Conservation International Foundation And Affiliates
Consolidated Financial Report
June 30, 2009
Contents

Independent Auditor’s Report On The Financial Statements        1

Financial Statements

Consolidated Statements...
Independent Auditor’s Report


To the Board of Directors
Conservation International Foundation
Arlington, Virginia

We hav...
Conservation International Foundation And Affiliates

Consolidated Statements Of Financial Position
June 30, 2009 And 2008...
Conservation International Foundation And Affiliates

Consolidated Statements Of Activities
Years Ended June 30, 2009 And ...
Conservation International Foundation And Affiliates

Consolidated Statements Of Cash Flows
Years Ended June 30, 2009 And ...
Conservation International Foundation And Affiliates

Notes To Consolidated Financial Statements
Note 1.      Nature Of Ac...
Conservation International Foundation And Affiliates

Notes To Consolidated Financial Statements
Note 1.      Nature Of Ac...
Conservation International Foundation And Affiliates

Notes To Consolidated Financial Statements
Note 1.      Nature Of Ac...
Conservation International Foundation And Affiliates

Notes To Consolidated Financial Statements
Note 1.      Nature Of Ac...
Conservation International Foundation And Affiliates

Notes To Consolidated Financial Statements
Note 1.       Nature Of A...
Conservation International Foundation And Affiliates

Notes To Consolidated Financial Statements
Note 1.       Nature Of A...
Conservation International Foundation And Affiliates

Notes To Consolidated Financial Statements
Note 2.       Investments...
Conservation International Foundation And Affiliates

Notes To Consolidated Financial Statements
Note 3.       Fair Value ...
Conservation International Foundation And Affiliates

Notes To Consolidated Financial Statements
Note 4.      Grants And P...
Conservation International Foundation And Affiliates

Notes To Consolidated Financial Statements
Note 5.      Notes Receiv...
Conservation International Foundation And Affiliates

Notes To Consolidated Financial Statements
Note 7.      Notes Payabl...
Conservation International Foundation And Affiliates

Notes To Consolidated Financial Statements
Note 8.       Grants Paya...
Conservation International Foundation And Affiliates

Notes To Consolidated Financial Statements
Note 9.      Board Design...
Conservation International Foundation And Affiliates

Notes To Consolidated Financial Statements
Note 9.      Board Design...
Conservation International Foundation And Affiliates

Notes To Consolidated Financial Statements
Note 11.     Retirement P...
Conservation International Foundation And Affiliates

Notes To Consolidated Financial Statements
Note 13.      Commitments...
Conservation International Foundation And Affiliates

Notes To Consolidated Financial Statements
Note 14.     Allocation O...
Independent Auditor’s Report On The Supplementary Information


To the Board of Directors
Conservation International Found...
Conservation International Foundation And Affiliates

Consolidating Statement Of Financial Position
June 30, 2009
(In Thou...
Conservation International Foundation And Affiliates

Consolidated Statement Of Functional Expenses
Year Ended June 30, 20...
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  1. 1. Conservation International Foundation And Affiliates Consolidated Financial Report June 30, 2009
  2. 2. Contents Independent Auditor’s Report On The Financial Statements 1 Financial Statements Consolidated Statements Of Financial Position 2 Consolidated Statements Of Activities 3 Consolidated Statements Of Cash Flows 4 Notes To Consolidated Financial Statements 5 – 21 Independent Auditor’s Report On The Supplementary Information 22 Supplementary Information Consolidating Statement Of Financial Position 23 Consolidated Statement Of Functional Expenses 24
  3. 3. Independent Auditor’s Report To the Board of Directors Conservation International Foundation Arlington, Virginia We have audited the accompanying consolidated statement of financial position of Conservation International Foundation and Affiliates (CI) as of June 30, 2009, and the related consolidated statements of activities and cash flows for the year then ended. These financial statements are the responsibility of CI’s management. Our responsibility is to express an opinion on these financial statements based on our audit. The consolidated financial statements of CI for the year ended June 30, 2008, were audited by other auditors whose report, dated October 17, 2008, expressed an unqualified opinion on those statements. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. 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 2009 consolidated financial statements referred to above present fairly, in all material respects, the financial position of Conservation International Foundation and Affiliates as of June 30, 2009, 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. In accordance with Government Auditing Standards, we have also issued our report dated October 26, 2009, on our consideration of CI’s internal control over financial reporting and our tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements, and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit. CI’s internal control over financial reporting and tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements, and other matters for the year ended June 30, 2008, was reported on by other auditors in their report, dated October 17, 2008. Vienna, Virginia October 26, 2009 McGladrey & Pullen, LLP is a member firm of RSM International, an affiliation of separate and independent legal entities. 1
  4. 4. Conservation International Foundation And Affiliates Consolidated Statements Of Financial Position June 30, 2009 And 2008 (In Thousands) Assets 2009 2008 Cash and cash equivalents $ 115,446 $ 81,949 Investments, net 27,574 41,297 Grants and promises to give, net 192,603 241,636 Notes receivable, net 2,108 2,432 Prepaid expenses and other assets 2,066 2,371 Property and equipment, net 6,000 6,573 Total assets $ 345,797 $ 376,258 Liabilities And Net Assets Liabilities Accounts payable and accrued expenses $ 5,515 $ 5,129 Accrued salaries, vacation and employee benefits 6,596 7,208 Notes payable 5,377 4,717 Grants payable 32,019 30,713 Deferred revenue 1,046 553 Total liabilities 50,553 48,320 Net Assets Unrestricted Operating 6,456 6,889 Board designated Contingency fund 4,125 4,125 Endowment 5,139 4,515 Total unrestricted 15,720 15,529 Temporarily restricted 266,373 299,309 Permanently restricted 13,151 13,100 Total net assets 295,244 327,938 Total liabilities and net assets $ 345,797 $ 376,258 See Notes To Consolidated Financial Statements. 2
  5. 5. Conservation International Foundation And Affiliates Consolidated Statements Of Activities Years Ended June 30, 2009 And 2008 (In Thousands) 2009 2008 Temporarily Permanently Temporarily Permanently Unrestricted Restricted Restricted Total Unrestricted Restricted Restricted Total Revenue and support: Grants and contributions: Foundations $ 6,478 $ 61,083 $ 51 $ 67,612 $ 6,928 $ 138,078 $ 51 $ 145,057 Individuals 7,080 8,637 - 15,717 6,570 18,935 - 25,505 Corporations 2,041 10,179 - 12,220 1,592 22,663 - 24,255 Non-U.S. Government - 11,523 - 11,523 - 1,207 - 1,207 NGO/multilaterals 2 10,543 - 10,545 19 27,253 - 27,272 U.S. Government - 6,260 - 6,260 - 7,229 - 7,229 Cancellations and de-obligations - (6,793) - (6,793) - - - - Investment (loss) income (2,221) (1,950) - (4,171) 563 (1,307) - (744) Licensing agreements, product sales and other income 1,003 2,162 - 3,165 1,095 2,057 - 3,152 Net assets released from - donor restrictions 129,907 (129,907) - - 119,128 (119,128) - - Total revenue and support 144,290 (28,263) 51 116,078 135,895 96,987 51 232,933 Expenses: Program services: Science and Knowledge 15,790 - - 15,790 15,460 - - 15,460 Global Strategies and Ecosystem Finance 24,411 - - 24,411 25,560 - - 25,560 Field Programs 63,583 - - 63,583 56,976 - - 56,976 Global Marine 3,619 - - 3,619 2,296 - - 2,296 Global Outreach 14,490 - - 14,490 12,087 - - 12,087 Total program services 121,893 - - 121,893 112,379 - - 112,379 Supporting services: Management and operations 14,692 - - 14,692 14,194 - - 14,194 Development 7,514 - - 7,514 8,691 - - 8,691 Total supporting services 22,206 - - 22,206 22,885 - - 22,885 Total expenses 144,099 - - 144,099 135,264 - - 135,264 Changes in net assets before non-operating activity 191 (28,263) 51 (28,021) 631 96,987 51 97,669 Non-operating activity: (Loss) gain on translation of affiliate and field office net assets - (1,545) - (1,545) - 64 - 64 (Loss) gain on translation of grants and pledges receivable - (3,128) - (3,128) - 4,835 - 4,835 Changes in net assets 191 (32,936) 51 (32,694) 631 101,886 51 102,568 Net assets: Beginning 15,529 299,309 13,100 327,938 14,898 197,423 13,049 225,370 Ending $ 15,720 $ 266,373 $ 13,151 $ 295,244 $ 15,529 $ 299,309 $ 13,100 $ 327,938 See Notes To Consolidated Financial Statements. 3
  6. 6. Conservation International Foundation And Affiliates Consolidated Statements Of Cash Flows Years Ended June 30, 2009 And 2008 (In Thousands) 2009 2008 Cash Flows From Operating Activities Changes in net assets $ (32,694) $ 102,568 Adjustments to reconcile changes in net assets to net cash provided by operating activities: Depreciation and amortization 945 1,269 (Gain) loss on disposal of property and equipment (3) 124 Donated investments (3,355) (7,451) Net realized and unrealized loss on sales of investments 6,226 4,250 Allowance for security defaults - 250 Net loss (gain) on translation of foreign denominated grants and promises to give receivable 3,128 (4,835) Loss on notes receivable 137 276 Net contributions restricted for long-term investment (51) (51) Cancellations and de-obligations 6,793 - Changes in assets and liabilities: (Increase) decrease in: Grants and promises to give receivable 39,112 (81,330) Prepaid expenses and other assets 305 (461) Increase (decrease) in: Accounts payable and accrued expenses 386 (398) Accrued salaries, vacation and employee benefits (612) 967 Grants payable 1,306 3,069 Deferred revenue 493 (6,969) Net cash provided by operating activities 22,116 11,278 Cash Flows From Investing Activities Proceeds from sales of investments 20,636 35,861 Purchases of investments (10,038) (4,702) Transfer from (to) cash and cash equivalents 254 (27,526) Purchase of property and equipment (369) (527) Collections on notes receivable 1,667 1,835 Issuance of notes receivable (1,480) (2,167) Net cash provided by investing activities 10,670 2,774 Cash Flows From Financing Activities Proceeds from notes payable 991 300 Principal payments on notes payable (331) (446) Contributions restricted for long-term investments 51 51 Net cash provided by (used in) financing activities 711 (95) Net increase in cash and cash equivalents 33,497 13,957 Cash And Cash Equivalents Beginning 81,949 67,992 Ending $ 115,446 $ 81,949 Supplemental Disclosure Of Cash Flow Information Cash paid for interest $ 194 $ 189 Supplemental Schedule of Noncash Investing Activities Donated investments $ 3,355 $ 7,451 See Notes To Consolidated Financial Statements. 4
  7. 7. Conservation International Foundation And Affiliates Notes To Consolidated Financial Statements Note 1. Nature Of Activities And Significant Accounting Policies Nature of activities: Conservation International Foundation and Affiliates (CI), founded in 1987, imagines a healthy prosperous world in which societies are forever committed to caring for and valuing nature for the long-term benefit of people and all life on Earth. By building upon a strong foundation of science, partnership and field demonstration, CI empowers societies to responsibly and sustainably care for nature for the well-being of humanity. An entrepreneurial organization with its headquarters in the Washington, D.C. metro area and offices in 28 countries, CI’s overarching goal is to integrate the sustainable management of natural resources into development principles and practices. Our emphasis is on sustaining the well-being of people while protecting the healthy ecosystems (i.e., biodiversity – the genes, species and ecological processes) and ecosystem services we all need. We are currently focusing on six broad elements of human well-being, where the health of ecosystems and ecosystem services play a major role; chief among them are climate, fresh water, and food security. Within each, we focus on specific areas where CI can have an important impact. We accomplish our goals by influencing global policies, markets and public opinion to understand, appreciate, and properly value nature’s assets. Our work is undertaken by cross-functional teams made up of staff experts from five programs: Science & Knowledge develops the social, economic, and natural science that underpins CI’s core proposition that nature is essential for human well-being and development; this science also helps set CI’s priorities. Over the next few years, our focus will be on understanding and quantifying the contribution of nature to human well-being, projecting impacts of global change on natural systems and identifying “tipping points,” developing land/seascape- use scenarios, and measuring the impact of policy and market interventions. Global Strategies & Ecosystem Finance is responsible for developing CI’s approach to the six areas of human well-being, from inception to completion (i.e., from the design and business planning stage, through management of cross-institutional teams, to broadened partnerships and sustainable financing). Ecosystem finance supports project development, financing and works to ensure long-term sustainability of our efforts. Field Programs provide on-the-ground demonstrations for CI’s core premise that sustainable economic growth that benefits human well-being over the long-term depends upon protecting nature’s assets. CI will develop, implement, and manage field programs that will achieve important objectives on the ground (i.e., their ability to demonstrate successful nature-based development at various scales) and/or to contribute to policy and markets objectives. See Note 15 for a breakdown of field program expenses by region. Global Marine develops and tests (at field-model sites) innovative and amplifiable approaches to (and funding mechanisms for): comprehensive ocean governance and management, replacing negative economic incentives with positive incentives in favor of ocean stewardship, and marine adaptation to climate change. Global Marine is an important incubator of new and creative marine initiatives. Global Outreach engages the sectors – corporate, governmental, development, NGO, and the public – that create the policies and markets that CI aims to influence toward a nature-based development path. To this end, Global Outreach brings together CI’s three major units that specifically target influential external audiences: the Center for Environmental Leadership in Business, the Center for Conservation and Government, and Global Marketing + Communications. 5
  8. 8. Conservation International Foundation And Affiliates Notes To Consolidated Financial Statements Note 1. Nature Of Activities And Significant Accounting Policies (Continued) Affiliates: The accompanying consolidated financial statements include the operations of CI – Brazil, CI – Suriname, CI – Mexico, CI – Guyana, and ShanShui Center for Nature & Society in China. All of the aforementioned organizations are separately incorporated in their respective countries. Due to the significant amount of oversight and support (financial and programmatic) provided by CI, their financial activities have been consolidated with the financial activities of CI. A summary of CI’s significant accounting policies follows: Basis of accounting: The accompanying consolidated financial statements have been prepared on the accrual basis of accounting, whereby, revenue is recognized when earned and expenses are recognized when incurred. Principles of consolidation: All transactions between CI and its affiliates have been eliminated in consolidation. Basis of presentation: The financial presentation follows the recommendations of the Financial Accounting Standards Board (FASB) in its Statement of Financial Accounting Standards (SFAS) No. 117, Financial Statements of Not-for- Profit Organizations. Under SFAS No. 117, CI 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. Net assets, revenue, gains and losses are classified based on the existence or absence of donor-imposed restrictions. Accordingly, net assets and changes therein are classified and reported as follows: Unrestricted net assets – Contributions and other inflows of assets whose use is not subject to donor-imposed stipulations. Temporarily restricted net assets – Contributions and other inflows of assets whose use is subject to donor- imposed stipulations that either expire by the passage of time or will be met by actions of CI pursuant to those stipulations, such as usage for specific programs. Permanently restricted net assets – Contributions and other inflows of assets whose use is subject to donor- imposed stipulations that the principal must be maintained permanently by CI. The accompanying consolidated financial statements include the worldwide operations of CI (affiliates and field offices). At June 30, 2009 and 2008, assets held in foreign countries totaled approximately $13,617,000 and $22,673,000, respectively. The consolidated statements of activities include revenue of $1,379,000 and $11,872,000 from foreign country programs for the years ended June 30, 2009 and 2008, respectively. Cash and cash equivalents: Cash and short-term investments with maturities at dates of purchase of three months or less are classified as cash equivalents, except that any such cash or investments purchased with endowment funds or with management-designated investment funds are classified as investments. Investments: Investments are carried at estimated fair market value in the consolidated statements of financial position. Fair value of investments is estimated based on quoted market prices where available. Investments may include some short-term investments, which consist primarily of money market funds and other short-term investments temporarily held by investment managers. Investments in investment partnerships are valued at fair value, based on the applicable percentage ownership of the underlying partnership’s net assets as of the measurement date, as determined by CI. 6
  9. 9. Conservation International Foundation And Affiliates Notes To Consolidated Financial Statements Note 1. Nature Of Activities And Significant Accounting Policies (Continued) Investments (continued): In determining fair value, CI utilizes valuations provided by the fund manager of the underlying investment partnerships. The underlying investment partnerships value securities and other financial instruments on a fair value basis of accounting. The estimated fair values of certain investments of the underlying investment partnerships, which may include private placements and other securities for which prices are not readily available, are determined by CI of the respective other investment partnership and may not reflect amounts that could be realized upon immediate sale, nor amounts that may be ultimately realized. Accordingly, the estimated fair values may differ significantly from the values that would have been used had a ready market existed for these investments. The fair value of CI’s investments in other investment partnerships generally represents the amount CI would expect to receive if it were to liquidate its investment in the investment partnerships, excluding any redemption charges that may apply. CI may adjust the respective manager’s valuation when circumstances support such an adjustment. Investment income and net appreciation (depreciation) on investments are reported as follows, when earned: As increases in permanently restricted net assets, if the terms of the gift or relevant state law require that they be added back to the principal of the permanently restricted contributions. As increases (decreases) in temporarily restricted net assets, if the terms of the gift or state law impose restrictions on the current use of the investment income or net appreciation (depreciation). As increases (decreases) in unrestricted net assets in all other cases. Concentrations of credit and market risk: CI’s financial instruments that are exposed to concentrations of credit risk consist primarily of its cash and cash equivalents, investments, and grants and pledges receivable. CI invests its excess cash and cash equivalents and maintains its investments with high-quality financial institutions. CI had approximately $3,960,000 and $3,701,000 of cash and cash equivalents on hand and at financial institutions in foreign countries at June 30, 2009 and 2008, respectively. The majority of the funds invested in foreign countries are uninsured. At times, CI maintains cash balances at financial institutions in excess of Federal Deposit Insurance Corporation (FDIC) limits. Management believes the risk in these situations to be minimal. The composition and maturities of investments, as well as investment performance, are regularly monitored by management. Market values of investments may decline for a number of reasons, including changes in prevailing market and interest rates, increases in defaults and credit rating downgrades. As a result of the sub-prime mortgage crises and collapse of the credit markets, one of CI’s investment accounts, the Columbia Asset Management Strategic Cash Fund (Columbia Fund), was closed by Columbia Asset Management on December 6, 2007. At this time, CI chose to stay in the fund and allow Columbia Asset Management to liquidate the portfolio in an orderly manner. Included in this fund’s holdings were various structured investment vehicles and asset-backed securities, which were impacted by these economic conditions and resulted in the fund assets being frozen. At June 30, 2009, CI had $3.6 million, representing 13% of total investments, invested in the Columbia Fund. At date of management’s review of subsequent events, CI’s investment in the Columbia Fund was $2.8 million. Grants, contributions, and promises to give: Grants, contributions, and promises to give are recognized as revenue in the year a non-revocable commitment is received from the donor. They are reported as increases in the appropriate revenue category of net assets. Grants and promises to give that will not be collected within one year have been discounted at a risk-free rate of return in effect at the time the gift was pledged, based upon anticipated payment dates. In-kind contributions consisted of donated professional fees, goods and office space in 2009 and 2008. The in-kind contributions are recorded at their fair value as of the date the goods or services are provided. In-kind contributions were $401,000 and $184,000 for the years ended June 30, 2009 and 2008, respectively. 7
  10. 10. Conservation International Foundation And Affiliates Notes To Consolidated Financial Statements Note 1. Nature Of Activities And Significant Accounting Policies (Continued) Notes receivable: Notes are recorded as receivables at face value when the agreement is signed by both parties. Related interest income is recognized as it is earned. An allowance for uncollectible notes is based on an evaluation of the collectability of the principal and interest. Property and equipment: Property and equipment purchased with unrestricted funds are stated at cost and depreciated on the straight-line basis over their related estimated useful lives, generally three to five years. Assets with a unit cost of $5,000 or more that are purchased from unrestricted funding sources are capitalized. Expenditures for maintenance and reports that do not improve or extend the lives of the respective assets are expensed as incurred. Prior to July 1, 2008, property and equipment purchased under restricted grant agreements were recorded at cost and depreciated on the straight-line basis over their related estimated useful lives, generally three to five years. Beginning July 1, 2008, property and equipment purchased under restricted grant agreements are expensed and charged to the corresponding program in accordance with the terms and conditions of the agreements. Property and equipment purchased under restricted grant agreements prior to July 1, 2008, continue to be depreciated on the straight-line basis over their related estimated useful lives. Leasehold improvements are recorded at cost and are amortized over the life of the lease. Land and buildings are stated at cost; buildings are depreciated on the straight-line basis over an estimated useful life of 30 years. When assets are retired or sold, the related cost and accumulated depreciation are removed from the accounts and any gain or loss on retirement or disposal of the assets is recorded as revenue or expense. Impairment of long-lived assets: CI 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 reported at the lower of the carrying amount or fair value, less costs to sell. Grants payable: Grants are recognized as liabilities in the year CI makes the commitment. Fair value of financial instruments: The following methods and assumptions were used to estimate the fair value of each class of financial instruments, for which it is practicable to estimate that value: Cash and cash equivalents: For cash and cash equivalents, the carrying amount is a reasonable estimate of fair value. Grants and promises to give receivable: Fair value is estimated based on the donor’s verifiable pledge. For those due in greater than one year, fair value is estimated by discounting estimated future cash flows at rates approximating the current rate for risk-free when the promise is made. Notes receivable: The carrying amount of notes receivable approximated the net realizable value of these instruments. Fair value is adjusted in consideration of the allowance for uncollectible notes receivable. 8
  11. 11. Conservation International Foundation And Affiliates Notes To Consolidated Financial Statements Note 1. Nature Of Activities And Significant Accounting Policies (Continued) Investments: For securities held for investment purposes, fair values are based on quoted market prices. If a quoted market price is not available, fair value is estimated using quoted market prices for similar securities. Although management uses its best judgment at estimating the fair value of the underlying assets for those investments, there are inherent limitations in any valuation technique. Therefore, the value is not necessarily indicative of the amount that could be realized in a current transaction. Future events will also affect the estimates of fair value, and the effect of such events on the estimates of fair value could be material. Accounts payable and accrued expenses: The carrying amount of these amounts approximates fair value because of the short maturity of these obligations. Accrued salaries, vacation, and employee benefits: The carrying amount of these amounts approximates fair value because of the short maturity of these obligations. Notes payable: The carrying amounts of notes payable approximated fair value, due to CI’s past timely payment history and intent to meet these commitments. Grants payable: The carrying amounts of grants payable approximated fair value, due the short maturity of these obligations. Foreign currency translation: The U.S. dollar is the reporting currency for CI’s worldwide operations. Transactions in currencies other than dollars are translated into dollars at the rate of exchange in effect during the month of the transaction. Assets and liabilities denominated in non-U.S. currency are translated into dollars at the exchange rate in effect at the date of the consolidated statements of financial position. Allocation of functional expenses: The costs of providing program and supporting services have been summarized on a functional basis in the consolidated statements of activities. Expenses that relate directly to a program or supporting service are allocated to that program or supporting service. Use of estimates: The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenue and expenses during the reporting period. Significant items subject to such estimates and assumptions include the carrying value of investments and grants and pledges receivable. Actual results could differ from those estimates. Reclassifications: Certain items in the June 30, 2008 financial statements have been reclassified to conform to the June 30, 2009 financial statement presentation. The reclassifications had no effect on the previously reported change in net assets. Income taxes: CI is exempt from income taxes under Section 501(c)(3) of the Internal Revenue Code (IRC). CI is subject to unrelated business income taxes under Section 512 of the IRC; however, in the opinion of management, no provision for income taxes is required to be made. The aforementioned affiliates are organized as tax-exempt entities in their respective countries, with the exception of CI – Guyana. This affiliate is organized under the Companies Act of Guyana regulations. Its by-laws prohibit the accumulation or distribution of profits. 9
  12. 12. Conservation International Foundation And Affiliates Notes To Consolidated Financial Statements Note 1. Nature Of Activities And Significant Accounting Policies (Continued) Recently issued pronouncements: Effective July 1, 2008, CI adopted Statement of Financial Accounting Standards (SFAS) No. 157, Fair Value Measurements, issued by the Financial Accounting Standards Board (FASB). SFAS No 157 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, and sets out a fair value hierarchy. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and lowest priority to unobservable inputs (Level 3). Inputs are broadly defined under SFAS No. 157 as assumptions market participants would use in pricing an asset or liability. CI has added the required disclosures in Note 3 to the financial statements. In August 2008, FASB issued Staff Position (FSP) 117-1, Endowments of Not-for-Profit Organizations: Net Asset Classification of Funds Subject to an Enacted Version of the Uniform Prudent Management of Institutional Funds Act, and Enhanced Disclosures for all Endowment Funds. The standard 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) and expands disclosures about an organization’s endowment (both donor-restricted and board designated funds), whether or not the organization is subject to UPMIFA. CI has adopted this statement for the year ended June 30, 2009. CI has added the required disclosures in Note 9 to the financial statements. In June 2006, FASB issued FASB Interpretation No. 48 (FIN 48), Accounting for Uncertainty in Income Taxes – an interpretation of FASB Statement 109. FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with SFAS No. 109, Accounting for Income Taxes. FIN 48 prescribes a comprehensive model for recognizing, measuring, presenting and disclosing in the financial statements tax positions taken or expected to be taken on a tax return, including positions that the organization is exempt from income taxes or not subject to income taxes on unrelated business income. If there are changes in net assets as a result of the application of FIN 48, these will be accounted for as an adjustment to the opening net asset balance, along with accompanying disclosures about the amounts of liabilities. CI presently discloses or recognizes income tax positions based on management’s estimate of whether it is reasonably possible or probable, respectively, that a liability has been incurred for unrecognized income tax benefits by applying SFAS No. 5, Accounting for Contingencies. CI has elected to defer the application of FIN 48 in accordance with FSP FIN 48-3, which defers the effective date to fiscal years beginning after December 15, 2008. CI will be required to adopt FIN 48 in its 2010 annual financial statements. Management has assessed the impact of FIN 48 and determined that it will have no material impact on its financial position and changes in net assets at this time. Subsequent events: In May 2009, FASB issued SFAS No. 165, Subsequent Events, which establishes general standards of accounting for and disclosure of events that occur after the balance sheet date, but before financial statements are issued or are available to be issued. CI has adopted this statement for the year ended June 30, 2009. CI evaluated subsequent events for potential required disclosures through October 26, 2009, which is the day the financial statements were available to be issued. 10
  13. 13. Conservation International Foundation And Affiliates Notes To Consolidated Financial Statements Note 2. Investments The fair value of investments at June 30, 2009 and 2008, consist of the following (in thousands): 2009 2008 Mutual funds $ 12,934 $ 22,288 Limited partnership and other 6,091 7,589 Marketable securities 5,773 9,772 Money market funds 3,026 1,898 Allowance for security defaults (250) (250) $ 27,574 $ 41,297 Investment (loss) income for the years ended June 30, 2009 and 2008, consist of the following (in thousands): 2009 2008 Realized and unrealized losses $ (6,226) $ (4,250) Interest and dividends 2,120 3,867 Investment management fees (65) (111) Change in allowance for security defaults - (250) Investment (loss) $ (4,171) $ (744) The allowance for security defaults was determined by assessing the collectability of asset-backed securities held in the Columbia Fund (See Note1). Note 3. Fair Value Of Financial Instruments For the year ended June 30, 2009, CI adopted SFAS No. 157, Fair Value Measurements, issued by FASB. SFAS No. 157 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, and sets out a fair value hierarchy. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). Inputs are broadly defined under SFAS No. 157 as assumptions market participants would use in pricing an asset or liability. The three levels of the fair value hierarchy under SFAS No. 157 are described below: Level 1: Unadjusted quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date. The types of investments included in Level 1 include listed equities and listed derivatives. As required by SFAS No. 157, CI does not adjust the quoted price for these investments, even in situations where CI holds a large position and a sale could reasonably impact the quoted price. Level 2: Inputs other than quoted prices within Level 1 that are observable for the asset or liability, either directly or indirectly, and fair value is determined through the use of models or other valuation methodologies. Investments which are generally included in this category include corporate bonds and loans, less liquid and restricted equity securities and certain over-the-counter derivatives. A significant adjustment to a Level 2 input could result in the Level 2 measurement becoming a Level 3 measurement. 11
  14. 14. Conservation International Foundation And Affiliates Notes To Consolidated Financial Statements Note 3. Fair Value Of Financial Instruments (Continued) Level 3: Inputs are unobservable for the asset or liability and include situations where there is little, if any, market activity for the asset or liability. The inputs into the determination of fair value are based upon the best information in the circumstances and may require significant management judgment or estimation. Investments that are included in this category generally include equity and debt positions in private companies and general and limited CI interests in private investment funds, real estate funds, debt funds and distressed debt. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an investment’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. CI’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the investment. The table below presents the balances of assets and liabilities measured at fair value on a recurring basis by level within the hierarchy: Description Level 1 Level 2 Level 3 Total Mutual funds $ 9,372 $ - $ 3,562 $ 12,934 Limited partnership and other - 6,003 88 6,091 Marketable securities 5,773 - - 5,773 Money market funds 3,026 - - 3,026 $ 18,171 $ 6,003 $ 3,650 $ 27,824 Mutual funds, marketable securities, and money market funds are classified as Level 1 instruments when they are actively traded on public exchanges. Limited partnerships that do not have quoted market prices in active markets are classified as Level 2 instruments. Their value is determined using models and other valuation methodologies, which are corroborated by market data. The mutual funds classified as Level 3 instruments represent the Columbia Fund, the nature of which is detailed in Note 1, and are done so primarily due to the fact that CI is uncertain as to when they will be able to redeem the investment. The other investment classified as a Level 3 instrument, is due to the market value being based on unobservable inputs that are not corroborated by market data. For assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3), SFAS No. 157 requires reconciliation of the beginning and ending balances, separately, for each major category of assets and liabilities, except for derivative assets and liabilities, which may be presented net. The table below represents the reconciliation of CI’s assets measured at fair value on a recurring basis using significant unobservable inputs: Beginning balance of assets, July 1, 2008 $ 12,707 Net realized and unrealized gains (losses) (917) Sales (8,140) Ending balance of assets, June 30, 2009 $ 3,650 12
  15. 15. Conservation International Foundation And Affiliates Notes To Consolidated Financial Statements Note 4. Grants And Promises To Give Receivable CI considers grants and promises to give receivable to be collectible within one year, unless otherwise stated by the donor. Unconditional promises to give are due as follows (in thousands): 2009 2008 Within one year $ 118,569 $ 125,077 2 to 5 years 77,234 124,136 Over 5 years 2,950 3,500 Gross promises to give 198,753 252,713 Less discount to present value (6,150) (11,077) Net grants and promises to give receivable $ 192,603 $ 241,636 At June 30, 2009 and 2008, $1,695,000 and $2,833,000, respectively, had been conditionally pledged to CI. Because of uncertainties with regard to their realization, conditional promises are recognized only if and when the specified conditions are met. As such, these amounts are not reported in the accompanying consolidated statements of financial position or consolidated statements of activities. CI’s grants and promises to give receivable balance includes receivables from the federal government, foreign governments, and private donors. CI’s ten largest contributors during the year ended June 30, 2009, comprised approximately 70% or $81,229,000 of its revenue. CI’s ten largest contributors during the year ended June 30, 2008, comprised approximately 80% or $187,854,000 of its revenue. CI’s ten largest grants and promises to give receivable balances comprised approximately $169,793,000 or 88% at June 30, 2009, while the ten largest grants and promises to give totaled $212,198,000 or 88% as of June 30, 2008. Note 5. Notes Receivable As more fully discussed in Note 7, CI entered into note agreements with International Finance Corporation (IFC), Starbucks Corporation and the Overseas Private Investment Corporation (OPIC). In accordance with the note agreements, CI made loans to small- and medium-sized enterprises, which support biodiversity conservation and conservation-oriented employment in the regions in which CI works. At June 30, 2009 and 2008, notes receivable, less allowance for uncollectible notes, totaled approximately $2,108,000 and $2,432,000, respectively. The outstanding notes bear interest at rates ranging from 8% to 12% and are due between July 2009 and July 2016. 13
  16. 16. Conservation International Foundation And Affiliates Notes To Consolidated Financial Statements Note 5. Notes Receivable (Continued) In September 2006, CI relinquished its right to purchase option shares in The Day Chocolate Company Limited (the Company) in exchange for a $717,600, ten-year, interest-free note from the Company, with payments due to CI in 20 equal, semi-annual installments. The Company began making payments on this note in February 2007. The following schedule shows required future minimum repayments (in thousands): Years Ending June 30, 2010 $ 1,686 2011 310 2012 172 2013 114 2014 56 2015 and thereafter 128 2,466 Less allowance for uncollectible notes (358) $ 2,108 The allowance for uncollectible notes was determined by assessing the risk for each note. Note 6. Property and Equipment Property and equipment at June 30, 2009 and 2008, consist of the following (in thousands): 2009 2008 Furniture and equipment $ 7,906 $ 8,481 Leasehold improvements 2,971 2,952 Land 1,784 1,784 Buildings 555 555 13,216 13,772 Less accumulated depreciation and amortization (7,216) (7,199) Net property and equipment $ 6,000 $ 6,573 Depreciation expense for the years ended June 30, 2009 and 2008, was $945,000 and $1,269,000, respectively. 14
  17. 17. Conservation International Foundation And Affiliates Notes To Consolidated Financial Statements Note 7. Notes Payable Notes payable at June 30, 2009 and 2008, consist of the following (in thousands): 2009 2008 Starbucks $ 3,500 $ 2,500 OPIC 1,089 1,277 IFC-GEF 563 637 De Surinaamsche Bank N.V. 225 255 IFC - 48 $ 5,377 $ 4,717 CI entered into note agreements with IFC, Starbucks Corporation and OPIC to provide loans to small- and medium- sized enterprises, which support biodiversity conservation and conservation-oriented employment in hotspots and tropical wilderness areas where CI works. The loan principal, net of risk compensation fees for IFC, is due between September 2009 and August 2014 and bear interest rates ranging from 2.5% to 5.0%. During 2002, CI entered into a 15-year financing agreement with De Surinaamsche Bank N.V. in Suriname, to purchase an office building for $450,000. Under the terms of the agreement, CI makes monthly payments of $2,500, excluding interest. The outstanding balance bears interest at 9.50% per annum. The financing agreement is secured by the land and building. The book value of the secured assets was $343,000 at June 30, 2009. The following schedule shows required future principal payments (in thousands) as of June 30, 2009: Years Ending June 30, 2010 $ 454 2011 491 2012 529 2013 1,548 2014 1,280 2015 and thereafter 1,075 $ 5,377 Each loan agreement has various covenants, including ratios regarding liquidity and debt-to-net assets. 15
  18. 18. Conservation International Foundation And Affiliates Notes To Consolidated Financial Statements Note 8. Grants Payable During 2009 and 2008, CI entered into grant agreements with various domestic and foreign non-governmental organizations. CI expenses the grant obligation and records the corresponding liability when the grant agreement is signed, because the grants are unconditional. As of June 30, 2009 and 2008, CI’s total commitments were approximately $32,019,000 and $30,713,000, respectively. CI disburses grant funds to grant recipients based upon the recipients’ cash needs and does not schedule these payments in advance. CI estimates that the majority of this balance will be paid to recipients within the next fiscal year, so no discount on these payments is calculated. Note 9. Board Designated And Permanently Restricted Net Assets CI adopted FSP No. FAS 117-1 for the year ended June 30, 2009. Management has interpreted UPMIFA as requiring the preservation of the fair value of original donor-restricted contributions as of the date of the gift, absent explicit donor stipulations to the contrary. As a result of this interpretation, CI classifies as permanently restricted net assets (a) the original value of permanently restricted cash contributions and (b) the discounted value of the future permanently restricted cash contributions. The remaining portion of the donor-restricted cash contributions are classified as temporarily restricted net assets, until those amount are appropriated for expenditure in a manner consistent with the standard of prudence prescribed by UPMIFA. In accordance with UPMIFA, CI considers the following factors in making a determination to appropriate or accumulate donor-restricted cash contributions: The purpose of CI and donor-restricted endowment fund The duration and preservation of the fund General economic conditions The possible effect of inflation and deflation The expected total return from income and the appreciation of investments Other available financial resources Investment policies CI has adopted investment and spending policies for permanently restricted cash contributions that attempt to provide a predictable stream of funding to programs, while maintaining purchasing power. All earnings from these funds are reflected as temporarily restricted net assets, until appropriated for program expenditures. CI’s endowment funds consist of the following at June 30, 2009 (in thousands): Temporarily Permanently Unrestricted Restricted Restricted Total Donor-restricted endowment funds $ - $ 643 $ 13,151 $ 13,794 Board designated endowment funds 5,139 - - 5,139 $ 5,139 $ 643 $ 13,151 $ 18,933 16
  19. 19. Conservation International Foundation And Affiliates Notes To Consolidated Financial Statements Note 9. Board Designated And Permanently Restricted Net Assets (Continued) Endowment fund activity for the year ended June 30, 2009, consists of the following (in thousands): Temporarily Permanently Unrestricted Restricted Restricted Total Endowment net assets, beginning of year $ 4,515 $ 4,084 $ 13,100 $ 21,699 Investment return: Interest and dividends 110 484 - 594 Realized and unrealized loss on investments (681) (2,992) - (3,673) Amounts appropriated for expenditure (208) (933) - (1,141) Contributions 1,403 - 51 1,454 Endowment net assets, end of year $ 5,139 $ 643 $ 13,151 $ 18,933 Endowment funds are invested in the following manner as of June 30, 2009 (in thousands): Money market funds $ 688 Mutual funds 9,203 Marketable securities 4,986 Limited partnerships 4,056 $ 18,933 Investment and spending policies: CI has adopted investment and spending policies for endowment assets that attempt to provide a predictable stream of funding to programs supported by its endowment, while seeking to maintain the purchasing power of the endowment assets. CI’s spending and investment policies work together to achieve this objective through diversification of asset classes. The current long-term return objective is to generate a return that supports a 5% spending rate, while generating sufficient return to maintain the purchasing power of the corpus of the funds. To satisfy its long-term rate of return objectives, CI 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). CI targets a diversified asset allocation that places a greater emphasis on equity-based investments to achieve its long- term return objectives within prudent risk parameters. The spending policy calculates the amount of appropriations annually distributed from CI’s various endowed funds for grant making and administration. The current spending policy is to distribute the lesser of the accumulated earnings or 5% of the total endowment assets’ average balance of the preceding calendar year. If economic indicators suggest a downturn in investments, CI may choose to reduce the spending percentage to ensure the corpus is preserved. 17
  20. 20. Conservation International Foundation And Affiliates Notes To Consolidated Financial Statements Note 9. Board Designated And Permanently Restricted Net Assets (Continued) Annual returns in excess of spending are re-invested in the endowment assets. In the event that an endowment fund experiences investment losses in a particular year, these losses will be attributed to that fund. Unspent earnings on permanently restricted net assets, net of expenses incurred, totaled approximately $643,000 and $4,084,000 at June 30, 2009 and 2008, respectively, and are included in temporarily restricted net assets. Note 10. Temporarily Restricted Net Assets As of June 30, 2009, temporarily restricted net assets are restricted to the following programs (in thousands): 2009 2008 Science & Knowledge $ 31,422 $ 46,596 Global Strategies & Ecosystem Finance 123,613 138,869 Field Programs 79,618 76,049 Global Marine 560 1,123 Global Outreach 17,934 19,932 Operations 13,111 16,597 Development 115 143 $ 266,373 $ 299,309 Net assets were released from restriction for the year ended June 30, 2009, by incurring expenditures in accordance with donor stipulations as follows (in thousands): 2009 2008 Science & Knowledge $ 17,002 $ 16,542 Global Strategies & Ecosystem Finance 24,176 25,106 Field Programs 64,140 58,118 Global Marine 4,035 2,550 Global Outreach 13,467 11,932 Operations 5,594 3,855 Development 1,493 1,025 $ 129,907 $ 119,128 18
  21. 21. Conservation International Foundation And Affiliates Notes To Consolidated Financial Statements Note 11. Retirement Plans Eligible headquarters’ employees participate in a defined contribution retirement plan. CI matches employee contributions up to 6% of basic salary. Contributions made by CI during the years ended June 30, 2009 and 2008, amounted to approximately $1,355,000 and $1,286,000, respectively. During 2002, CI established an International Retirement Savings Plan (IRSP) for in-country staff working in CI’s field offices. CI adopted the IRSP with an effective participation date of January 1, 2001. In accordance with the IRSP, CI makes annual contributions of 3% of each eligible staff person’s annual salary. Contributions for the years ended June 30, 2009 and 2008, were $283,000 and $242,000, respectively. As of June 30, 2009 and 2008, CI’s accumulated liability was $927,000 and $938,000, respectively, which is included in accrued salaries, vacation, and employee benefits in the consolidated statements of financial position. An independently-managed investment fund accumulating vested and non-vested CI contributions is included within investments in the consolidated statements of financial position. Eligible CI – Brazil employees participate in a defined contribution retirement plan. CI matches employee contributions as a percentage of basic salary, as determined by the employee’s age and length of service. Average contributions are 5 – 6% of annual salaries. CI contributions vest annually at the rate of 10% per year after the first year. Contributions made by CI during the years ended June 30, 2009 and 2008, amounted to approximately $102,000 and $87,000, respectively. Note 12. Related Party Transactions Members of CI’s Board of Directors and their related entities pledged approximately $36.8 million and $51.4 million during the years ended June 30, 2009 and 2008, respectively. Of this amount, approximately $45.2 million and $49.6 million were receivable at June 30, 2009 and 2008, respectively. CI pledged approximately $335,000 to a related party during the year ended June 30, 2009. Of this amount pledged, approximately $86,000 was payable at June 30, 2009. Note 13. Commitments And Contingencies Leases: CI leases office space in Arlington, Virginia; Seattle, Washington; and foreign countries. CI is also obligated under several non-cancelable leases for office equipment. In addition, CI holds land concessions in Guyana and Fiji. The lease for CI’s Arlington, Virginia headquarters was signed on March 31, 2006, and began on December 1, 2006. The agreement expires on November 30, 2021. CI maintains a letter of credit with Bank of America as a security deposit on its lease. 19
  22. 22. Conservation International Foundation And Affiliates Notes To Consolidated Financial Statements Note 13. Commitments And Contingencies (Continued) Approximate annual payments under the non-cancelable lease agreements as of June 30, 2009, are as follows (in thousands): Years Ending June 30, 2010 $ 4,083 2011 3,800 2012 3,661 2013 3,600 2014 3,569 2015 and thereafter 27,076 $ 45,789 Total rent expense for the years ended June 30, 2009 and 2008, was approximately $4,633,000 and $4,444,000, respectively. U.S. Federal Grants: CI receives grants from various agencies of the U.S. Government. Such grants are subject to audit under the provisions of OMB Circular A-133. The ultimate determination of amounts received under the U.S. Government grants is based upon the allowance of costs reported to and accepted by the U.S. Government as a result of the audits. Until such audits have been accepted by the U.S. Government, there exists a potential contingency to refund any amount received in excess of allowable costs. Management is of the opinion that no material liability will result from such audits. CI’s undrawn letter of credit with the U.S. Government at June 30, 2009 and 2008, was approximately $4.6 million and $7.5 million, respectively. CI draws funds quarterly, based on the prior quarter’s spending. CI Affiliates: CI – Brazil, an independent affiliate of CI, owns an ecotourism property in Brazil through interest in Rio Negro Comércio, Serviços e Turismo, Ltd., its subsidiary corporation. The property consists of a lodge situated on 7.647 hectares in the state of Mato Grosso do Sul protected area. 7,000 hectares of this land is designated as a private reserve under an agreement between the State of Mato Grosso do Sul and SEMACT, the Brazilian agency responsible for natural resource preservation. CI – Brazil has been paying property taxes on the 647,000 hectares of land that fall outside the reserve area. Land designated as a private reserve is not subject to property tax; however, CI – Brazil has received an assessment notice form the Brazilian Federal Revenue Service (BFRS) in the amount of Brazilian Real 5,535,686 (approximately $2,853,000 at June 30, 2009) for tax years 2003 – 2005. CI – Brazil has challenged this assessment on the basis that the area has been put in protection. CI – Brazil must first seek an administrative remedy for relief of this assessment and if unsuccessful, may seek judicial remedy. CI has engaged counsel in Brazil. They have provided an opinion that CI’s likelihood of success for an administrative remedy is “possible,” and the likelihood of a judicial remedy is “probable.” Litigation: CI is involved in various claims and legal actions arising in the ordinary course of business. Based upon information currently available, management believes the ultimate disposition of these matters will not have a material adverse effect on its financial position, changes in net assets or cash flows. 20
  23. 23. Conservation International Foundation And Affiliates Notes To Consolidated Financial Statements Note 14. Allocation Of Joint Costs CI’s website, the purpose of which is to increase conservation awareness, serve as a resource to scientists and researchers and to educate the public about biodiversity and conservation, includes material that contains appeals for contributions. The costs of conducting those activities included an element of joint costs that were allocated as follows (in thousands): 2009 2008 Global Outreach $ 1,521 $ 1,114 Operations 114 - Development 461 566 Total $ 2,096 $ 1,680 Note 15. Analysis Of Field Program Expenses The following is a break-down by region of program related expenses: 2009 2008 South America $ 24,574 $ 25,678 Central America 3,750 3,490 Africa and Madagascar 9,767 11,231 Asia Pacific 25,492 16,577 Total $ 63,583 $ 56,976 Note 16. Subsequent Events On July 1, 2009, CI and ShanShui Center for Nature & Society terminated their affiliate agreement. ShanShui Center for Nature & Society became an independent entity and as such, will not be consolidated in future years. On July 7, 2009, CI entered into a note agreement with Agence Française De Developpement (AFD). AFD will make available to CI a credit facility of a maximum aggregate principal of $3,500,000 with an interest rate not to exceed 5.62%. Payments are due semi-annually between January 2014 and July 2021. CI will loan the funds to small and medium enterprises located in developing countries, whose activities preserve biodiversity. 21
  24. 24. Independent Auditor’s Report On The Supplementary Information To the Board of Directors Conservation International Foundation Arlington, Virginia Our audit was made for the purpose of forming an opinion on the basic consolidated financial statements for the year ended June 30, 2009, taken as a whole. The consolidating and other supplementary information which follows is presented for purposes of additional analysis of the basic consolidated financial statements rather than to present the financial position of the individual entities. The consolidating and other supplementary 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. Vienna, Virginia October 26, 2009 McGladrey & Pullen, LLP is a member firm of RSM International, an affiliation of separate and independent legal entities. 22
  25. 25. Conservation International Foundation And Affiliates Consolidating Statement Of Financial Position June 30, 2009 (In Thousands) Field Assets Headquarters Affiliates Offices Total Cash and cash equivalents $ 111,486 $ 738 $ 3,222 $ 115,446 Investments, net 27,484 88 2 27,574 Grants and promises to give, net 186,393 1,121 5,089 192,603 Notes receivable, net 2,108 - - 2,108 Prepaid expenses and other assets 1,386 175 505 2,066 Property and equipment, net 3,323 2,184 493 6,000 Total assets $ 332,180 $ 4,306 $ 9,311 $ 345,797 Liabilities And Net Assets Current Liabilities Accounts payable and accrued expenses $ 4,901 $ 155 $ 459 $ 5,515 Accrued salaries, vacation and employee benefits 3,952 774 1,870 6,596 Notes payable 5,152 225 - 5,377 Grants payable 26,307 1,439 4,273 32,019 Deferred revenue 1,046 - - 1,046 Due from (to) accounts 12,521 (5,229) (7,292) - Total liabilities 53,879 (2,636) (690) 50,553 Net Assets Unrestricted Operating 4,750 1,706 - 6,456 Board designated Contingency fund 4,125 - - 4,125 Endowment 5,139 - - 5,139 Total unrestricted 14,014 1,706 - 15,720 Temporarily restricted 251,136 5,236 10,001 266,373 Permanently restricted 13,151 - - 13,151 Total net assets 278,301 6,942 10,001 295,244 Total liabilities and net assets $ 332,180 $ 4,306 $ 9,311 $ 345,797 23
  26. 26. Conservation International Foundation And Affiliates Consolidated Statement Of Functional Expenses Year Ended June 30, 2009 (In Thousands) Global Strategies And Science And Ecosystem Field Global Global Knowledge Finance Programs Marine Outreach Operations Development Total Salaries and fringe benefits $ 8,694 $ 3,911 $ 20,547 $ 1,507 $ 7,588 $ 9,007 $ 3,849 $ 55,103 External grants 3,578 18,230 21,329 1,259 735 - - 45,131 Professional services 651 750 6,307 61 2,394 1,455 1,153 12,771 Travel, meetings, and events 1,205 532 6,472 462 1,530 650 1,464 12,315 Other direct costs 545 550 3,775 177 1,163 2,389 600 9,199 Occupancy 874 366 1,945 116 862 820 387 5,370 Furniture and equipment 151 28 2,657 20 120 270 19 3,265 Depreciation and amortization 92 44 551 17 98 101 42 945 $ 15,790 $ 24,411 $ 63,583 $ 3,619 $ 14,490 $ 14,692 $ 7,514 $ 144,099 24

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