The Land Trust Alliance, Inc. And Affiliate
Consolidated Financial Report
December 31, 2008
Contents

Independent Auditor’s Report On The Financial Statements        1

Financial Statements

Consolidated Balance Sh...
Independent Auditor’s Report


To the Board of Directors
The Land Trust Alliance, Inc.
Washington, D.C.

We have audited t...
The Land Trust Alliance, Inc. And Affiliate

Consolidated Balance Sheet
December 31, 2008
(With Comparative Totals For 200...
The Land Trust Alliance, Inc. And Affiliate

Consolidated Statement Of Activities
Year Ended December 31, 2008
(With Compa...
The Land Trust Alliance, Inc. And Affiliate

Consolidated Statement Of Functional Expenses
Year Ended December 31, 2008
(W...
The Land Trust Alliance, Inc. And Affiliate

Consolidated Statement Of Cash Flows
Year Ended December 31, 2008
(With Compa...
The Land Trust Alliance, Inc. And Affiliate

Notes To Consolidated Financial Statements
Note 1.       Nature Of Activities...
The Land Trust Alliance, Inc. And Affiliate

Notes To Consolidated Financial Statements
Note 1.       Nature Of Activities...
The Land Trust Alliance, Inc. And Affiliate

Notes To Consolidated Financial Statements
Note 1.       Nature Of Activities...
The Land Trust Alliance, Inc. And Affiliate

Notes To Consolidated Financial Statements
Note 1.       Nature Of Activities...
The Land Trust Alliance, Inc. And Affiliate

Notes To Consolidated Financial Statements
Note 4.      Investments
Investmen...
The Land Trust Alliance, Inc. And Affiliate

Notes To Consolidated Financial Statements
Note 6.       Permanently Restrict...
The Land Trust Alliance, Inc. And Affiliate

Notes To Consolidated Financial Statements
Note 6.      Permanently Restricte...
The Land Trust Alliance, Inc. And Affiliate

Notes To Consolidated Financial Statements
Note 8.      Fair Value Measuremen...
The Land Trust Alliance, Inc. And Affiliate

Notes To Consolidated Financial Statements
Note 9.       Leases (Continued)
T...
Independent Auditor’s Report On The Supplementary Information


To the Board of Directors
The Land Trust Alliance, Inc.
Wa...
The Land Trust Alliance, Inc. And Affiliate

Consolidating Balance Sheet
December 31, 2008
(With Comparative Totals For 20...
The Land Trust Alliance, Inc. And Affiliate

Consolidating Statement Of Activities
Year Ended December 31, 2008
(With Comp...
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Financial Statement Template

  1. 1. The Land Trust Alliance, Inc. And Affiliate Consolidated Financial Report December 31, 2008
  2. 2. Contents Independent Auditor’s Report On The Financial Statements 1 Financial Statements Consolidated Balance Sheet 2 Consolidated Statement Of Activities 3 Consolidated Statement Of Functional Expenses 4 Consolidated Statement Of Cash Flows 5 Notes To Consolidated Financial Statements 6 – 14 Independent Auditor’s Report On The Supplementary Information 15 Supplementary Information Consolidating Balance Sheet 16 Consolidating Statement Of Activities 17
  3. 3. Independent Auditor’s Report To the Board of Directors The Land Trust Alliance, Inc. Washington, D.C. We have audited the accompanying consolidated balance sheet of The Land Trust Alliance, Inc. and Affiliate (the Organization) as of December 31, 2008, and the related consolidated statements of activities, functional expenses, and cash flows for the year then ended. These financial statements are the responsibility of the Organization’s management. Our responsibility is to express an opinion on these financial statements based on our audit. The prior year summarized comparative information has been derived from the Organization’s 2007 financial statements and in our report, dated March 17, 2008, we expressed an unqualified opinion on those financial statements. 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 of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the 2008 consolidated financial statements referred to above present fairly, in all material respects, the financial position of The Land Trust Alliance, Inc. and Affiliate as of December 31, 2008, and the changes in their net assets and their cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America. Gaithersburg, Maryland March 20, 2009 McGladrey & Pullen, LLP is a member firm of RSM International, an affiliation of separate and independent legal entities. 1
  4. 4. The Land Trust Alliance, Inc. And Affiliate Consolidated Balance Sheet December 31, 2008 (With Comparative Totals For 2007) Assets 2008 2007 Cash And Cash Equivalents $ 2,194,664 $ 3,225,405 Receivables 58,190 55,076 Promises To Give 2,080,350 2,029,823 Investments 4,001,239 3,595,982 Prepaid Expenses 142,370 147,483 Inventory 51,637 44,602 Property And Equipment, Net 564,186 631,494 Deposits 8,419 8,419 $ 9,101,055 $ 9,738,284 Liabilities And Net Assets Liabilities Accounts payable and accrued expenses $ 515,761 $ 591,357 Conditional contribution - 250,000 Deferred rent 411,498 411,627 Total liabilities 927,259 1,252,984 Commitments (Notes 9 And 10) Net Assets Unrestricted 3,126,225 3,266,631 Temporarily restricted 3,745,355 4,416,453 Permanently restricted 1,302,216 802,216 8,173,796 8,485,300 $ 9,101,055 $ 9,738,284 See Notes To Consolidated Financial Statements. 2
  5. 5. The Land Trust Alliance, Inc. And Affiliate Consolidated Statement Of Activities Year Ended December 31, 2008 (With Comparative Totals For 2007) 2008 Temporarily Permanently 2007 Unrestricted Restricted Restricted Total Total Support and revenue: Grants $ 204,500 $ 4,367,147 $ 500,000 $ 5,071,647 $ 4,755,785 Contributions: Individual memberships and donations 2,300,356 15,295 - 2,315,651 2,442,618 Organizational memberships 920,608 - - 920,608 882,196 Other donations 21,797 - - 21,797 12,629 Conference fees 880,490 - - 880,490 1,078,009 Investment (loss) income (85,235) (27,989) - (113,224) 266,222 Accreditation fees 219,500 - - 219,500 119,000 Publication sales 97,481 - - 97,481 116,418 Other programs 9,769 - - 9,769 14,821 Net assets released from restrictions 5,025,551 (5,025,551) - - - Total support and revenue 9,594,817 (671,098) 500,000 9,423,719 9,687,698 Expenses: Program services 7,678,945 - - 7,678,945 7,095,585 Management and general 630,575 - - 630,575 761,804 Fundraising 1,425,703 - - 1,425,703 1,138,111 Total expenses 9,735,223 - - 9,735,223 8,995,500 Change in net assets (140,406) (671,098) 500,000 (311,504) 692,198 Net assets: Beginning 3,266,631 4,416,453 802,216 8,485,300 7,793,102 Ending $ 3,126,225 $ 3,745,355 $ 1,302,216 $ 8,173,796 $ 8,485,300 See Notes To Consolidated Financial Statements. 3
  6. 6. The Land Trust Alliance, Inc. And Affiliate Consolidated Statement Of Functional Expenses Year Ended December 31, 2008 (With Comparative Totals For 2007) 2008 Program Services Supporting Services Education And Policy And Conservation Total Management 2008 2007 Capacity Building Outreach Defense Accreditation Program And General Fundraising Total Total Personnel expenses: Salaries and benefits $ 1,896,943 $ 882,174 $ 147,942 $ 290,667 $ 3,217,726 $ 411,617 $ 787,488 $ 4,416,831 $ 3,889,374 Contractors/consultants 842,147 429,518 172,047 31,643 1,475,355 16,055 160,070 1,651,480 1,899,208 Total personnel expenses 2,739,090 1,311,692 319,989 322,310 4,693,081 427,672 947,558 6,068,311 5,788,582 Nonpersonnel expenses: Grants, scholarships, awards 993,321 7,705 - - 1,001,026 - - 1,001,026 754,997 Rent 267,653 76,594 11,608 - 355,855 37,363 72,562 465,780 380,277 Staff and project travel and expenses 242,132 62,972 13,320 20,379 338,803 9,692 110,463 458,958 377,863 Facility, exhibiting, meals and a/v fees 405,101 1,568 272 - 406,941 305 921 408,167 379,115 Printing, design and copying 156,156 104,652 4,871 12,975 278,654 3,153 54,245 336,052 381,740 Staff training and recruitment 22,887 5,412 1,243 1,833 31,375 23,075 85,702 140,152 61,630 Depreciation 69,335 26,343 4,143 - 99,821 13,675 22,674 136,170 122,017 Postage and delivery 48,509 28,004 796 6,983 84,292 5,958 40,907 131,157 141,178 Equipment lease and maintenance 82,624 18,567 2,721 445 104,357 5,073 15,177 124,607 116,665 Telecommunications 52,115 18,271 4,162 7,238 81,786 8,630 8,184 98,600 109,764 Meetings/receptions 16,664 14,910 4,690 2,397 38,661 10,010 30,293 78,964 71,938 Supplies 45,113 6,936 1,440 7,602 61,091 5,075 12,257 78,423 70,429 Board and committee meetings - - - 30,021 30,021 17,879 - 47,900 44,556 Bank service charges 29,937 670 105 - 30,712 3,082 4,542 38,336 42,747 Professional fees 2,352 2,057 141 - 4,550 32,890 769 38,209 52,855 Dues/subscriptions/library 3,722 12,201 125 1,269 17,317 7,192 9,698 34,207 33,990 Commercial insurance 2,951 - - - 2,951 18,021 - 20,972 22,535 Small equipment/software 5,351 1,446 108 880 7,785 1,720 916 10,421 14,388 Royalties 4,716 - - - 4,716 - - 4,716 13,246 Advertising - - - - - - - - 277 Other 4,454 385 61 250 5,150 110 8,835 14,095 14,711 Total nonpersonnel expenses 2,455,093 388,693 49,806 92,272 2,985,864 202,903 478,145 3,666,912 3,206,918 Total expenses $ 5,194,183 $ 1,700,385 $ 369,795 $ 414,582 $ 7,678,945 $ 630,575 $ 1,425,703 $ 9,735,223 $ 8,995,500 See Notes To Consolidated Financial Statements. 4
  7. 7. The Land Trust Alliance, Inc. And Affiliate Consolidated Statement Of Cash Flows Year Ended December 31, 2008 (With Comparative Totals For 2007) 2008 2007 Cash Flows From Operating Activities Change in net assets $ (311,504) $ 692,198 Adjustments to reconcile change in net assets to net cash (used in) provided by operating activities: Depreciation 136,170 122,017 Donated securities (184,862) (321,321) Deferred rent (129) (6,870) Loss on disposal of property and equipment - 2,729 Increase (decrease) in discount on promises to give 2,687 (28,349) Realized and unrealized loss on investments 322,876 10,365 Contributions, restricted for long-term purposes – endowment (500,000) (541) Change in assets and liabilities: (Increase) decrease in: Receivables (3,114) (38,133) Promises to give (53,214) 771,769 Prepaid expenses 5,113 (17,299) Inventory (7,035) 1,342 Deposits - 11,114 Increase (decrease) in: Accounts payable and accrued expenses (75,596) 42,826 Conditional contribution (250,000) 250,000 Net cash (used in) provided by operating activities (918,608) 1,491,847 Cash Flows From Investing Activities Purchase of property and equipment (68,861) (196,008) Purchase of investments (1,939,945) (1,874,187) Proceeds from sale of investments 1,396,673 1,066,600 Net cash used in investing activities (612,133) (1,003,595) Cash Flows From Financing Activities Contributions, restricted for long-term purposes – endowment 500,000 541 Net cash provided by financing activities 500,000 541 Net (decrease) increase in cash and cash equivalents (1,030,741) 488,793 Cash And Cash Equivalents Beginning 3,225,405 2,736,612 Ending $ 2,194,664 $ 3,225,405 Supplemental Schedule Of Noncash Investing And Financing Activities Donated securities $ 184,862 $ 321,321 Leasehold improvements paid for by lessor $ - $ 407,835 See Notes To Consolidated Financial Statements. 5
  8. 8. The Land Trust Alliance, Inc. And Affiliate Notes To Consolidated Financial Statements Note 1. Nature Of Activities And Significant Accounting Policies Nature of activities: The Land Trust Alliance, Inc. and Affiliate (the Organization) is comprised of two entities: The Land Trust Alliance, Inc. (the Alliance) and The Land Trust Accreditation Commission (the Commission). The Alliance is a not-for-profit corporation organized under the laws of Massachusetts. The Alliance was formed in 1982 to advance the mission of land trusts. Since then, it has trained thousands of conservation leaders, won new federal incentives for conservation on private land, and developed standards and practices to professionalize and safeguard land trust work. The Alliance has championed the use of conservation easements, a legal device that restricts certain types of development but keeps the land in the hands of the current owners or their families. Farms, forests, ranches, waterways, and scenic vistas have all been protected through the efforts of land trusts nationwide. Through its programs and services, the Alliance leads the movement by facilitating state-of-the-art information collection and exchange; national and regional training, including providing tools and training on how to plan and prioritize their conservation work; ensuring the continued protection, in perpetuity, of land already set aside for conservation; and advancing public policies to accelerate the pace of private voluntary conservation. More than 1,000 land trusts are members of the Alliance, which operates through a national office in Washington, D.C. and regional programs around the country. In 2006, the Commission, an independent program of the Alliance, was created to support the mission of the Alliance, by operating a land trust accreditation program to ensure public confidence in land conservation and to build strong land conservation organizations by verifying land trust implementation of specific indicator practices from the Land Trust Standards and Practices, as established by the Alliance. The Commission is headquartered in Saratoga Springs, New York. The following is a summary of the Organization’s significant accounting policies: Basis of accounting: The accompanying financial statements are presented in accordance with the accrual basis of accounting, whereby, revenue is recognized when earned and expenses are recognized when incurred. Principles of consolidation: The accompanying consolidated financial statements include the accounts of the Alliance and the Commission, which are under the common control of the Alliance’s Board of Directors. All significant transactions between the Alliance and the Commission have been eliminated in the consolidation. Basis of presentation: The financial statement presentation follows the recommendations of the Financial Accounting Standards Board (FASB) in its Statement of Financial Accounting Standards (SFAS) No. 117, Financial Statements for Not-for-Profit Organizations. Under SFAS No. 117, 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. Cash and cash equivalents: For the purpose of reporting cash flows, the Organization considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. Money funds and certificates of deposit held by investment custodians are considered investments. Investments: Investments with readily determinable fair values are reflected at fair market value. To adjust the carrying value of these investments, the change in fair market value is recorded as a component of investment income in the consolidated statement of activities. 6
  9. 9. The Land Trust Alliance, Inc. And Affiliate Notes To Consolidated Financial Statements Note 1. Nature Of Activities And Significant Accounting Policies (Continued) Financial risk: The Organization maintains its cash in bank deposit accounts which, at times, may exceed federally insured limits. The Organization has not experienced any losses in such accounts. The Organization believes it is not exposed to any significant financial risk on cash and cash equivalents. The Organization invests in certificates of deposits, money funds, and equities. Such investments are exposed to various risks such as market and credit. Due to the level of risk associated with such investments and the level of uncertainty related to changes in the value of such investments, it is at least reasonably possible that changes in risks in the near term could materially affect investment balances and the amounts reported in the consolidated financial statements. Receivables: Receivables are carried at original invoice amount less an estimate made for doubtful receivables based on a review of all outstanding amounts on a monthly basis. Management determines the allowance for doubtful accounts by identifying troubled accounts and by using historical experience applied to an aging of accounts. Receivables are written off when deemed uncollectible. Recoveries of receivables previously written off are recorded when received. There was no provision for doubtful accounts at December 31, 2008. Promises to give: Unconditional promises to give are recognized as revenue or gains in the period acknowledged. Conditional promises to give are recognized when the conditions on which they depend are substantially met. Promises to give are carried at original amount promised less an estimate made for doubtful promises based on a review of all outstanding promises on a monthly basis. Management determines the allowance for doubtful promises by regularly evaluating individual promises to give and considering prior history of donor and proven collectibility of past donations. Promises to give are written off when deemed uncollectible. Recoveries of promises to give previously written off are recorded when received. There was no allowance for doubtful promises at December 31, 2008. Inventory: Inventory, which consists primarily of publications for re-sale, is stated at the lower of cost or market using the first in, first out (FIFO) method. Management establishes a reserve for any inventory deemed to be nonsaleable by identifying nonmarketable items and by using historical experience applied to recent sales. Items are written off when deemed unmarketable. There was no allowance for obsolescence, based on management’s evaluation of the salability of inventory at December 31, 2008. Property and equipment: Property and equipment (including software) is recorded at cost. Donated equipment is stated at the estimated fair market value at the time of donation. Depreciation is computed over the estimated useful lives of the respective assets on a straight-line basis. The Organization capitalizes all property and equipment purchased with a cost of $500 or more. Impairment of long-lived assets: The Organization accounts for the valuation of long-lived assets under SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets. SFAS No. 144 requires that long-lived assets and certain identifiable intangible assets be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of the long-lived asset is measured by a comparison of the carrying amount of the asset to future undiscounted net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the estimated fair value of the assets. Assets to be disposed of are reportable at the lower of the carrying amount or fair value, less costs to sell. 7
  10. 10. The Land Trust Alliance, Inc. And Affiliate Notes To Consolidated Financial Statements Note 1. Nature Of Activities And Significant Accounting Policies (Continued) Conditional contribution: During 2007, the Alliance received $250,000 in conditional contributions that required 100% matching by the Alliance. During 2008, the Alliance received the matching funds. During 2008, the Alliance received a grant which includes an endowment contribution of $500,000 payable in a future year based on the Alliance raising $3,000,000 in endowment contributions. The endowment contribution has not been received; therefore, a liability is not recorded as of December 31, 2008. Deferred rent: Rent expense is being recognized on a straight-line basis over the life of the lease. The difference between rent expense recognized and rental payments, as stipulated in the lease, is reflected as deferred rent in the consolidated balance sheet. In addition, deferred rent also includes the landlord incentive on a portion of the leasehold improvement cost, which is being amortized over the life of the lease. Support and revenue: Contributions received, including grants, are recorded as unrestricted, temporarily restricted, or permanently restricted support, depending on the existence and/or nature of any donor restrictions. All donor-restricted support is reported as an increase in temporarily or permanently restricted net assets, depending on the nature of the restriction. When a 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 reported in the consolidated statement of activities as net assets released from restrictions. Membership dues revenue is recognized when received. Conference fees are recognized during the period the conference is held. Expenses: Direct costs associated with specific programs are recorded as program expenses. Administrative overhead expenses are allocated to the various programs based on personnel time spent on these activities. Fringe benefits are allocated based on labor dollars spent on these activities. Income taxes: The Alliance and the Commission are generally exempt from federal income taxes under the provisions of Section 501(c)(3) of the Internal Revenue Code (IRC). In addition, the Alliance and the Commission qualify for charitable contributions deductions and have been classified as organizations that are not private foundations. Business income which is not related to exempt purposes, less applicable deductions, is subject to federal and state corporate income taxes. Neither the Alliance nor the Commission had any net unrelated business income at December 31, 2008. Estimates: The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Prior period information: The financial statements include certain prior year summarized comparative information in total but not by net asset class. Such information does not include sufficient detail to constitute a presentation in conformity with accounting principles generally accepted in the United States of America. Accordingly, such information should be read in conjunction with the Organization’s consolidated financial statements for the year ended December 31, 2007, from which the summarized information was derived. Reclassification: Certain 2007 financial information has been reclassified to conform to the 2008 presentation. The reclassifications have no impact on the previously reported change in net assets. 8
  11. 11. The Land Trust Alliance, Inc. And Affiliate Notes To Consolidated Financial Statements Note 1. Nature Of Activities And Significant Accounting Policies (Continued) Recently issued accounting pronouncements: In July 2006, FASB issued Interpretation No. 48, Accounting for Uncertainty in Income Taxes (FIN 48). FIN 48 prescribes a minimum threshold for financial statement recognition of the benefit of a tax position taken, or expected to be taken, by a filer in the filer’s tax return. On December 30, 2008, FASB issued FASB Staff Position (FSP) FIN 48-3, Effective Date of FASB Interpretation No. 48 for Certain Nonpublic Enterprises. The FSP defers the effective date of FIN 48 for certain nonpublic enterprises, including nonpublic not- for-profit organizations, for fiscal years beginning after December 15, 2008. The Organization presently recognizes income tax positions based on management’s estimate of whether it is reasonably possible that a liability has been incurred for unrecognized income tax benefits by applying SFAS No. 5, Accounting for Contingencies. The Organization has not yet determined the impact of the adoption of FIN 48 on its consolidated financial statements. On August 6, 2008, FASB issued FASB Staff Position (FSP) No. FAS 117-1, which provides guidance on the net asset classification of donor-restricted endowment funds for a not-for-profit organization that is subject to an enacted version of the Uniform Prudent Management of Institutional Funds Act of 2006 (UPMIFA). UPMIFA is a model act approved by the Uniform Law Commission (ULC, formerly known as the National Conference of Commissioners on Uniform State Laws) that serves as a guideline for states to use in enacting legislation. This FSP also improves disclosures about an organization’s endowment funds (both donor-restricted endowment funds and board designated endowment funds), whether or not the organization is subject to UPMIFA. The Organization has added the required disclosures in Note 6 of the consolidated financial statements. Note 2. Promises To Give Promises to give in one year or more are measured using the present value of future cash flows based on a discount rate of 4%. Promises to give at December 31, 2008, consist of the following: Promises to give in less than one year $ 1,393,127 Promises to give in one to two years 703,717 Total unconditional promises to give 2,096,844 Less discount to net present value 16,494 $ 2,080,350 Note 3. Property And Equipment Property and equipment and accumulated depreciation at December 31, 2008, and depreciation expense for the year ended December 31, 2008, are as follows: Estimated Accumulated Depreciation Asset Category Useful Lives Cost Depreciation Net Expense Office equipment 3 to 7 years $ 893,508 $ 672,094 $ 221,414 $ 95,212 Leasehold improvements Lease term 410,919 68,147 342,772 40,958 $ 1,304,427 $ 740,241 $ 564,186 $ 136,170 9
  12. 12. The Land Trust Alliance, Inc. And Affiliate Notes To Consolidated Financial Statements Note 4. Investments Investments at fair market value at December 31, 2008, consist of the following: Certificates of deposit $ 2,725,000 Equities 506,788 Money funds 491,317 Corporate bonds 278,134 $ 4,001,239 Investment income for the year ended December 31, 2008, consists of the following: Interest and dividends $ 209,652 Realized and unrealized loss on investments (322,876) $ (113,224) Subsequent to year-end, the credit and liquidity crisis in the United States and throughout the global financial system has resulted in substantial volatility in financial markets and the banking system. These and other economic events have had a significant adverse impact on investment portfolios. As a result, the Organization’s investments have likely incurred a significant decline in fair value since December 31, 2008. Note 5. Temporarily Restricted Net Assets Temporarily restricted net assets at December 31, 2008, are available for the following programs, and net assets during the year ended December 31, 2008, were released from restrictions by incurring expenses satisfying the restricted purpose. Net assets were released and are available in the following programs: Balance Net Additions Net Assets Balance December 31, And Investment Released From December 31, 2007 Losses Restriction 2008 Purpose restricted: National office $ 2,221,738 $ 1,613,094 $ 2,457,175 $ 1,377,657 Field office program 1,205,556 2,469,277 2,012,376 1,662,457 Accreditation 701,488 273,382 348,000 626,870 Endowment earnings 31,595 (31,595) - - Time restricted: National office 256,076 30,295 208,000 78,371 $ 4,416,453 $ 4,354,453 $ 5,025,551 $ 3,745,355 10
  13. 13. The Land Trust Alliance, Inc. And Affiliate Notes To Consolidated Financial Statements Note 6. Permanently Restricted Net Assets Interpretation of Relevant Law The Board of Directors of the Alliance has interpreted the District of Columbia enacted version of UPMIFA as requiring the preservation of the fair value of the original gift as of the gift date of the donor-restricted endowment funds, absent explicit donor stipulations to the contrary. As a result of this interpretation, the Alliance 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 Organization in a manner consistent with the standard of prudence prescribed by UPMIFA. In accordance with UPMIFA, the Organization considers the following factors in making a determination to appropriate or accumulate donor-restricted endowment funds: a. The duration and preservation of the fund b. The purposes of the organization and the donor-restricted endowment fund c. General economic conditions d. The possible effects of inflation and deflation e. The expected total return from income and the appreciation of investments f. Other resources of the organization g. The investment policies of the organization Return Objective and Risk Parameters The Alliance’s objective is to earn a respectable, long-term, risk-adjusted total rate of return to support the designated programs. We recognize and accept that pursuing a respectable rate of return involves risk and potential volatility. The generation of current income will be a secondary consideration. The Alliance targets a diversified asset allocation that places a greater emphasis on equity-based investments to achieve its long-term return objectives within prudent risk constraints. The Alliance has established a policy portfolio, or normal asset allocation. While the policy portfolio can be adjusted from time to time, it is designed to serve for long-time horizons based upon long-term expected returns. The Alliance has a preference for simple investment structures which will have lower cost, easier oversight, and less complexity for internal financial management and auditing. Spending Policy The Alliance will appropriate for expenditure in its annual budget a maximum of 5% of the rolling average of the market value of the endowment assets over the preceding 12 quarters, the base to be adjusted for new capital contributions to the endowment. There may be times when the Alliance may opt not to take the maximum spending rate, but rather reinvest some of the annual return. This spending rate is based on the long-term assumption of 8% of nominal investment returns and a 3% inflation rate. 11
  14. 14. The Land Trust Alliance, Inc. And Affiliate Notes To Consolidated Financial Statements Note 6. Permanently Restricted Net Assets (Continued) Funds with Deficiencies From time to time, the fair value of assets associated with individual donor-restricted endowment funds may fall below the level that the donor or UPMIFA requires the Alliance to retain as a fund of perpetual duration. In accordance with generally accepted accounting principles (GAAP), deficiencies of this nature that are reported in unrestricted net assets were $233,388 as of December 31, 2008. These deficiencies resulted from unfavorable market fluctuations that occurred shortly after the investment of new permanently restricted contributions. Temporarily Permanently Unrestricted Restricted Restricted Total Endowment net assets, beginning of year $ - $ 31,827 $ 802,216 $ 834,043 Investment return: Investment income - 32,483 - 32,483 Net depreciation (realized and unrealized) (233,388) (64,310) - (297,698) Total investment return (233,388) (31,827) - (265,215) Contributions - - 500,000 500,000 Appropriation of endowment assets for expenditure - - - - Endowment net assets, end of year $ (233,388) $ - $ 1,302,216 $ 1,068,828 Permanently restricted net assets at December 31, 2008, are comprised as follows: Berkley Endowment $ 1,200,000 Kingsbury Browne Award Endowment 102,216 $ 1,302,216 Note 7. Retirement Plan The Organization maintains a 403(b) defined contribution retirement plan that covers all full-time employees that choose to participate. The Alliance contributes 9% for employees starting in the 37th month of employment and 7.5% of salary to other employees between the 7th and 36th months of service. Total retirement expense for the year ended December 31, 2008, was $277,275. The Organization provides certain employees the opportunity to defer current compensation under a 457(b) plan. The Organization made a $10,900 contribution to this plan during the year ended December 31, 2008. 12
  15. 15. The Land Trust Alliance, Inc. And Affiliate Notes To Consolidated Financial Statements Note 8. Fair Value Measurement During the year ended December 31, 2008, the Organization adopted SFAS No. 157, Fair Value Measurements. SFAS No. 157 establishes a single authoritative definition of fair value, sets out a framework for measuring fair value, and requires additional disclosures about fair value measurements. SFAS No. 157 applies to all assets and liabilities that are being measured and reported on a fair value basis. SFAS No. 157 requires new disclosure that establishes a framework for measuring fair value in GAAP and expands disclosure about fair value measurements. SFAS No. 157 enables the reader of the financial statements to assess the inputs used to develop those measurements by establishing a hierarchy for ranking the quality and reliability of the information used to determine fair values. SFAS No. 157 requires that assets and liabilities carried at fair value be classified and disclosed in one of the following three categories: a. Level 1: Quoted market prices in active markets for identical assets or liabilities b. Level 2: Observable market-based inputs or unobservable inputs that are corroborated by market data c. Level 3: Unobservable inputs that are not corroborated by market data In determining the appropriate levels, the organization performs a detailed analysis of the assets and liabilities that are subject to SFAS No. 157. At each reporting period, all assets and liabilities for which the fair value measurement is based on significant unobservable inputs are classified as Level 3. The table below presents the balances of assets and liabilities measured at fair value on a recurring basis by level within the hierarchy: Level 1 Level 2 Level 3 Total Promises to give $ 1,393,127 $ - $ 687,223 $ 2,080,350 Investments 4,001,239 - - 4,001,239 $ 5,394,366 $ - $ 687,223 $ 6,081,589 Note 9. Leases The Alliance leases its Washington, D.C. office space under an operating lease expiring in 2017. This lease agreement provides for the Alliance to pay a stated minimum annual rent and a proportionate percentage of increases in operating expenses. Also, the Alliance has leases on offices in the states of Colorado, New York, Michigan, North Carolina, Connecticut and Montana. In addition, a landlord improvements allowance was provided to be applied toward reimbursement of the costs incurred by the Alliance for the preparation of its headquarters space. Deferred rent was recognized to allocate the benefit of these improvements throughout the remaining term of the lease. 13
  16. 16. The Land Trust Alliance, Inc. And Affiliate Notes To Consolidated Financial Statements Note 9. Leases (Continued) The future minimum lease payments on the above leases at December 31, 2008, are as follows: Years Ending December 31, 2009 $ 394,685 2010 379,900 2011 382,617 2012 397,252 2013 410,025 2014 – 2017 1,441,002 $ 3,405,481 Total rent expense charged to operations for office space under these leases for the year ended December 31, 2008, was $465,780. Note 10. Commitments The Organization has entered into several contracts for hotel rooms relating to various events through October 2010. In the event of cancellation, the Organization is required to pay various costs of the hotel rooms as stipulated in the contracts, the amounts of which are dependent upon the date of cancellation. Note 11. Line Of Credit The Organization has an unsecured line of credit agreement with a bank in the amount of $500,000. Borrowings on the line accrue interest at an annual rate of 1.75% plus the London InterBank Offered Rate (LIBOR). The agreement expired on May 31, 2008. The agreement was renewed as of June 10, 2008, with no expiration date. At December 31, 2008, the Organization had no borrowings on the line of credit. Note 12. Letter Of Credit The Organization has a letter of credit for the deposit on its office space. The letter is secured by a certificate of deposit in the amount of $58,839. 14
  17. 17. Independent Auditor’s Report On The Supplementary Information To the Board of Directors The Land Trust Alliance, Inc. Washington, D.C. Our audit was made for the purpose of forming an opinion on the basic consolidated financial statements for the year ended December 31, 2008, taken as a whole. The consolidating information and other supplementary information for the year ended December 31, 2008, which follows, is presented for purposes of additional analysis of the basic consolidated financial statements rather than to present the financial position and changes in net assets of the individual entities and is not a required part of the basic consolidated financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic consolidated financial statements and in our opinion is fairly stated, in all material respects, in relation to the basic consolidated financial statements taken as a whole. The supplementary information for the year ended December 31, 2008, was audited by us and in our report, dated March 17, 2008, and we expressed an unqualified opinion on such information in relation to the basic consolidated financial statements taken as a whole. Gaithersburg, Maryland March 20, 2009 McGladrey & Pullen, LLP is a member firm of RSM International, an affiliation of separate and independent legal entities. 15
  18. 18. The Land Trust Alliance, Inc. And Affiliate Consolidating Balance Sheet December 31, 2008 (With Comparative Totals For 2007) 2008 Assets The Alliance The Commission Eliminations Total 2007 Cash And Cash Equivalents $ 1,826,148 $ 368,516 $ - $ 2,194,664 $ 3,225,405 Receivables 29,714 29,000 (524) 58,190 55,076 Promises To Give 1,795,480 309,870 (25,000) 2,080,350 2,029,823 Investments 4,001,239 - - 4,001,239 3,595,982 Prepaid Expenses 135,514 6,856 - 142,370 147,483 Inventory 51,637 - - 51,637 44,602 Property And Equipment, Net 554,091 10,095 - 564,186 631,494 Deposits 8,419 - - 8,419 8,419 $ 8,402,242 $ 724,337 $ (25,524) $ 9,101,055 $ 9,738,284 Liabilities And Net Assets Liabilities Accounts payable and accrued expenses $ 523,416 $ 17,869 $ (25,524) $ 515,761 $ 591,357 Conditional contribution - - - - 250,000 Deferred rent 411,498 - - 411,498 411,627 Total liabilities 934,914 17,869 (25,524) 927,259 1,252,984 Net Assets Unrestricted 3,046,628 79,597 - 3,126,225 3,266,631 Temporarily restricted 3,118,484 626,871 - 3,745,355 4,416,453 Permanently restricted 1,302,216 - - 1,302,216 802,216 7,467,328 706,468 - 8,173,796 8,485,300 $ 8,402,242 $ 724,337 $ (25,524) $ 9,101,055 $ 9,738,284 16
  19. 19. The Land Trust Alliance, Inc. And Affiliate Consolidating Statement Of Activities Year Ended December 31, 2008 (With Comparative Totals For 2007) 2008 The Alliance The Commission Eliminations Total 2007 Support and revenue: Grants $ 4,798,265 $ 273,382 $ - $ 5,071,647 $ 4,755,785 Contributions: Individual memberships and donations 2,315,651 - - 2,315,651 2,442,618 Organizational memberships 920,608 - - 920,608 882,196 Other donations 21,797 - - 21,797 12,629 Conference fees 880,490 - - 880,490 1,078,009 Investment (loss) income (115,633) 2,409 - (113,224) 266,222 Accreditation fees - 219,500 - 219,500 119,000 Publication sales 97,481 - - 97,481 116,418 Other programs 32,769 - (23,000) 9,769 14,821 Total support and revenue 8,951,428 495,291 (23,000) 9,423,719 9,687,698 Expenses: Program services 7,264,365 437,580 (23,000) 7,678,945 7,095,584 Management and general 566,478 64,097 - 630,575 761,805 Fundraising 1,425,703 - - 1,425,703 1,138,111 Total expenses 9,256,546 501,677 (23,000) 9,735,223 8,995,500 Change in net assets (305,118) (6,386) - (311,504) 692,198 Net assets: Beginning 7,772,446 712,854 - 8,485,300 7,793,102 Ending $ 7,467,328 $ 706,468 $ - $ 8,173,796 $ 8,485,300 17

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