tax on investment appreciation was made.
Management has determined that the modified cash basis of accounting as
described above is an acceptable basis for the preparation of the financial
statements in the circumstances.
Use of Estimates
The preparation of financial statements 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
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Basis of Presentation
Net assets and revenues, expenses, gains, and losses are classified based on
the existence or absence of donor-imposed restrictions. All net assets of the
Fund are considered unrestricted.
Cash and Cash Equivalents
Cash and cash equivalents consist of short-term investments with a maturity
of three months or less at the time of purchase, except for those short-term
investments managed by the Fund’s investment managers as part of their
long-term investment strategies.
Fair Value Measurements
The Fund follows guidance on Fair Value Measurements which defines fair value
and establishes a fair value hierarchy organized into three levels based upon
the input assumptions used in pricing assets. Level 1 inputs have the highest
reliability and are related to assets with unadjusted quoted prices in active
markets. Level 2 inputs relate to assets with other than quoted prices in active
markets which may include quoted prices for similar assets or liabilities or other
inputs which can be corroborated by observable market data. Level 3 inputs are
unobservable inputs and are used to the extent that observable inputs do not exist.
18
TURRELL FUND
Notes to Financial Statements
December 31, 2014 and 2013
2. Summary of Significant Accounting Policies (continued)
Investments Valuation
Investments are carried at fair value. The fair value of alternative investments
(hedge funds and private equity) has been estimated using the Net Asset Value
(“NAV”) as reported by the management of the respective alternative investment
fund. Applicable guidance provides for the use of NAV as a “Practical Expedient”
for estimating fair value of alternative investments. NAV reported by each
alternative investment fund is used as a practical expedient to estimate the fair
value of the Fund’s interest therein and their classification within Level 2 or 3 is
based on the Fund’s ability to redeem its interest in the near term.
Investment Income Recognition
Purchases and sales of securities are recorded on a settlement date basis. Interest
and dividend income is recorded when received. Realized and unrealized gains
and losses are included in the statement of activities.
Investment Risks and Uncertainties
Alternative investments consist of non-traditional, not readily marketable
investments, some of which may be structured as offshore limited partnerships,
venture capital funds, hedge funds, private equity funds and common trust
funds. The underlying investments of such funds, whether invested in stock
or other securities, are generally not currently traded in a public market and
typically are subject to restrictions on resale. Values determined by investment
managers and general partners of underlying securities that are thinly traded
or not traded in an active market may be based on historical cost, appraisals,
a review of the investees’ financial results, financial condition and prospects,
together with comparisons to similar companies for which quoted market prices
are available or other estimates that require varying degrees of judgment.
Because of the inherent uncertainty of valuations, the estimated fair values
may differ significantly from the values that would have been used had a ready
market for such investments existed or had such investments been liquidated,
and those differences could be material.
Grants
Grant expense is recorded when paid.
Accounting for Uncertainty in Income Taxes
The Fund recognizes the effect of income tax positions only if those positions are
more likely than not to be sustained. Management has determined that the Fund
had no uncertain tax positions that would require financial statement recognition
or disclosure. The Fund is no longer subject to examinations by the applicable
taxing jurisdictions for periods prior to December 31, 2011.
19
TURRELL FUND
Notes to Financial Statements
December 31, 2014 and 2013
2. Summary of Significant Accounting Policies (continued)
Subsequent Events
Management has evaluated subsequent events for disclosure and/or recognition
in the financial statements through the date that the financial statements were
available to be issued, which is May 12, 2015.
3. Federal Excise Tax
The Fund is exempt from federal income tax under Section 501(c)(3) of the Internal
Revenue Code (the Code) and is a private foundation as defined under Section
509(a) of the Code. The Fund is subject to a federal excise tax of 2% on its net
investment income, including net realized gains, less expenses incurred in the
production of the investment income, unless the Fund qualifies for the reduced 1%
rate by meeting certain minimum grant distribution requirements in accordance
with a specified formula. The Fund was taxed at the 2% rate in 2014 and 2013.
4. Concentration of Credit Risk
Financial instruments that potentially subject the Fund to significant concentrations
of credit risk consist principally of cash and cash equivalents and investments.
The Fund’s cash is maintained in one bank account which, at times, may exceed
federally insured limits. The Fund has not experienced any losses on its cash
deposits. Investments are managed by a professional investment management
firm and are monitored by the Finance and Investment Committee and an
investment advisor engaged by the Fund.
5. Fair Value Measurements
The following are the classes and major categories of investments grouped
by the fair value hierarchy for those investments measured at fair value on a
recurring basis at December 31:
2014
Level 1
Mutual Funds
Fixed Income
Equity
REITS
Mortgage-backed bonds
Hedge Funds
Multi-strategy
Level 2
$ 18,516,364
63,538,347
1,523,748
-
$
-
Private Equity
Short-term cash investments $ 83,578,459
- $
2,863
15,180,157
Level 3
Total
-
11,862,968
$ 15,183,020 $ 11,862,968
$
18,516,364
63,538,347
1,523,748
2,863
15,180,157
11,862,968
110,624,447
4,400,980
$ 115,025,427
20
TURRELL FUND
Notes to Financial Statements
December 31, 2014 and 2013
5. Fair Value Measurements (continued)
2013
Level 1
Mutual Funds
Fixed Income
Equity
REITS
Mortgage-backed bonds
Hedge Funds
Multi-strategy
Private Equity
Short-term cash investments $
Level 2
Level 3
Total
20,502,575
67,413,797
1,407,083
-
3,154
-
20,502,575
67,413,797
1,407,083
3,154
-
14,854,604
-
14,854,604
10,162,152
114,343,365
89,323,455 $
14,857,758 $
10,162,152
10,162,152
4,753,168
$ 119,096,533
The following is a reconciliation of the beginning and ending balances for
Level 3 investments at December 31:
2014
Balance
Beginning
of Year
Purchases
Sales
Total Realized
and Unrealized
Gain/(Loss)
Private Equity $10,162,152 $ 3,293,911 $ (2,276,821) $
Balance
End
of Year
683,726 $ 11,862,968
2013
Balance
Beginning
of Year
Purchases
Sales
Total Realized
and Unrealized
Gain/(Loss)
Private Equity $ 8,842,668 $ 1,462,125 $ (1,107,444) $
Balance
End
of Year
964,803 $ 10,162,152
The net change in unrealized appreciation on Level 3 assets held at year-end
was $683,726 and $964,803 for 2014 and 2013, respectively.
Information regarding alternative investments valued at NAV using the practical
expedient at December 31, 2014 is as follows:
Fair Value
Hedge Funds - Multistrategy see “a” below
Private Equity see “b” below
Total
Unfunded
Commitments
$ 15,180,157 $
11,862,968
$ 27,043,125
6,968,808
$
* The private equities are illiquid assets.
21
6,968,808
Redemption Redemption
Frequency Notice Period
Quarterly
60 days
*
*
TURRELL FUND
Notes to Financial Statements
December 31, 2014 and 2013
5. Fair Value Measurements (continued)
a. This category includes investments in diversified, commingled pools of
hedge funds that invest in a wide range of strategies including equity long/
short, macro, event driven, convertible arbitrage, fixed income arbitrage,
volatility, fund of funds and multi-strategy. Management of the commingled
pools has the discretion to reallocate among these strategies based upon
their valuation process. Each commingled pool is priced monthly by the fund
administrator who compiles the prices from each underlying hedge fund
administrator to determine the monthly valuation. Investments in these funds
can be redeemed on a quarterly basis with 60 days’ notice.
b. This category includes several diversified, commingled pools of limited
partnership interests in individual private equity partnerships that have long
expected lives (> 10 years) and are illiquid. The underlying private equity
partnerships represent different strategies including real estate, venture,
buyout, distressed debt and power and infrastructure. The fund administrator
compiles the estimated net asset values of each underlying private equity
partnership to determine the quarterly valuation for each commingled pool.
Investments in these pools are not redeemable. Distributions to investors
are made following the liquidation of partnership assets usually through a
sale or an initial public offering.
6. Pension Plan
The Fund has a non-contributory defined contribution pension plan covering
all of its full-time employees. For 2014 and 2013, the Fund’s expense was
$99,579 and $76,650, respectively.
7. Lease Agreements
The Fund leases office space and equipment for its operations under noncancelable operating lease agreements expiring on June 30, 2015 and August
30, 2015, respectively. Future minimum lease payments due in 2015 are
$45,668.
22
TURRELL FUND
Notes to Financial Statements
December 31, 2014 and 2013
8. Natural Expenses by Object Classification
The costs of providing various program services and other activities of the Fund
have been summarized on a functional basis in the statement of activities. A
summary of the administrative expenses by natural type of disbursement is
presented below:
2014
Staff salaries
Consultant
Pension and disability
Payroll taxes
Employee benefits
Retiree benefits
Travel
Telephone
General office
Legal and accounting
Rent
Insurance
Trustee personal development stipend
$
$
615,059
28,870
112,163
39,691
107,140
35,794
84,578
11,046
207,036
78,015
81,009
20,173
20,000
1,440,574
2013
$
632,967
16,519
87,397
42,011
94,473
31,480
87,467
9,646
178,705
83,144
78,967
17,500
20,000
$ 1,380,276
9. Postretirement Benefits Other than Pensions
The Fund provides medical benefits to its retirees and their dependents. These
benefits include Medicare supplement coverage and Medicare “B” premiums
and are paid from the Fund’s operations. The Fund expenses the benefits
on a pay-as-you-go basis. Substantially all full-time employees are eligible for
these benefits if they have three years of service and reach normal retirement
age while working for the Fund. For 2014 and 2013, the Fund’s expense was
$35,794 and $31,480, respectively.
23