THE FOUNDATION CENTER
Financial Statements
December 31, 2010 and 2009
(With Independent Auditors’ Report Thereon)
KPMG LLP
345 Park Avenue
New York, NY 10154
Independent Auditors’ Report
The Board of Trustees
The Foundation Center:
We have audited the accompanying balance sheets of The Foundation Center (the Center) as of
December 31, 2010 and 2009, and the related statements of changes in unrestricted net assets, changes in
net assets, and cash flows for the years then ended. These financial statements are the responsibility of the
Center’s management. 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 of material misstatement. An audit includes consideration of
internal control over financial reporting as a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Center’s
internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our audits provide a reasonable
basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the
financial position of The Foundation Center as of December 31, 2010 and 2009, and the changes in its net
assets and its cash flows for the years then ended in conformity with U.S. generally accepted accounting
principles.
April 18, 2011
KPMG LLP is a Delaware limited liability partnership,
the U.S. member firm of KPMG International Cooperative
(“KPMG International”), a Swiss entity.
THE FOUNDATION CENTER
Balance Sheets
December 31, 2010 and 2009
Assets
2010
2009
136,991 169,738 3,702,623 92,996 20,517,709 3,949,238 132,661 18,071,554 2,123,571 638,432 2,394,070 371,126 $
27,212,322 25,088,387 $
990,809 4,797,501 1,993,311 993,135 4,640,734 1,797,169 7,781,621 7,431,038 241,945 9,718,208 2,123,571 237,020 9,127,954 2,394,070 12,083,724 11,759,044 Temporarily restricted (note 6)
5,632,977 4,184,305 Permanently restricted (note 6):
General purposes
Library acquisitions
Public education
1,000,000 250,000 464,000 1,000,000 250,000 464,000 1,714,000 1,714,000 19,430,701 17,657,349 27,212,322 25,088,387 Cash
Contributions and other receivables, net of allowance for
doubtful accounts (note 2)
Publications inventory
Investments (note 3)
Furniture, equipment, and leasehold improvements, at cost, less
accumulated depreciation and amortization of $9,484,336
and $8,937,194 in 2010 and 2009, respectively
Other assets
Total assets
$
Liabilities and Net Assets
Liabilities:
Accounts payable and accrued expenses
Deferred revenue
Accumulated postretirement benefit obligation (note 4)
Total liabilities
Commitments (note 8)
Net assets:
Unrestricted:
Undesignated
Board-designated for long-term investment (note 5)
Investment in furniture, equipment, and leasehold improvements
Total unrestricted
Total permanently restricted
Total net assets
Total liabilities and net assets
$
See accompanying notes to financial statements.
2
THE FOUNDATION CENTER
Statements of Changes in Unrestricted Net Assets
Years ended December 31, 2010 and 2009
Operating
Revenues and gains:
Foundation and corporate contributions
Publication revenues
Program service and other fees
Investment return (note 3)
Net assets released from restrictions (note 5)
$
Nonoperating
Long-term
investment
2010
Total
2009
3,075,153 11,139,175 1,947,330 11,156 3,599,058 — — — 1,501,471 46,520 — — — — 125,000 3,075,153 11,139,175 1,947,330 1,512,627 3,770,578 2,082,879 10,916,274 2,075,507 2,968,313 4,796,425 19,771,872 1,547,991 125,000 21,444,863 22,839,398 8,421,809 4,476,937 1,843,501 234,925 117,652 55,843 — — — 8,656,734 4,594,589 1,899,344 8,746,656 4,600,176 1,806,209 14,742,247 408,420 — 15,150,667 15,153,041 3,774,678 823,728 108,188 30,534 — — 3,882,866 854,262 4,260,023 952,862 Total supporting services
4,598,406 138,722 — 4,737,128 5,212,885 Total expenses and losses
19,340,653 547,142 — 19,887,795 20,365,926 (230,123) 230,123 — — — — — (1,500,000) — 1,500,000 — — — — (1,709,135) — (197,642) — (197,642) 48,133 — — (1,034,746) (1,034,746) — 201,096 (466,670) 590,254 324,680 812,470 Total revenues and gains
Expenses and losses:
Program services:
Data collection and publications
Library/learning centers and other public services
Research and other programs
Total program services
Supporting services:
Management and general
Fundraising
Acquisition of furniture, equipment, and leasehold
improvements from operations
Increase in board-designated amount for long-term
investment (note 5)
Expenses associated with reduction-in-force (note 4)
Pension and postretirement changes other than net
periodic benefit cost (note 4)
Net asset reclassification for adoption of
ASC 958-205 (notes 5 and 6)
Increase (decrease) in unrestricted net assets
$
See accompanying notes to financial statements.
3
THE FOUNDATION CENTER
Statements of Changes in Net Assets
Years ended December 31, 2010 and 2009
2010
2009
324,680 812,470 4,164,564 19,940 1,034,746 3,219,022 29,687 — (3,599,058) (46,520) (125,000) (4,649,764) (21,661) (125,000) Increase (decrease) in temporarily restricted net assets
1,448,672 (1,547,716) Increase (decrease) in net assets
1,773,352 (735,246) 17,657,349 18,392,595 19,430,701 17,657,349 Increase in unrestricted net assets
$
Changes in temporarily restricted net assets:
Foundation and corporate contributions
Investment return (note 3)
Net asset reclassification for adoption of ASC 958-205 (notes 5 and 6)
Net assets released from restrictions:
For operating activities
For capital purposes
For long-term investment (note 5)
Net assets at beginning of year
Net assets at end of year
$
See accompanying notes to financial statements.
4
THE FOUNDATION CENTER
Statements of Cash Flows
Years ended December 31, 2010 and 2009
2010
Cash flows from operating activities:
Change in net assets
Adjustments to reconcile change in net assets to net cash
provided by (used in) operating activities:
Depreciation and amortization
Decrease in allowance for doubtful accounts
Net appreciation in fair value of investments
Capital campaign contributions
Changes in operating assets and liabilities, net:
Contributions and other receivables, less amounts
classified as financing activities
Publications inventory
Other assets
Accounts payable and accrued expenses
Deferred revenue
Accumulated postretirement benefit obligation
$
2009
1,773,352 (735,246) 547,142 (5,000) (1,145,904) — 534,883 (5,000) (2,570,954) (16,410) (50,766) 39,665 (267,306) (2,326) 156,767 196,142 (312,780) (25) 98,426 129,504 150,953 134,652 Net cash provided by (used in) operating activities
1,241,766 (2,591,997) Cash flows from investing activities:
Purchase of investments
Proceeds from sale of investments
Acquisition of furniture, equipment, and leasehold improvements
(3,455,562) 2,155,311 (276,643) (3,051,496) 4,961,133 (237,364) (1,576,894) 1,672,273 302,381 937,727 Net cash provided by financing activity
302,381 937,727 Net (decrease) increase in cash
(32,747) 18,003 169,738 151,735 136,991 169,738 Net cash (used in) provided by investing activities
Cash flows from financing activity:
Cash received from capital campaign
Cash at beginning of year
Cash at end of year
$
See accompanying notes to financial statements.
5
THE FOUNDATION CENTER
Notes to Financial Statements
December 31, 2010 and 2009
(1)
Organization and Summary of Significant Accounting Policies
Organization
The Foundation Center (the Center) is a not-for-profit organization exempt from U.S. federal income taxes
under Section 501(c)(3) of the Internal Revenue Code and has been designated as an organization that is
not a private foundation. The Center’s mission is to strengthen the social sector by advancing knowledge
about philanthropy in the U.S. and around the world. The Center accomplishes its mission by: operating
library/learning centers in five locations that offer free access to information resources and educational
programs; maintaining unique databases of information on foundations, corporate donors, and grantmaking
public charities; providing a content-rich web site with a variety of free search tools, tutorials,
downloadable reports, and other information updated daily; conducting research and publishing reports on
the growth of the foundation field and on trends in foundation support of the nonprofit sector; educating
thousands of people each year through a full curriculum of training courses; publishing books ranging from
basic primers on fundraising and nonprofit management to comprehensive reference works; and
coordinating a nationwide network of funding information centers that offer free local access to Center
resources and training. Its audience includes grantseekers, grantmakers, researchers, policymakers, the
media, and the general public.
Summary of Significant Accounting Policies
(a)
Basis of Presentation
The net assets of the Center and changes therein are classified and reported as follows:
Unrestricted net assets – Net assets that are not subject to donor-imposed stipulations. This category
of net assets includes amounts designated by the board of trustees (board) for long-term investment
and amounts invested in furniture, equipment, and leasehold improvements, net of accumulated
depreciation and amortization.
Temporarily restricted net assets – Net assets subject to donor-imposed stipulations that will be met
by actions of the Center and/or the passage of time.
Permanently restricted net assets – Net assets subject to donor-imposed stipulations that the
principal be maintained permanently by the Center. The Center is permitted to use the income earned
on the related investments for general or specified operating purposes.
Revenues are reported as increases in unrestricted net assets unless their use is limited by
donor-imposed restrictions. Expenses are reported as decreases in unrestricted net assets. Gains and
losses on investments and other assets or liabilities are reported as increases or decreases in
unrestricted net assets unless their use is restricted by explicit donor stipulation or by law.
Expirations of temporary restrictions on net assets (i.e., the donor-stipulated purpose has been
fulfilled and/or the stipulated time period has elapsed) are reported as net assets released from
restrictions.
(b)
Fair Value and Investments
Fair value is defined as the exchange price that would be received for an asset or paid to transfer a
liability (an exit price) in the principal or most advantageous market for the asset or liability in an
6
(Continued)
THE FOUNDATION CENTER
Notes to Financial Statements
December 31, 2010 and 2009
orderly transaction between market participants on the measurement date. The three levels of the fair
value hierarchy are as follows:
•
Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities
that a reporting entity has the ability to access at the measurement date.
•
Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable
for the asset or liability, either directly or indirectly.
•
Level 3 inputs are unobservable inputs for the asset or liability.
Investments classified in Levels 2 and 3 consist of shares or units in investment funds as opposed to
direct interests in the funds’ underlying holdings, which may be marketable. Because the net asset
value reported by each fund is used as a practical expedient to estimate fair value of the Center’s
interest therein, its classification in Level 2 or 3 is based on the Center’s ability to redeem its interest
at or near December 31. If the interest can be redeemed in the near term, the investment is classified
as Level 2. The classification of investments in the fair value hierarchy is not necessarily an
indication of the risks, liquidity, or degree of difficulty in estimating the fair value of each
investment’s underlying assets and liabilities.
(c)
Other Matters
Cash and cash equivalents managed for long-term investment purposes are included in investments.
Publications inventory is stated at the lower of direct production cost (first in, first out) or market.
Revenue is recognized during the fiscal year in which the service relates. Deferred revenue primarily
includes annual subscriptions paid in advance of the period to which they relate.
Contributions, which include unconditional promises to give, are recognized as revenues in the
period received.
Authorship costs are recorded as program expenses in the year incurred.
Depreciation and amortization are provided on a straight-line basis over a 10-year estimated useful
life for furniture and equipment, over a 5-year estimated useful life for electronic equipment, and
over the shorter of the remaining term of the lease or useful lives for leasehold improvements.
Total investment return (loss) net of the amount appropriated for operations, net assets released from
restrictions for capital purposes, depreciation and amortization expense, pension and postretirement
changes other than net periodic benefit cost, and other gains or losses and other nonrecurring
activities are reported as nonoperating activities in the statements of changes in unrestricted net
assets.
Accounting estimates are an integral part of the financial statements prepared by management and
are based upon management’s current judgments. Actual results could differ from those estimates.
Other significant accounting policies are set forth in the financial statements and the following notes.
7
(Continued)
THE FOUNDATION CENTER
Notes to Financial Statements
December 31, 2010 and 2009
The Center recognizes the effect of income tax positions only if those positions are more likely than
not of being sustained. Income generated from activities unrelated to the Center’s exempt purpose is
subject to tax under Internal Revenue Code Section 511. The Center recognized unrelated business
income tax expense of $15,122 and $9,843 for the years ended December 31, 2010 and 2009,
respectively.
(2)
Contributions and Other Receivables
Contributions and other receivables consist of the following at December 31:
2010
Contributions receivable, due to be collected as follows:
Less than one year
One to five years
Other receivables
Allowance for doubtful accounts
2009
$
2,745,302
481,334
520,987
(45,000)
1,864,890
1,342,000
792,348
(50,000)
$
3,702,623
3,949,238
The Center’s contributions receivables include $800,000 and $1,300,000 receivable from one donor at
December 31, 2010 and 2009, respectively.
(3)
Investments
Cash equivalents are carried at fair value based upon quoted market prices. Investment in bonds and notes,
and common and preferred stocks is through a fund of funds. The underlying securities in the fund are
primarily marketable. The investments are not subject to any redemption restrictions or lock up.
Investments at December 31, 2010 and 2009 consist of the following:
2010
Cash equivalents
Bonds and notes:
Government
Corporate
Mortgages
Other
Common and preferred stocks:
Domestic
International
$
$
8
2009
9,045,724 6,105,510 665,775 1,165,107 1,065,241 432,754 715,101 1,055,625 1,191,834 442,681 6,433,055 1,710,053 6,420,602 2,140,201 20,517,709 18,071,554 (Continued)
THE FOUNDATION CENTER
Notes to Financial Statements
December 31, 2010 and 2009
The following table presents the Center’s fair value hierarchy for those assets measured at fair value as of
December 31, 2010 and 2009:
Fair value
Financial assets:
Cash equivalents
$
Bonds and notes
Common and preferred stocks
Total
$
Total
$
Level 2
Level 3
9,045,724 3,328,877 8,143,108 9,045,724 — — — 3,328,877 8,143,108 — — — 20,517,709 9,045,724 11,471,985 — Fair value
Financial assets:
Cash equivalents
$
Bonds and notes
Common and preferred stocks
2010
Level 1
2009
Level 1
Level 2
Level 3
6,105,510 3,405,241 8,560,803 6,105,510 — — — 3,405,241 8,560,803 — — — 18,071,554 6,105,510 11,966,044 — The board has approved an annual spending rate of up to 4.5% of the average market value of the
investments managed by the investment manager at the end of the three preceding years. The components
of investment return for the years ended December 31, 2010 and 2009 are as follows:
2010
Interest and dividends
Net appreciation in fair value of investments
$
Total investment return
Less investment return appropriated under spending policy,
including temporarily restricted amount of $19,940 and
$29,687 in 2010 and 2009, respectively
Investment return reported as nonoperating
(4)
$
2009
386,663 1,145,904 427,046 2,570,954 1,532,567 2,998,000 31,096 410,589 1,501,471 2,587,411 Postretirement Healthcare Benefits
The Center sponsors an unfunded postretirement healthcare plan that covers former employees who met
certain eligibility requirements. The Center chose to enroll eligible retirees into a Medicare Advantage
Plan. The Center’s postretirement healthcare benefits program has been terminated with respect to
individuals whose Center employment terminated on or after November 1, 2009 except for individuals who
elected to participate in, and retire under, the Center’s Voluntary Early Retirement Program (VERP), and
who satisfy the VERP’s requirements for Retiree Health Benefits. These individuals remain eligible for
9
(Continued)
THE FOUNDATION CENTER
Notes to Financial Statements
December 31, 2010 and 2009
health benefits after retirement from the Center, in accordance with and subject to the Center’s retiree
health program terms, even if their employment terminated after October 31, 2009. The expenses
associated with the Center’s reduction in force, as reflected in the 2009 statement of changes in
unrestricted net assets, totaled $1,709,135 and is considered part of supporting services.
The following table provides information with respect to the plan as of and for the years ended
December 31, 2010 and 2009:
2010
Change in benefit obligation:
Benefit obligation at January 1
Net periodic benefit cost
Benefits paid
$
1,797,169 103,405 (104,905) 1,662,517 211,065 (28,280) 1,795,669 1,845,302 197,642 — 226,955 (275,088) $
1,993,311 1,797,169 $
103,405 104,905 104,905 211,065 28,280 28,280 Pension and postretirement changes other than net periodic
benefit cost:
Actuarial loss
Plan amendments
Benefit obligation at December 31
Net periodic benefit cost
Employer contributions
Benefits paid
2009
The assumptions used in the measurement of the Center’s benefit obligation are shown in the following
table:
Weighted average discount rate as of December 31
Medical trend rates (applied to net incurred claims)
2010
2009
5.12%
10.00% during
2010 and
10.00% in 2011
grading to
5.00% by 2016
6.05%
9.00% during
2009 and
10.00% in 2010
grading to
5.00% by 2015
The assumption used in the measurement of the Center’s net periodic benefit cost is shown in the following
table:
2010
Weighted average discount rate as of December 31
10
6.05%
2009
5.88%
(Continued)
THE FOUNDATION CENTER
Notes to Financial Statements
December 31, 2010 and 2009
Assumed healthcare cost trend rates have a significant effect on the amounts reported for healthcare plans.
A 1% point change in assumed healthcare cost trend rates would have the following effects on the amounts
reported:
2010
1% increase
1% decrease
Effect on total service and
interest cost
Effect on postretirement
benefit obligation
$
2009
1% increase
1% decrease
10,792 (9,216) 56,098 (43,659) 233,996 (198,166) 202,122 (171,864) Projected premium payments for each of the next five years and thereafter through 2021 are as follows:
Amount
2011
2012
2013
2014
2015
Thereafter through 2020
$
157,910 146,234 149,787 152,532 152,929 617,857 $
1,377,249 On November 1, 2009, the Center amended its postretirement healthcare plan resulting in a gain of
$275,088. In addition, as of December 31, 2009, a net actuarial loss of $226,955 was not yet recognized as
a component of net periodic postretirement benefit cost. The resulting net gain of $48,133 is recorded on
the December 31, 2009 statement of changes in unrestricted net assets, increasing unrestricted net assets.
For the year ended December 31, 2010, a net actuarial loss of $197,642 was not yet recognized as a
component of net periodic postretirement benefit cost. The $197,642 is recorded on the December 31, 2010
statement of changes in unrestricted net assets, decreasing unrestricted net assets. The cumulative loss not
yet recognized as a component of net periodic benefit cost is $313,577 and $115,935 at December 31, 2010
and 2009, respectively. Such amount consists primarily of net actuarial losses.
It is estimated that $86,325 of the actuarial loss will be included as a component of net periodic benefit
cost in fiscal year 2011.
(5)
Board-Designated Amounts for Long-Term Investment
The board-designated amount for long-term investment was established by the board of trustees as a means
to enhance the sustainability of the Center. It is an unrestricted fund with net assets of $9,718,208 and
$9,127,954 at December 31, 2010 and 2009, respectively. The 2009 amount includes $806,067 of net
appreciation on permanently restricted endowment. In 2010, the net appreciation on permanently restricted
endowment was $1,034,746 and was reclassified to temporarily restricted net assets in accordance with the
Center’s adoption of the New York Prudent Management of Institutional Funds Act (NYPMIFA). In 2010,
11
(Continued)
THE FOUNDATION CENTER
Notes to Financial Statements
December 31, 2010 and 2009
$125,000 in foundation contributions was released from restrictions and an additional amount of
$1,500,000 was designated by the board for long-term investment. In 2009, $125,000 in foundation
contributions was released from restrictions and an additional amount of $1,000,000 was designated by the
board for long-term investment.
(6)
Net Assets
Temporarily restricted net assets were available for the following purposes or for future periods at
December 31, 2010 and 2009:
2010
Data collection and publications
Library/learning centers and other public services
Other programs
Capital campaign initiatives
Future periods
Net asset reclassification for adoption of ASC 958-205
Total
2009
$
157,405 620,261 939,660 423,236 2,457,669 1,034,746 26,000 830,963 562,268 1,170,974 1,594,100 — $
5,632,977 4,184,305 The Center has three permanently restricted endowments; general endowment, library acquisition
endowment, and public education endowment.
The general purposes endowment was established in 1996. The income from this endowment is
unrestricted and used for general purposes. This fund’s permanently restricted net assets totaled $1,000,000
at December 31, 2010 and 2009.
The library acquisitions endowment fund was created to provide support for acquisitions for the Center’s
New York library. Income from the library acquisitions endowment is temporarily restricted. In 2008, the
Center received an additional contribution of $100,000 to this fund. This fund’s permanently restricted net
assets totaled $250,000 at December 31, 2010 and 2009.
The public education fund was created to provide support for the Center’s public education programs.
Income from the public education is temporarily restricted. This fund’s permanently restricted net assets
totaled $464,000 at December 31, 2010 and 2009.
In 2010, the Center adopted NYPMIFA. Accordingly, the Center classifies as permanently restricted net
assets (a) the original value of gifts donated to the permanent endowment, (b) the original value of
subsequent gifts to the permanent endowment and (c) accumulations to the permanent endowment made in
accordance with the direction of the applicable donor gift instrument at the time the accumulation is added
to the fund. Accounting Standards Codification (ASC) No. 958-205, Not-for-Profit Entities, requires the
portion of a donor-restricted endowment fund that is not classified as permanently restricted to be
classified as temporarily restricted net assets until appropriated for expenditure. The impact of the standard
is a $1,034,746 reclassification from unrestricted to temporarily restricted net assets and is reflected in the
2010 statements of changes in unrestricted net assets and changes in net assets.
12
(Continued)
THE FOUNDATION CENTER
Notes to Financial Statements
December 31, 2010 and 2009
The composition of the Center’s donor-restricted endowment by net asset class and reconciliation of the
beginning and ending balances at December 31, 2010 and 2009 are as follows:
(7)
Balance at January 1, 2010
Investment return
Distributions
Net appreciation of investments
Net asset reclassification for
adoption of ASC 958-205
$
Balance at December 31, 2010
$
Unrestricted
Temporarily
restricted
806,067
19,569
(37,986)
247,096
—
19,940
(19,940)
—
1,714,000
—
—
—
(1,034,746)
1,034,746
—
—
1,034,746
1,714,000
2,748,746
Unrestricted
Temporarily
restricted
Permanently
restricted
Total
—
Permanently
restricted
Total
2,520,067
39,509
(57,926)
247,096
Balance at January 1, 2009
Investment return
Contribution
Distributions
Net appreciation of investments
$
323,852 27,845 — (51,769) 506,139 — 29,687 — (29,687) — 1,714,000 — — — — 2,037,852 57,532 — (81,456) 506,139 Balance at December 31, 2009
$
806,067 — 1,714,000 2,520,067 Pension Plan
The Center has a noncontributory, defined contribution group annuity pension plan, which provides for the
option of voluntary employee contributions and covers all employees who meet minimum age and service
requirements. Pension costs are funded when accrued, and benefits vest on contribution to the plan. Total
cost of the plan for the years ended December 31, 2010 and 2009 amounted to approximately $907,000 and
$993,000, respectively.
13
(Continued)
THE FOUNDATION CENTER
Notes to Financial Statements
December 31, 2010 and 2009
(8)
Lease Commitments
The Center occupies office facilities in New York City, Washington, D.C., Cleveland, San Francisco, and
Atlanta under various lease agreements that expire at various dates through 2019. Beginning in 2005, the
Center subleases part of its New York City facility. Future minimum annual rental payments under the
lease agreements, net of sublease income, are as follows:
Amount
Year ending December 31:
2011
2012
2013
2014
2015
Thereafter
$
1,938,376 1,930,355 2,009,808 2,033,520 1,320,222 1,101,328 $
10,333,609 In connection with the New York lease, the Center maintained a letter of credit in the amount of $300,000
and $400,000 as of December 31, 2010 and 2009, respectively. There were no amounts outstanding under
this letter of credit during the year or at December 31, 2010 and 2009. Rent expense was approximately
$2,114,000 and $1,993,000 in 2010 and 2009, respectively.
(9)
Subsequent Events
In connection with the preparation of the financial statements and in accordance with ASC
Subtopic 855-10, Subsequent Events, the Center evaluated subsequent events after the balance sheet date of
December 31, 2010 through April 18, 2011, which was the date the financial statements were available to
be issued and determined that there were no matters that are required to be disclosed.
14