American Brotherhood for the Blind
T/A American Action Fund for Blind Children and Adults and
T/A Blind Children and Adults Action Fund of America
Financial Statements
December 31, 2014
Table of Contents
Independent Auditor's Report ................................................................................2
Financial Statements
Statement of Financial Position .............................................................................4
Statements of Activities .........................................................................................5
Statement of Functional Expenses .........................................................................7
Statement of Cash Flows........................................................................................9
Notes to Financial Statements ..............................................................................10
See Independent Auditor's Report
1
Independent Auditor's Report
To the Board of Directors and Officers of American Brotherhood for the Blind
T/A American Action Fund for Blind Children and Adults and
T/A Blind Children and Adults Action Fund of America
We have audited the accompanying financial statements of American Brotherhood
for the Blind T/A American Action Fund for Blind Children and Adults and T/A
Blind Children and Adults Action Fund of America (a nonprofit organization),
which comprise the statement of financial position as of December 31, 2014, and
the related statements of activities, functional expenses 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. 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 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.
See Independent Auditor's Report
2
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 American Brotherhood for the Blind
T/A American Action Fund for Blind Children and Adults and T/A Blind Children
and Adults Action Fund of America as of December 31, 2014, and the changes in
its net assets and its cash flows for the year then ended in accordance with
accounting principles generally accepted in the United States of America.
Rosen, Sapperstein & Friedlander, Chartered
Certified Public Accountants
March 20, 2015
See Independent Auditor's Report
3
American Brotherhood for the Blind
T/A American Action Fund for Blind Children and Adults and
T/A Blind Children and Adults Action Fund of America
Statement of Financial Position
December 31, 2014
ASSETS
Cash and cash equivalents (Note 1)
Prepaid expenses
Notes and other receivables (Notes 1 and 2)
Investments (Notes 1, 5 and 6)
Investment - Trust (Notes 1, 3 and 6)
Other investments - life insurance (Notes 1 and 6)
Property and equipment - net (Notes 1 and 4)
TOTAL ASSETS
$2,028,895
74,154
249,168
23,601,511
354,748
1,065,244
222,166
$27,595,886
LIABILITIES AND NET ASSETS
LIABILITIES:
Accounts payable and accrued expenses
Accrued annuity benefit (Notes 1, 3 and 6)
TOTAL LIABILITIES
NET ASSETS (NOTE 1)
Unrestricted
Temporarily restricted
Permanently restricted
TOTAL NET ASSETS
TOTAL LIABILITIES AND NET ASSETS
See Independent Auditor's Report
4
$32,297
116,843
149,140
27,139,858
206,888
100,000
27,446,746
$27,595,886
American Brotherhood for the Blind
T/A American Action Fund for Blind Children and Adults and
T/A Blind Children and Adults Action Fund of America
Statements of Activities
For the Year Ended December 31, 2014
Revenues, Gains and Other Support (Note 1)
Temporarily Permanently
Unrestricted Restricted
Restricted
Public support:
Contributions
Public support:
Donated services
Total public support
Investment income
(Note 6)
TOTAL REVENUES
AND GAINS AND
OTHER SUPPORT
Total
$3,322,485
$--
$--
$3,322,485
1,689,289
--
--
1,689,289
5,011,774
--
--
5,011,774
695,381
14,177
--
709,558
5,707,155
14,177
--
5,721,332
Expenses
Temporarily Permanently
Unrestricted Restricted
Restricted
Program services:
Braille publications
and library
Program services:
Advocacy and
protection of civil
rights
Program services:
Specialized programs
and service
Total
415,881
--
--
415,881
1,407,117
--
--
1,407,117
6,347,964
--
--
6,347,964
See Independent Auditor's Report
5
Temporarily Permanently
Unrestricted Restricted
Restricted
Total program
services
Supporting services:
Management and
general
Supporting services:
Fundraising
Total supporting
services
Total
8,170,962
--
--
8,170,962
94,445
--
--
94,445
686,969
--
--
686,969
781,414
--
--
781,414
TOTAL EXPENSES
8,952,376
--
--
8,952,376
CHANGES IN NET
ASSETS
(3,245,221)
14,177
--
(3,231,044)
NET ASSETS –
BEGINNING OF
YEAR
30,385,079
192,711
100,000
30,677,790
NET ASSETS – END
$27,139,858
OF YEAR
$206,888
$100,000
$27,446,746
See Independent Auditor's Report
6
American Brotherhood for the Blind
T/A American Action Fund for Blind Children and Adults and
T/A Blind Children and Adults Action Fund of America
Statement of Functional Expenses
December 31, 2014
Volunteer services (Note 1)
Salaries
Payroll related expenses
Total salaries and
related expenses
Supplies
Postage and shipping
Printing and publications
Travel
Conferences and
conventions
Professional fees
Telephone
Occupancy (Note 8)
Awards and grants
Information technology
(Note 5)
Program
Services:
Braille
Publications
and Library
Program
Services:
Advocacy and
Protection of
Civil Rights
Program
Services:
Specialized
Programs
and
Services
$253,159
$708,845
49,050
9,559
Program
Services:
Total
Supporting
Services:
Management
and General
Supporting
Services:
Fundraising
Supporting
Services:
Total
GRAND
TOTAL
$725,723
$1,687,727
$--
$--
$--
$1,687,727
137,341
26,153
127,531
24,309
313,922
60,021
9,810
1,854
3,270
615
13,080
2,469
327,002
62,490
311,768
872,339
877,563
2,061,670
11,664
3,885
15,549
2,077,219
2,752
----
8,762
1,710
-6,049
66,995
399,543
793,086
6,049
78,509
401,253
793,086
12,098
974
190
1,375
8,065
-410,438
272,571
--
974
410,628
273,946
8,065
79,483
811,881
1,067,032
20,163
--
1,006
1,006
2,012
936
--
936
2,948
15,300
8,017
74,198
--
484
102
11,331
503,000
20,680
113
11,301
150,654
36,464
8,232
96,830
653,654
45,265
55
286
--
-16
59
--
45,265
71
345
--
81,729
8,303
97,175
653,654
--
--
4,000,000
4,000,000
--
--
--
4,000,000
See Independent Auditor's Report
7
Equipment, rental,
maintenance and repair
Data processing
Other
Total expenses before
depreciation
Depreciation (Note 4)
TOTAL EXPENSES
Program
Services:
Braille
Publications
and Library
Program
Services:
Advocacy and
Protection of
Civil Rights
Program
Services:
Specialized
Programs
and
Services
3,780
1,386
-66
Program
Services:
Total
Supporting
Services:
Management
and General
Supporting
Services:
Fundraising
Supporting
Services:
Total
GRAND
TOTAL
1,386
6,552
--
--
--
6,552
-66
18,543
66
18,543
198
18,543
6,994
---
18,543
6,994
37,086
7,192
415,881
1,406,235
6,346,985
8,169,101
94,347
686,969
781,316
8,950,417
--
882
979
1,861
98
--
98
1,959
$415,881
$1,407,117
$6,347,964
$8,170,962
$94,445
$686,969
$781,414
$8,952,376
See Independent Auditor's Report
8
American Brotherhood for the Blind
T/A American Action Fund for Blind Children and Adults and
T/A Blind Children and Adults Action Fund of America
Statement of Cash Flows
December 31, 2014
CASH FLOWS FROM OPERATING ACTIVITIES
Changes in net assets
Adjustments to reconcile changes in net assets to net cash
provided by operating activities
Depreciation
Unrealized loss on investments
Realized gain on investments
Gain on sale of property and equipment
Fulfillment of programmatic investment
Donated Braille lending library materials
Donated investment
Decrease (increase) in assets: Prepaid expenses
Increase (decrease) in liabilities: Accounts payable and accrued
expenses
NET CASH PROVIDED BY OPERATING ACTIVITIES
$(3,231,044)
1,959
740,662
(104,772)
(2,629)
3,500,000
(1,562)
(80,000)
(2,892)
(31,478)
788,244
CASH FLOWS FROM INVESTING ACTIVITIES
Cash paid for investments
Proceeds from sale of investments
Payment received on note receivable
Proceeds from sale of property and equipment
NET CASH USED BY INVESTING ACTIVITIES
NET CHANGE IN CASH AND CASH EQUIVALENTS
CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR
CASH AND CASH EQUIVALENTS - END OF YEAR
See Independent Auditor's Report
9
(6,742,873)
6,326,260
52,814
173,899
189,900
598,344
1,430,551
$2,028,895
American Brotherhood for the Blind
T/A American Action Fund for Blind Children and Adults and
T/A Blind Children and Adults Action Fund of America
Notes to Financial Statements
December 31, 2014
NOTE 1 - NATURE OF THE ORGANIZATION AND SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES
Nature of the Organization
American Brotherhood for the Blind T/A American Action Fund for Blind
Children and Adults and T/A Blind Children and Adults Action Fund of America
(Action Fund), headquartered in Baltimore, Maryland, is a nonprofit corporation
established for the purpose of integrating the blind into society on the basis of
equality.
Basis of Presentation
The Action Fund follows the Presentation of Financial Statements for Not-forProfit Entities topic of the Financial Accounting Standards Board (FASB)
Accounting Standards Codification. This pronouncement sets standards for the
financial statement presentation for not-for-profit organizations. The Action Fund
is required to report information regarding its financial position and activities
according to three (3) classes of net assets: unrestricted net assets, temporarily
restricted net assets and permanently restricted net assets.
Temporarily restricted net assets relate to assets held in trust through the donor's
lifetime. The Action Fund has elected to treat temporarily restricted revenue spent
in the same year as unrestricted revenue.
Permanently restricted net assets include scholarship and book funds, where the
donor has restricted that only the income may be used for its stated purpose and
that the corpus may not be invaded. The income for the current year in the
restricted funds that was fully utilized for its specific purpose was transferred to
unrestricted net assets as a fulfillment of restrictions.
See Independent Auditor's Report
10
Revenue Recognition
The Action Fund has adopted the Revenue Recognition for Not-for-Profit Entities
topic of the FASB Accounting Standards Codification. In accordance with this
standard, contributions received are recorded as unrestricted, temporarily restricted
or permanently restricted support. All contributions are considered to be available
for unrestricted use unless specifically restricted, either temporarily or
permanently, by the donor.
Use of Estimates
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America 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 revenue and expenses during the reporting
period. Actual results could differ from those estimates.
Cash and Cash Equivalents
For purposes of reporting cash flows, the Action Fund considers all highly liquid
investments purchased with an original maturity of three (3) months of less to be a
cash equivalent.
Financial Credit Risk
The Action Fund maintains its cash balances at several financial institutions. The
balances are insured by the Federal Deposit Insurance Corporation (FDIC) up to
insured limits. As of December 31, 3014, the Action Fund's cash balances were in
excess of these insured limits. Management believes that the Action Fund is not
exposed to any significant credit risk with respect to its cash balances. In addition,
the Action Fund generally maintains investment balances in excess of the
Securities Investor Protection Corporation (SIPC) limits.
The Action Fund invests in various investments securities. Investment securities
are exposed to various risks such as interest rate, market and credit risks. Due to
the level of risk associated with certain investment securities, it is at least
See Independent Auditor's Report
11
reasonably possible that changes in the values of investment securities will occur
in the near term and those changes could materially affect the value reported in the
financial statements.
Notes and Other Receivables
Notes receivable consist of program-related loans to organizations and individuals
who support the Action Fund's mission of encouraging independence and
supporting entrepreneurship among the blind. Management evaluates the
creditworthiness of each borrower prior to the issuance of these loans.
Other receivables include monies due from third parties. The Action Fund
considers various factors as of the date of the financial statements in evaluating the
credit quality of these balances, including historical collection experience and
assessment of the counterparties' ability to repay their obligations.
Past due accounts are determined by management based on historical experience
and other relevant factors. On a periodic basis, the Action Fund writes off
uncollectible balances, after exhausting reasonable collection efforts. Based on
management's historical experience, management considers all notes and other
receivables to be fully collectible; therefore no allowance for doubtful accounts has
been reflected in the financial statements.
Investments
Action Fund's investment portfolio is classified as trading and is reported at its fair
value, based on quoted market prices at December 31, 2014. Realized and
unrealized holding gains and losses on trading securities with readily determinable
market values are included in investment income in the statements of activities.
When the Action Fund owns less than a 20% interest and does not exert significant
influence over the investment entity, the Action Fund applies the cost method of
accounting. This method is in accordance with Investments - Equity and Joint
Ventures Investments topic of the FASB Accounting Standards Codification.
Under the cost method, any dividends received are recognized as investment
income and a gain or loss is only reported when the investment is sold.
See Independent Auditor's Report
12
Other Investments - Life Insurance
The Action Fund invests in life insurance policies on members of management. A
policy is issued on the insured party, the Action Fund is the owner and beneficiary
of the policy and as such pays all premiums.
Fair Value of Financial Instruments
The FASB issued Accounting Standards update, Improving Disclosures about Fair
Value Measurements. This update amend FASB Accounting Standards
Codification topic, Fair Value Measurements and Disclosures, to require a number
of additional disclosures regarding fair value measurements. The update requires
disclosure of the amounts of significant transfers between Level 1 and Level 2
investments and the reasons for such transfers, the reasons for any transfers in or
out of Level 3 investments, and disclosure of the policy for determining when
transfers among levels are recognized. The update also clarified that disclosures
should be provided for each class of assets and liabilities and clarified the
requirement to disclose information about the valuation techniques and inputs used
in estimating Level 2 and Level 3 measurements. The update also requires that
information in the reconciliation of recurring Level 3 measurements about
purchases, sales, issuances and settlements be provided on a gross basis. The
adoption of topic Improving Disclosures about Fair Value Measurements only
required additional disclosures and did not have an impact on the financial
statements. See Note 7 for disclosures related to fair value measurements.
The carrying amounts of financial instruments reported in the statement of
financial position, including cash equivalents, prepaid expenses, receivables,
accounts payable and accrued expenses approximate their fair value due to their
short-term maturity.
Property and Equipment
Property and equipment is recorded at cost, net of accumulated depreciation. Major
additions and betterments are charged to the asset accounts while maintenance and
repairs which do not improve or extend the lives of the assets are expensed when
incurred. Contributed property is recorded at fair value at the date of donation.
See Independent Auditor's Report
13
Depreciation expense is calculated using the straight-line method over the
estimated useful lives of the respective assets.
Valuation of Long-Lived Assets
The Action Fund accounts for the valuation of long-lived assets under Impairment
or Disposal of Long-Lived Assets topic of the FASB Accounting Standards
Codification. Long-lived assets, such as property and equipment and purchased
intangibles subject to amortization, are reviewed for impairment whenever events
or changes in circumstances indicate that the carrying amount of an asset may not
be recoverable, and evaluated at least annually. Recoverability of assets to be held
and used is measured by comparing the carrying amount of an asset to estimated
undiscounted future cash flows expected to be generated by the asset. If the
carrying amount of an asset exceeds its estimated future cash flows, an impairment
charge is recognized in the amount by which the carrying amount of the asset
exceeds the fair value of the asset. Assets to be disposed of would be separately
presented in the statement of financial position and reported at the lower of the
carrying amount or fair valueless costs to sell, and are no longer depreciated. The
assets and liabilities of a disposed group classified as held for sale would be
presented separately in the appropriate asset and liability sections of the statement
of financial position. Management believes the value of long-lived assets exceed
the carrying value as of December 31, 2014.
Accrued Annuity Benefit
The Action Fund had established a charitable gift annuity program where donors
may contribute assets to the Action Fund and in return receive a guaranteed fixed
income for life. The Action Fund maintains a segregated investment account to
hold reserves required for gift annuity instruments. The investment reserve balance
related to this program amounted to $354,758. The Action Fund recognizes
contribution revenue for the difference between the fair value of the assets received
and the annuity liability. The gift annuity benefit liability represents monies
temporarily restricted until the annuity is satisfied.
Annuity benefit liabilities are recorded for the required life annuity payments at the
present value of expected future cash payments discounted using interest rates at
See Independent Auditor's Report
14
the date of gift and actuarial assumptions. The calculation of the liability includes
the donor's estimated life expectancy. The annuity obligations are adjusted each
year for changes in the life expectancy of the beneficiaries and are reduced as
payments are made to the donor. This program has since been discontinued. The
annuity benefit liability at December 31, 2014 includes future payments for
beneficiaries who entered the program prior to its termination.
Income Taxes
The Action Fund is exempt from federal income taxes under Internal Revenue
Code Section 501(c)(3). There were no income taxes paid on unrelated business
activities for the year ended December 31, 2014.
Accounting for Uncertainty in Income Taxes
The Action Fund adopted the Accounting for Uncertainty in Income Taxes topic of
the FASB Accounting Standards Codification. The standard requires the
recognition and measurement of uncertain tax positions taken or expected to be
taken by the Action Fund in the preparation of its tax returns. The Action Fund
determines whether it is more-likely-than-not that a certain tax position will be
sustained upon examination by a taxing authority. If an uncertain tax position is
less-likely-than-not to be sustained, an estimate of the potential effect is recognized
in the financial statements and the uncertain tax position is required to be
disclosed. Per the Action Fund's evaluation as of December 31, 2014, including all
prior tax years subject to examination, it was determined that no material
adjustments were required in the financial statements for tax positions less-likelythan-not to be sustained upon examination by a taxing authority. The Action Fund
believes it is no longer subject to income tax examinations for years prior to 2011.
Donated Services
The Action Fund has adopted the Revenue Recognition for Not-for-Profit Entities
topic of the FASB Accounting Standards Codification in the recognition of
donated services. Donated services are recognized at fair value if the services
received (a) create or enhance long-lived assets or (b) require specialized skills, are
See Independent Auditor's Report
15
provided by individuals possessing those skills, and would typically need to be
purchased if not provided by donation.
Donated services consist of volunteer services. Donated services are recorded on
the basis of time spent at rates paid by other organizations for comparable services.
The volunteer services primarily consist of services for the orientation and
adjustment to blindness and blindness advocacy, as well as accounting and
administrative services. The volunteer services are recorded as both public support
and program services; therefore, there is no effect on the change in net assets. No
amounts have been reflected in the financial statement for the volunteer accounting
and administrative services since they do not meet the criteria for recognition.
Functional Allocation of Expenses
The Action Fund reports its expenses on a functional basis in the statement of
activities. These functions consist of program and supporting service costs. Costs
have been allocated among the program and supporting service activities based on
management estimates using methods such as weighted-average distribution and
specific identification.
Subsequent Events
Events that occurred subsequent to December 31, 2014 have been evaluated by the
Action Fund's management for potential recognition or disclosure in the financial
statements through the date of the independent auditor's report, which is the date
the financial statements were available to be issued. Action Fund did not have any
material recognizable subsequent events during this period.
NOTE 2 - NOTES AND OTHER RECEIVABLES
Notes receivable at December 31, 2014 consists of an unsecured, non-interest
bearing note with Media Arc, Inc. (see Note 5). The note has no defined maturity
date. The outstanding balance due the Action Fund at December 31, 2014
amounted to $247,186.
Other receivables consist of unsecured, noninterest bearing balances due from third
parties and amounted to $1,982 at December 31, 2014.
See Independent Auditor's Report
16
NOTE 3 - INVESTMENT - TRUST
An irrevocable trust was created for the eventual benefit of the Action Fund. The
terms of the trust state that upon the death of Ramona Walhof, the property held by
the trust becomes the unrestricted property of the Action Fund. The contribution
was recognized as income in the year of the donation. The Action Fund has agreed
to make annuity payments of approximately $24,000 per year to Mrs. Walhof. The
present value of these payments over Mrs. Walhof's lifetime is currently estimated
at $116,843 as of December 31, 2014. All provisions of the Trust Agreement
remain unchanged.
NOTE 4 - PROPERTY AND EQUIPMENT
Property and equipment as of December 31, 2014 consists of the following:
Braille library - collected works
Office furniture and equipment
Braille press equipment
Braille lending library
Total
$214,045
20,897
102,003
174,293
511,238
Less: Accumulated depreciation
(289,072)
Property and equipment - net
$222,166
Depreciation expense for the year ended December 31, 104 amounted to $1,959.
Property and equipment includes a Braille library - collected works that is
considered historical treasures and as such, no depreciation is recognized on this
asset. During the year, donated land was recognized in the amount of $80,000.
Since this asset is not used in operations, it has been included in Investments.
NOTE 5 - INVESTMENT IN KNFB HOLDING TECHNOLOGY, INC.
The Action Fund makes program-related investments to further its purposes of
integrating the blind into society on the basis of equality. Such investments are
made primarily to accomplish the Action Fund’s program purpose rather than
produce income.
See Independent Auditor's Report
17
In 2009, the Action Fund invested in an entity subsequently known as KNFB
Holding Technology, Inc. (KNFB Holding), to develop and market a hand held
reader. Through various transactions, this investment represents a 49% stock
ownership in Media Arc, Inc. (Media Arc). As a result of this programmatic
investment, several significant accessible reading technologies for the blind were
developed, including the hand held reader. As of December 31, 2014, Action
Fund's program-related investment purpose has been fulfilled. Based on a number
of factors including future profit potential and current equity of Media Arc, Action
Fund does not believe it will receive further return on its investment and has
terminated its investment. For the year ended December 31, 2014 the Action Fund
has recognized an expense based on this termination in the amount of $4,000,000,
and is reflected as Information Technology in the statements of functional
expenses.
NOTE 6 - FAIR VALUE MEASUREMENTS
The Action Fund accounts for the fair value of its investments under the Fair Value
Measurement and Disclosure topic of the FASB Accounting Standards
Codification, which provides the framework for measuring fair value. That
framework provides a fair value hierarchy that prioritizes the inputs to valuation
techniques used to measure fair value. The hierarchy gives the highest priority to
unadjusted quoted prices in active markets for identical assets or liabilities (level 1
measurements) and the lowest priority to unobservable inputs (level 3
measurements). The three (3) levels of the fair value hierarchy under this guidance
are described as follows:
Level 1
Inputs to the valuation methodology are unadjusted quoted prices for identical
assets or liabilities in active markets that the Action Fund has the ability to access.
Level 2
Inputs to the valuation methodology include:
 quoted prices for similar assets or liabilities in active markets;
 quoted prices for identical or similar assets or liabilities in inactive markets;
See Independent Auditor's Report
18
 inputs other than quoted prices that are observable for the asset or liability;
and
 inputs that are derived principally from or corroborated by observable
market data by correlation or other means.
If the asset or liability has a specified (contractual) term, the level 2 input must be
observable for substantially the full term of the asset or liability.
Level 3
Inputs to the valuation methodology are unobservable and significant to the fair
value measurement.
The asset or liability's fair value measurement level within the fair value hierarchy
is based on the lowest level of any input that is significant to the fair value
measurement. Valuation techniques used need to maximize the use of observable
inputs and minimize the use of unobservable inputs.
The following is a description of the valuation methodologies used for assets and
liabilities measured at fair value:
Accrued annuity benefits: Valued at the present value of expected future cash
payments discounted using the interest rates at the time of the gift and actuarial
assumptions.
Alternative investments: Valued using the cost method of accounting.
Common and preferred stocks, corporate bonds, government securities, and
mutual funds: Valued at quoted prices for identical assets from active markets.
Money market funds: Valued at quoted prices for similar assets in active markets.
Investments in life insurance: Valued at accumulated value, net of surrender
charges.
The preceding methods described may produce a fair value calculation that may
not be indicative of net realizable value or reflective of future fair values.
Furthermore, although the Action Fund believes its valuation methods are
appropriate and consistent with other market participants, the use of different
See Independent Auditor's Report
19
methodologies or assumptions to determine the fair value of certain financial
instruments could result in a different fair value measurement at the reporting date.
There have been no changes in the methodologies used at December 31, 2014.
Such 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 following table sets forth by level, within the fair value hierarchy, the Action
Fund's assets and liabilities at fair value at December 31, 2014:
Payor Class
Assets:
Alternative investments
Corporate bonds
Common and preferred
stocks
Government securities
Money market funds
Mutual funds
Investments subtotal
Other investments - life
insurance
Assets at Fair Value
Level 1
Level 2
Level 3
Fair Value
$-1,324,540
$---
$636,828
--
$636,828
1,324,540
473,854
426,452
-20,050,222
22,275,068
--1,044,363
-1,044,363
----636,828
473,854
426,452
1,044,363
20,050,222
23,956,259
--
--
1,065,244
1,065,244
$1,702,072
$25,021,503
$116,843
$116,843
$22,275,068 $1,044,363
Liabilities:
Accrued annuity benefits
$--
$--
The following table sets forth a summary of changes in the fair value of Action
Fund's level 3 assets and liabilities during the year ended December 31, 2014.
Balance - beginning of year
Fair value of donated investment
Assets
$6,038,585
80,000
Liabilities
$116,843
--
Fulfillment of programmatic investment
Return on annuity investment
(3,500,000)
(1,013,600)
---
See Independent Auditor's Report
20
Assets
97,087
$1,702,072
Increase in cash surrender value
Balance - end of year
Liabilities
-$116,843
The Action Fund's return on investments for the year ended December 31, 2014
consisted of the following components:
Interest and dividends
Gains (losses) on investments:
Net realized gains
Net change in unrealized gains
Life insurance - net of premiums
Net losses on investments
Total return on investments
Unrestricted Temporarily Total
Restricted
$1,328,642
$14,177
$1,342,819
107,401
(611,709)
(128,953)
(633,261)
$695,381
----$14,177
107,401
(611,709)
(128,953)
(633,261)
$709,558
Expenses relating to investment revenue, including custodial fees and investment
advisory fees, amounted to approximately $225,995 and have been netted against
investment income in the accompanying statements of activities.
NOTE 7 - ALLOCATION OF JOINT COSTS
The American Action Fund incurred joint costs of $1,342,079 for information
materials and activities that included fund raising appeals. Of those costs, $684,460
was allocated to fund raising expense and $657,619 was allocated to specialized
programs and services. Management based these allocations on an analysis of the
content of the materials, reasons for distributing the materials and the audience to
whom the material were distributed.
NOTE 8 - PREMISES
The Action Fund has facilities in Baltimore, Maryland and Tarzana, California.
The Baltimore facility is located at the National Center for the Blind which allows
free usage of facilities for organizations that serve the blind. The California facility
See Independent Auditor's Report
21
is rented on a one (1) year lease term. Rent expense related to this lease for the
year ended December 31, 2014 amounted to approximately $61,000 and is
included in the statement of functional expenses as occupancy.
NOTE 9 - RETIREMENT PLAN
The Action Fund has a qualified 403(b) retirement plan for the benefit of all
eligible employees. Eligible employees may make voluntary contributions to the
plan not to exceed the Internal Revenue Service limits. The Action Fund does not
make any contributions to the plan.
See Independent Auditor's Report
22