Sample Notes to the Financial Statements
Note: Most of the following sample disclosures will apply to all local councils. Some will not. Please
ensure that your council’s footnote disclosures are clearly representative of its unique financial
situation.
LOCAL COUNCIL INC., BOY SCOUTS OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2012 and 2011
NOTE 1—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Organization
The Local Council, Boy Scouts of America (the “Council”) operates in XXXXXXX,
Texas, including the counties of XXXXX, XXXX, XXXXXXX, and XXXXXXXXX XXXXX. The
Council has five camping facilities. The Trust Fund was established for the benefit of the Council. The
Council is a not-for-profit organization devoted to promoting, within the territory covered by the charter
from time to time granted it by the Boy Scouts of America and in accordance with the Bylaws, and Rules
and Regulations of the Boy Scouts of America, the Scouting program of promoting the ability of boys and
young men and women to do things for themselves and others, training them in Scoutcraft, and teaching
them patriotism, courage, self-reliance, and kindred virtues, using the methods which are now in common
use by the Boy Scouts of America.
The Council’s programs are classified as follows:
Tiger Cubs—One-year, family-oriented program for a group of teams, each consisting of
a first-grade (or 7-year-old) boy and an adult partner (usually a parent). A Tiger Cub den is part of the
Cub Scout pack.
Cub Scouts—Family- and community-centered approach to learning citizenship,
compassion, and courage through service projects, ceremonies, games, and other activities promoting
character development and physical fitness.
Boy Scouting—With the Scout Oath and Scout Law as guides, and the support of parents
and religious and neighborhood organizations, Scouts develop an awareness and appreciation of their role
in their community and become well-rounded young men through the advancement of the program.
Scouts progress in rank through achievements, gain additional knowledge and responsibilities, and earn
merit badges that introduce a lifelong hobby or a rewarding career.
Varsity Scouting—Program for young men ages 14–17 that provides options for those
who are looking for rugged high adventure or challenging sporting activities and still want to be a part of
a Scouting program that offers the advancement opportunities and values of the Boy Scouts of America.
There are five fields of emphasis, including advancement, high-adventure sports, personal development,
service, and special programs and events.
Venturing—Provides experiences to help young men and women, ages 14—or 13 with
completion of the eighth grade—through 20, become mature, responsible, caring adults. Young teens
learn leadership skills and participate in challenging outdoor activities, including having access to Boy
Scout camping properties, a recognition program, and Youth Protection training.
LOCAL COUNCIL INC., BOY SCOUTS OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 2012 and 2011
NOTE 1—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Learning for Life—Program to enable young people to become responsible individuals
by teaching positive character traits, career development, leadership, and life skills so they can make
ethical choices and achieve their full potential.
The Council’s website address is ____________________________.
Principles of Consolidation
The Council has voting control over and an economic interest in the Trust Fund, which
results in the accounts of the Trust Fund being consolidated with those of the Council in the
accompanying consolidated financial statements. All intercompany balances and transactions have been
eliminated in the consolidation. The Council and the Trust Fund are hereinafter collectively referred to as
the “Organization.”
Fund Accounting
To ensure observance of limitations and restrictions placed on the use of available
resources, the accounts of the Organization are maintained in accordance with the principles of fund
accounting. Under such principles, resources for various purposes are classified for accounting and
reporting purposes into funds that are in accordance with specified activities or objectives.
The Organization also prepares financial statements in accordance with the Financial
Accounting Standards Board (FASB) standards for not-for-profit organizations (ASC 958-205 and
subsections). Under these standards, the Organization is required to report information regarding its
financial position and activities according to three classes of net assets: unrestricted net assets,
temporarily restricted net assets, and permanently restricted net assets. In addition, the Organization is
required to present a statement of cash flows.
Contributions
Contributions receivable are recognized upon notification of a donor’s unconditional
promise to give to the Organization. Unconditional promises to give that are expected to be collected in
less than one year are measured at net realizable value because that amount results in a reasonable
estimate of fair value in accordance with the Contributions Received section of the FASB ASC.
Contributions that are restricted by the donor are reported as increases in unrestricted net assets if the
restrictions expire in the fiscal year in which the contributions are recognized. All other donor-restricted
contributions are reported as increases in temporarily or permanently restricted net assets, depending on
the nature of the restrictions. When a donor restriction expires, that is, when a stipulated time restriction
ends or purpose restriction is accomplished, temporarily restricted net assets are reclassified to
unrestricted net assets and are reported in the consolidated statement of changes in net assets as assets
released from restrictions.
LOCAL COUNCIL INC., BOY SCOUTS OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 2012 and 2011
NOTE 1—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Donated Materials and Services
Donated land, buildings, equipment, investments, and other noncash donations are
recorded as contributions at their fair market value at their date of donation. The Organization reports the
donations as unrestricted support, unless explicit donor stipulations specify how the donated assets must
be used. Gifts of long-lived assets with explicit restrictions that specify how the assets must be used, and
gifts of cash or other assets that must be used to acquire long-lived assets are reported as restricted
support. Absent explicit donor stipulations about how long those long-lived assets must be maintained,
the Organization reports expirations of donor restrictions when the donated or acquired long-lived assets
are placed in service.
Donated services that do not require specialized skills or enhance nonfinancial assets are
not recorded in the accompanying consolidated financial statements because no objective basis is
available to measure the value of such services. A substantial number of volunteers have donated
significant amounts of their time to the Organization’s program services and its fundraising campaigns,
the value of which is not recorded in the accompanying consolidated financial statements.
Advertising
Advertising costs are charged to operations in the period in which the advertisement is
placed. Advertising for 2012 and 2011 amounted to approximately $XXX and $XXX, respectively.
Advertising costs for 2012 include a contribution totaling approximately $XXX for advertising services
performed for the Organization.
Investments
Investments consist primarily of assets invested in marketable equity and debt securities,
alternative investments, commodities, and money-market accounts. The Organization accounts for
investments in accordance with the FASB standard for investments held by not-for-profit organizations
(ASC 958-320 and subsections). This standard requires that investments in equity securities with readily
determinable fair values and all investments in debt securities be measured at fair value in the
consolidated Statement of Financial Position. Fair value of marketable equity and debt securities is based
on quoted market prices. Alternative investments are stated at the fair value of their underlying assets and
allocated to the investors in proportion to the investor’s ownership percentage. The realized and
unrealized gain or loss on investments is reflected in the consolidated Statement of Changes in Net
Assets.
Investments are exposed to various risks such as significant world events, interest rate,
credit, and overall market volatility risks. Due to the level of risk associated with certain investment
securities, it is reasonably possible that changes in the fair value of investments will occur in the near
term and that such changes could materially affect the amounts reported in the consolidated Statement of
Financial Position. See also Notes 6 and 7.
LOCAL COUNCIL INC., BOY SCOUTS OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 2012 and 2011
NOTE 1—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Investment Policy
The Council’s investment policy intends for the Council to invest in assets that would
produce results exceeding the investment’s purchase price and incur a significant yield of return, while
assuming a moderate level of investment risk. The Council expects its Endowment Fund, over time, to
provide a reasonable rate of return. To satisfy the long-term rate-of-return objective, the Council relies on
a total return strategy in which investment returns are achieved through both capital appreciation (realized
and unrealized) and current yield (interest and dividends). The Council targets a diversified asset
allocation that places a greater emphasis on marketable equity and debt securities and money-market
accounts to achieve its long-term return objectives within prudent risk constraints.
Spending Policy
On September 15, 2010, the board of directors (through the executive committee)
approved an endowment spending policy. The policy defines the total funds available from the
Endowment Fund in a given year (the distributable income) as up to 5 percent of the Endowment Fund’s
average market value over the preceding three years. The Endowment Fund is to have returns greater than
the proposed distribution plus management and trustee fees. If the market value of the Endowment Fund
falls to or below the amount of the fund’s donor-restricted gifts, then the spending policy will be amended
in accordance with the guidelines not to exceed the actual earnings of the fund. The executive committee
(subject to the board of directors’ approval) may amend this spending policy.
Accounts Receivable
Accounts receivable are recorded primarily for product sales and are reported at net
realizable value if the amounts are due within one year. An allowance for doubtful accounts is based on
an analysis of expected collection rates determined from experience. No allowance for doubtful accounts
was considered necessary as of December 31, 2012, and 2011.
Interfund Loans
The interfund loans at December 31, 2012, result from the Operating Fund making
advances of surplus cash funds to the Capital Fund for operating purposes. In March 2013, the amounts
due from the Capital Fund were relieved by the Operating Fund, thus satisfying the obligation.
Inventory
Inventory consists of Scouting and other items available for resale and is stated at the
lower of cost or market. Cost is determined using the average method.
LOCAL COUNCIL INC., BOY SCOUTS OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 2012 and 2011
NOTE 1—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Land, Buildings, and Equipment
Land, buildings, and equipment acquired prior to January 1, 1973, are stated at appraised
values as established by officials of the Council. Land, buildings, and equipment purchased subsequent to
January 1, 1973, are recorded at cost. Donated land, buildings, and equipment are recorded at the
approximate fair market value of the asset on the date of donation. Improvements or betterments of a
permanent nature are capitalized. Expenditures for maintenance and repairs are charged to expense as
incurred. The costs of assets retired or otherwise disposed of, and the related accumulated depreciation,
are eliminated from the accounts in the year of disposal. Gains or losses resulting from property disposals
are credited or charged to operations currently. Land, buildings, and equipment are depreciated using the
straight-line method over the estimated useful lives of the assets.
Construction-in-progress represents costs incurred on the construction of assets that have
not been completed or placed in service as of the end of the year.
Estimates
The preparation of the consolidated financial statements in conformity with accounting
principles generally accepted in the United States requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the consolidated financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ from those estimates. Management
believes that these estimates and assumptions provide a reasonable basis for the fair presentation of the
consolidated financial statements.
Functional Allocation of Expenses
The costs of providing the various programs and supporting services have been
summarized on a functional basis in the consolidated statement of functional expenses. Costs that are not
directly associated with providing specific services have been allocated based upon the relative time spent
by employees of the Council providing those services. In accordance with the policy of the National
Council of the Boy Scouts of America (the “National Council”), the payments of the charter and national
service fees to the National Council are not allocated as functional expenses.
Reclassifications
Certain reclassifications have been made to the 2011 summarized financial statement
information to conform to the current-year presentation. These reclassifications had no effect on the
increase in net assets for 2011.
LOCAL COUNCIL INC., BOY SCOUTS OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 2012 and 2011
NOTE 1—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Income Taxes
The Council is a not-for-profit organization that is exempt from income taxes under
Section 501(c)(3) of the Internal Revenue Code and comparable state law as a charitable organization,
whereby only unrelated business income, as defined by Section 509(a)(1) of the Code is subject to federal
income tax. The Council currently has no unrelated business income. Accordingly, no provision for
income taxes has been recorded. The Council has adopted the provisions of the FASB standard on
Accounting for Uncertainty in Income Taxes (ASC 740-10-25). The Council does not believe there are
any material uncertain tax positions and, accordingly, it will not recognize any liability for unrecognized
tax benefits. For the year ended December 31, 2012, there were no interest or penalties recorded or
included in its consolidated financial statements.
Recent Accounting Pronouncements
New accounting standards are now issued by the Financial Accounting Standards Board
(FASB) through Accounting Standards Updates (ASUs) to the FASB Accounting Standards Codification
(ASC). The FASB does not consider the updates authoritative on a standalone basis; they become
authoritative when incorporated into the ASC. The ASUs will be in a six-digit, two-segment format
(20YY-XX) where YY is the year issued and XX is the sequential number of each update. So, ASU 201201 would be the first update issued in 2012, and so forth.
Compensation—Retirement Benefits—Multiemployer Plans (Subtopic 715—80),
Disclosures about an Employer’s Participation in a Multiemployer Plan (“ASU 2011-09”)—Issued in
September 2011, this ASU requires expanded disclosures for certain defined benefit pension and other
postretirement plans. ASU 2011-09 is effective for local councils in 2012 with early adoption permitted.
The Council adopted the provisions of this ASU on October 1, 2011, which did not materially affect the
Council’s financial statements (see Note 11).
Fair Value Measurement (Topic 820), Amendments to Achieve Common Fair Value
Measurement and Disclosure Requirements in U.S. GAAP and IFRSs (“ASU 2011-04”)—In May 2011,
the FASB issued ASU No. 2011-04, which amended ASC 820, Fair Value Measurement, to change the
wording used to describe many of the requirements in U.S. GAAP for measuring fair value and for
disclosing information about fair value measurements. The adoption of ASU 2011-04 became effective
for local councils starting in 2012 and had no material effect on the Council’s financial statements (see
Note 7).
Improving Disclosures about Fair Value Measurements (“ASU 2010-06”)—In January
2010, the FASB issued ASU No. 2010-06, which amended ASC 820 to require new disclosures related to
transfers in and out of Level 1 and Level 2 fair value measurements, including reasons for the transfers,
and to require new disclosures related to activity in Level 3 fair value measurements. The new
disclosures and clarifications of existing disclosures were effective for interim and annual reporting
periods beginning after December 15, 2009, except for the disclosures about purchases, sales, issuances,
and settlements in the roll forward of activity in Level 3 fair value measurements. Those disclosures were
effective for the Council starting in 2011(see Note 7).
LOCAL COUNCIL INC., BOY SCOUTS OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 2012 and 2011
NOTE 2—ENDOWMENT FUND
The Council’s Endowment Fund includes donor-restricted endowment funds. As required
by accounting principles generally accepted in the United States, net assets associated with endowment
funds are classified and reported based on the existence or absence of donor-imposed restrictions.
Unrestricted net assets, identified by the Council’s board of directors to be used for future investment and
growth, are included in unrestricted net assets—board-designated.
The Council has interpreted the State Prudent Management of Institutional Funds Act (“SPMIFA”) as
requiring the preservation of the original gift amount of the donor-restricted endowment funds absent
explicit donor stipulations to the contrary. As a result of this interpretation, the Council classifies as
permanently restricted net assets: (a) the original value of gifts donated to the permanent endowment, (b)
the original value of subsequent gifts to the permanent endowment, and (c) accumulations to the
permanent endowment made in accordance with the direction of the applicable donor gift instrument at
the time the accumulation is added to the fund. The remaining portion of the donor-restricted endowment
fund that is not classified in permanently restricted net assets is classified as temporarily restricted net
assets until those amounts are appropriated for expenditure by the Council in a manner consistent with the
standard of prudence prescribed by SPMIFA. In accordance with SPMIFA, the Council considers the
following factors in making a determination to appropriate or accumulate donor-restricted endowment
funds:
(1)
(2)
(3)
(4)
(5)
(6)
(7)
The duration and preservation of the fund
The purposes of the Council and the donor-restricted endowment fund
General economic conditions
The possible effect of inflation and deflation
The expected total return from income and the appreciation of investments
Other resources of the Council
The investment policies of the Council
LOCAL COUNCIL INC., BOY SCOUTS OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 2012 and 2011
NOTE 2—ENDOWMENT FUND (CONTINUED)
Changes in the endowment net assets (deficit) for the years ended December 31, 2012 and 2011,
are as follows:
Unrestricted— Unrestricted—
Non-BoardBoardDesignated
Designated
Endowment Fund
net assets,
December 31, 2010
$
XXX
$ XXX
Net asset
reclassification based
on change in law
XXX
Endowment Fund, after
reclassification
Temporarily
Restricted
Total
XXX
$ XXX
$ XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
Investment return
XXX
XXX
XXX
XXX
XXX
Contributions
XXX
XXX
XXX
XXX
XXX
Other revenue
XXX
XXX
XXX
XXX
XXX
Appropriation of
endowment assets
for expenditure
$
XXX
$
XXX
$
Permanently
Restricted
$
XXX
$
XXX
$
XXX
Endowment Fund
net assets,
December 31, 2011
XXX
XXX
XXX
XXX
XXX
Investment return
XXX
XXX
XXX
XXX
XXX
Contributions
Appropriation of
endowment assets
for expenditure
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
$ XXX
Endowment Fund
net assets (deficit),
December 31, 2012
$
XXX
$
XXX
$
$
XXX
LOCAL COUNCIL INC., BOY SCOUTS OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 2012 and 2011
NOTE 2—ENDOWMENT FUND (CONTINUED)
From time to time, the fair value of assets associated with individual donor-restricted endowment
funds may fall below the level the donor or SPMIFA requires the Council to retain as permanently
restricted. Deficiencies of this nature result from unfavorable market fluctuations and would be included
in unrestricted net assets. As of December 31, 2012, total deficiencies are $XXX. There were no
deficiencies at December 31, 2011.
NOTE 3—NET ASSETS AND RESTRICTIONS
Substantially all of the restrictions on net assets at the end of 2012 are related to funds raised
through the ongoing capital and endowment campaigns to help prepare the Council for future Scouting
needs, charitable trusts of which the Council is a beneficiary, and United Way Services funding for the
next year.
Temporarily restricted net assets are available for the following purposes at December 31, 2012 and 2011:
2012
2011
Endowment funds subject to a time restriction
by explicit donor stipulation or by SPMIFA:
With purpose restrictions:
gift
With purpose restrictions: Other
Capital campaign
United Way
General operations
$
XXX
XXX
XXX
XXX
XXX
$
XXX
$
XXX
XXX
XXX
XXX
XXX
$
XXX
Permanently restricted net assets consist of the following at December 31, 2012 and 2011:
Permanently restricted endowment gifts required
to be retained either by explicit donor stipulations
or by SPMIFA:
General endowments
Charitable lead and remainder trusts (see Note 8)
Cash surrender value of life insurance
2012
2011
$ XXX
XXX
XXX
$
XXX
XXX
XXX
$ XXX
$
XXX
LOCAL COUNCIL INC., BOY SCOUTS OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 2012 and 2011
NOTE 4—NET ASSETS RELEASED FROM RESTRICTIONS
Net assets were released from donor restrictions during 2012 and 2011 by incurring expenses
satisfying the restricted purposes or by the occurrence of other events specified by donors. Net assets
released were donated by the following:
2012
Capital campaign
United Way
Friends of Scouting
Foundations
Camperships
Other direct contributions
$
2011
XXX
XXX
XXX
XXX
XXX
XXX
$ XXX
XXX
XXX
XXX
XXX
XXX
$ XXX
$ XXX
NOTE 5—CONTRIBUTIONS RECEIVABLE
Contributions receivable at December 31, 2012 and 2011, consist of the following:
2012
United Way
Friends of Scouting
Foundations
Other unrestricted promises
Restricted to capital campaign
Restricted to Endowment Fund
Total
Contributions receivable, due in:
Less than one year
$
XXX
XXX
XXX
XXX
XXX
XXX
2011
$
XXX
XXX
XXX
XXX
XXX
XXX
$ XXX
$
XXX
$ XXX
$
XXX
LOCAL COUNCIL INC., BOY SCOUTS OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 2012 and 2011
NOTE 5—CONTRIBUTIONS RECEIVABLE (CONTINUED)
Allocations from United Way of $XXX and $XXX (designated for general operating purposes for
the first three months of 2012 and 2011, respectively) have been recorded in the consolidated financial
statements since the amounts were pledged in 2012 and 2011, respectively. The Council has been notified
of an additional allocation from United Way in 2013 of approximately $XXX. The revenue from the
additional allocation will be recorded in 2013 when the firm commitment is received.
NOTE 6—INVESTMENTS
Investments at December 31, 2012 and 2011 are composed of the following:
2012
Fair
Value
Cost
Corporate common and preferred stocks
Corporate and other bonds
U.S. government obligations
Commodities
Hedge funds
Money market
$
XXX
XXX
XXX
XXX
XXX
XXX
$ XXX
2011
$
XXX
XXX
XXX
XXX
XXX
XXX
Fair
Value
Cost
$
$ XXX
XXX
XXX
XXX
XXX
XXX
XXX
$
$ XXX
XXX
XXX
XXX
XXX
XXX
XXX
$
XXX
The following schedule summarizes the investment return in the consolidated statement of changes in net
assets for the years ended December 31, 2012 and 2011:
2012
Interest and dividend income
Net realized and unrealized gains (losses)
Investment expenses
$
XXX
XXX
(XXX)
2011
$
$ XXX
XXX
XXX
(XXX)
$
XXX
The above investment return is classified in the 2012 and 2011 consolidated statement of changes
in net assets as follows:
2012
2011
Unrestricted
Temporarily restricted
$ XXX
XXX
$ XXX
$
XXX
XXX
$ XXX
LOCAL COUNCIL INC., BOY SCOUTS OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 2012 and 2011
NOTE 6—INVESTMENTS (CONTINUED)
Income from interest and dividends on investments and realized and unrealized gains and losses
on the sales of investments (“Investment Income, Gains, and Losses”) are recorded initially in the
Endowment Fund. Distributions of Investment Income, Gains, and Losses from the Endowment Fund are
recorded as income by the Operating and Capital Funds in the period in which the distributions are made
in accordance with the Council’s spending policy (Note 1). For 2012 and 2011, investment expenses were
$XXX and $XXX and are netted against investment return in the consolidated statement of functional
expenses (see schedule on previous page).
NOTE 7—SUMMARY OF FAIR VALUE EXPOSURE
The FASB Fair Value Measurement standard clarifies the definition of fair value for financial
reporting, establishes a framework for measuring fair value, and requires additional disclosure about the
use of fair value measurements in an effort to make the measurement of fair value more consistent and
comparable. The Council has adopted this standard for its financial assets and liabilities measured on a
recurring and nonrecurring basis (ASC 820-10).
Fair Value Measurement defines fair value as the amount that would be received from
the sale of an asset or paid for the transfer of a liability in an orderly transaction between market
participants, i.e., an exit price. To estimate an exit price, a three-tier hierarchy is used to prioritize the
inputs:
Level 1: Quoted prices in active markets for identical securities.
Corporate common and preferred stocks—Valued at the closing market price on the stock
exchange where they are traded (primarily the New York Stock Exchange).
Money market and savings accounts—Composed of funds invested in savings accounts at various
financial institutions and a money market mutual fund. Funds invested in savings accounts are
valued based on the value of deposited funds and net investment earnings less withdrawals and
fees. The money market mutual fund consists primarily of domestic commercial paper and other
cash management instruments, such as repurchase agreements and master notes, U.S. government
and corporate obligations and other securities of foreign issuers. The fund seeks to maintain a
stable net asset value ("NAV") of $1.
Level 2: Other significant observable inputs (including quoted prices for similar securities,
interest rates, prepayment spreads, credit risk, etc.).
The Investment Fund for Foundations ("TIFF") Multi-Asset Fund ("MAF")—Managed by TIFF
Advisory Services, Inc., who serves as the MAF's investment adviser, and is responsible for the
selection of money managers and other vendors, and for the MAF's asset allocation. The fund seeks
to achieve a total return that exceeds inflation plus 5 percent per year by employing a globally
diversified portfolio.
LOCAL COUNCIL INC., BOY SCOUTS OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 2012 and 2011
NOTE 7—SUMMARY OF FAIR VALUE EXPOSURE (CONTINUED)
Level 2 (continued): At December 31, 2012 and 2011, the MAF held the following investments:
Common stocks
U.S. Treasuries
Private investment funds
Repurchase agreements
2012
XX%
XX%
XX%
XX%
100%
2011
XX%
XX%
XX%
XX%
100%
Securities listed on a securities exchange or traded on the National Association of Securities
Dealers National Market System ("NASDAQ”) are valued at their closing price or at the most
recently quoted bid price if there is not a closing price. Debt securities and over-the-counter stocks
not listed on the NASDAQ are valued at prices that reflect a broker/dealer-supplied valuation or are
obtained from independent pricing services. If the available prices are deemed unreliable, the
valuation is based on fundamental valuation methods, which may include the analysis of the effect
of any restrictions on the resale of the security, industry analysis and trends, significant changes in
the issuer's financial position, and any other event that could have a significant effect on the value
of the security. Short-term debt securities with a maturity of 60 days or less are valued at amortized
cost, and those with a maturity of over 60 days are valued at market value. Repurchase agreements
are valued at cost. Private investment funds are valued either by management of the private
investment fund or is based on the most recent estimated value provided by the management of the
private investment fund plus all other relevant information reasonably available at the time of
valuation, including total returns of indices or exchange-traded funds that track markets to which
the private investment fund may be exposed. At December 31, 2012 and 2011, all MAF
investments were determined by its management to be Level 1 or 2, with the exception of the
private investment funds, which were determined to be Level 3. The NAV per share of the MAF is
determined by dividing the assets of MAF, less its liabilities, by the number of outstanding shares
of the MAF. At December 31, 2012 and 2011, the NAV is $XX.XX and $XX.XX, respectively.
BSA Commingled Endowment Fund, LP ("BSA Fund'')—Investments held by the BSA Fund are
valued at fair value based on the closing price for securities listed on a securities exchange, the
closing bid or ask price for over-the-counter securities not listed on a securities exchange, or at cost
or obtained from an independent pricing service for securities not listed or traded on any exchange
or on the over-the-counter market. The
custodian of the investments in the BSA Fund also has the ability to determine the fair value of
securities not listed or traded on any exchange or on the over-the-counter market based on available
information. The BSA Fund is valued at the number of units held by the Council and the Fund's
unit value.
LOCAL COUNCIL INC., BOY SCOUTS OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 2012 and 2011
NOTE 7—SUMMARY OF FAIR VALUE EXPOSURE (CONTINUED)
Level 3: Significant unobservable inputs (including the Council’s own assumptions in
determining the fair value of investments).
XYZ Asset Allocation, LP (“XYZ Fund”)—Investments held by the XYZ Fund are in private equity
investments and valued at fair value based on the best information available. Securities listed on a
securities exchange are valued at the closing price less a discount to reflect legal restrictions
associated with the securities, if any. Private interests are valued based on a methodology that
begins with the most recent information available from the general partner of the underlying fund
or the lead investor of a direct co-investment and considers subsequent transactions, such as
drawdowns or distributions, as well as other reliable information that reports or indicates valuation
changes, including realizations and other portfolio company events. Generally, the private equity
fund investments have a defined term with no right to withdraw. The XYZ Fund’s private equity
investments are diversified in large-cap buyout, mid-cap buyout, special situations, venture capital,
secondary holding, and investment holding. The XYZ Fund is valued at the Council’s ownership
percentage in the Fund's underlying net assets
Alternative investments—Composed of pooled investment funds. Acme Offshore Long/Short Fund,
Ltd., invests in hedge funds. The individual funds are valued at the NAV of shares held by the
Council. NAV is based on the value of the underlying assets owned by the fund, minus its
liabilities, and then divided by the number of shares outstanding. The NAV is determined by the
trust company of the individual investment.
The inputs and methodology used for valuing the Council’s financial assets and liabilities are not
indicators of the risks associated with those assets and liabilities.
The following tables provide fair value measurement information for financial assets and
liabilities measured at fair value on a recurring basis as of December 31, 2012 and 2011:
Description
Corporate common
stocksMulti-Asset Fund
TIFF
BSA Commingled Fund
XYZ Asset Allocation
Fund
Pooled investment funds
Money market accounts
Total investments
$
Level 1
XXX
2012
Level 2
$
Level 3
$
$
XXX
XXX
XXX
XXX
$
XXX
XXX
$
XXX
$
XXX
$
Total
XXX
XXX
XXX
XXX
XXX
XXX
LOCAL COUNCIL INC., BOY SCOUTS OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 2012 and 2011
NOTE 7—SUMMARY OF FAIR VALUE EXPOSURE (CONTINUED)
Fair value measurement information for financial assets and liabilities measured at fair value on a
recurring basis as of December 31, 2012 and 2011 (continued):
Description
Corporate common
stocksMulti-Asset Fund
TIFF
BSA Commingled Fund
XYZ Asset Allocation
Fund investment funds
Pooled
Money market accounts
Total investments
$
Level 1
XXX
2011
Level 2
$
Level 3
$
$
XXX
XXX
XXX
XXX
$
XXX
XXX
$
XXX
$
XXX
$
Total
XXX
XXX
XXX
XXX
XXX
XXX
Effective for 2011, the FASB Accounting Standards Update, Improving Disclosures about Fair
Value Measurements, requires that, in the reconciliation for fair value measurements using significant
unobservable inputs (Level 3), a reporting entity should present separately information about purchases,
sales, issuances, and settlements on a gross basis rather than as one net number (ASU 2010-06). The
following table reconciles the Council’s assets and liabilities classified as Level 3 measurements during
the years ended December 31, 2012 and 2011, on such a basis:
Balance, beginning of year
Purchases, issuances, and settlements
Net realized and unrealized losses included in earnings
Balance, end of year
Net unrealized gains (losses) on Level 3 securities
Held at end of year
Investments
2012
$XXX
(XXX)
XXX
$XXX
$(XX,XXX)
2011
$XXX
(XXX)
XXX
$XXX
$XX,XXX
LOCAL COUNCIL INC., BOY SCOUTS OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 2012 and 2011
NOTE 8—LAND, BUILDINGS, AND EQUIPMENT
Land, buildings, and equipment at December 31, 2012 and 2011, consist of the following:
Useful Lives
Land
Building, structures, and land improvements
Furniture, fixtures, and equipment
Construction in progress
Less: Accumulated depreciation
5-30 years
2-10 years
2012
2011
$ XXX
XXX
XXX
XXX
XXX
XXX
$
XXX
XXX
XXX
XXX
XXX
XXX
$ XXX
$
XXX
NOTE 9—LINE OF CREDIT
In December 2010, the Council entered into a $XXX line of credit agreement with a bank. The
line includes interest payable quarterly at prime less 1 percent, principal due in September 2013. At
December 31, 2012 and 2011, there were no outstanding balances on the line.
NOTE 10—CREDIT RISK
Financial instruments that potentially subject the Council to credit risk consist principally of cash
at financial institutions and investments. At times, the balances in cash accounts may be in excess of
FDIC insurance limits. Management continuously monitors the Council’s balances at financial
institutions and invests excess operating cash in short-term investments.
NOTE 11—EMPLOYEE BENEFIT PLANS
Retirement Plan
The National Council has a qualified defined benefit pension plan (the “Plan”) administered at the
national office that covers employees of the National Council and local councils, including the Local
Council, Inc. The plan name is the Boy Scouts of America Master Pension Trust - Boy Scouts of America
Retirement Plan for Employees and covers all employees who have completed one year of service and
who have agreed to make contributions. Eligible employees contribute 2 percent of compensation, and the
council contributes an additional 7 percent to the plan. Pension expense (excluding the contributions
made by employees) was approximately $XXX and $XXX in 2012 and 2011, respectively, and covered
current service cost. The actuarial information for the plan as of February 1, 2012, indicates that it is in
compliance with ERISA regulations regarding funding.
LOCAL COUNCIL INC., BOY SCOUTS OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 2012 and 2011
NOTE 11—EMPLOYEE BENEFIT PLANS (CONTINUED)
Retirement Plan (continued)
Thrift Plan
The Council has established a Thrift Plan covering substantially all of the employees of
the Council. Participants in the Thrift Plan may elect to make voluntary before-tax contributions based on
a percentage of their pay, subject to certain limitations set forth in the Internal Revenue Code of 1986, as
amended. The Council has elected to match employee contributions to the Thrift Plan up to 50 percent of
contributions from each participant, limited to 3 percent of each employee’s gross pay. The Council
contributed approximately $XXX and $XXX, respectively, to the Thrift Plan in 2012 and 2011,
respectively.
Health Care Plan
The Council’s employees participate in a health care plan provided by the National Council. The
Council pays a portion of the cost for the employees, and the employees pay the remaining portion and
the cost for any of their dependents participating in the plan. During the years ended December 31, 2012
and 2011, the Council remitted approximately $XXX and $XXX, respectively, on behalf of its employees
to the National Council related to the health care plan.
NOTE 13—SCOUT SHOP (If your council has a national Scout shop)
The National Council operates a Scout shop within the XXXXXX area. The National Council
manages the Scout shop and pays the Council an 8 percent commission on gross sales up to $XXX, and
13 percent on sales in excess of $XXX. The commissions earned (before expenses) by the Council during
2012 and 2011 amounted to approximately $XXX and $XXX, respectively, which are included in other
revenue in the consolidated statement of changes in net assets.
NOTE 14—LEASE COMMITMENTS
The Council accounts for the lease of office equipment and a Scout shop as operating leases.
Total rental expense amounted to approximately $XXX and $XXX in 2012 and 2011. These leases will
expire on various dates through 2014. The following is a schedule of future minimum lease payments
under these leases:
For the Year Ending December 31:
2013
2014
$
XXX
XXX
$ XXX
LOCAL COUNCIL INC., BOY SCOUTS OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 2012 and 2011
NOTE 15—RELATED-PARTY TRANSACTIONS
A Council officer is employed as president of a local bank where the Council maintains
significant account balances. As of December 31, 2012 and 2011, total Council deposits with the bank
were $X,XXX,XXX and $X,XXX,XXX, respectively.
NOTE 16— PRIOR-PERIOD INFORMATION
The consolidated financial statements include certain prior-year summarized comparative
information in total. Such information does not include sufficient detail to constitute a presentation in
conformity with accounting principles generally accepted in the United States. Accordingly, such
information should be read in conjunction with the Council’s consolidated financial statements for the
year ended December 31, 2011, from which the summarized information was derived.
NOTE 17— SUBSEQUENT EVENTS
These consolidated financial statements considered subsequent events through May 19, 2013, the
date the financial statements were available to be issued.