RURAL ADVANCEMENT FOUNDATION
INTERNATIONAL - USA
.
Pittsboro, North Carolina
.
AUDITED FINANCIAL STATMENTS
.
FOR THE YEAR ...
CONTENTS
Pages
Independent Auditor's Report 2-3
Financial Statements - Exhibits:
"A" Statements of Financial Position 4
"B...
INDEPENDENT AUDITOR'S REPORT
Page 1 of 2
Board of Directors
Rural Advancement Foundation International - USA
Pittsboro, No...
3
Page 2 of 2
Opinion
In our opinion, the financial statements referred to above present fairly, in all material
respects,...
4
EXHIBIT A
2012 2011
CURRENT ASSETS:
Cash and equivalents 438,157$ 403,219$
Charitable gift annuity 11,172 10,083
Receiva...
5
EXHIBIT B
Temporarily 2012 2011
Unrestricted Restricted Totals Totals
REVENUES AND PUBLIC SUPPORT:
Private foundations a...
6
EXHIBIT C
Tobacco
Communities
and Ag Contract
Just Enterprise Agriculture Farm General and 2012 2011
Foods Development R...
7
EXHIBIT D
2012 2011
CASH FLOWS FROM OPERATING ACTIVITIES:
Changes in net assets 346,130$ (2,793,287)$
Adjustments to rec...
8
RURAL ADVANCEMENT FOUNDATION INTERNATIONAL – USA
NOTES TO FINANCIAL STATEMENTS
Page 1 of 11
NATURE OF ACTIVITIES
Rural A...
9
RURAL ADVANCEMENT FOUNDATION INTERNATIONAL – USA
NOTES TO FINANCIAL STATEMENTS
Page 2 of 11
SUMMARY OF SIGNIFICANT ACCOU...
10
RURAL ADVANCEMENT FOUNDATION INTERNATIONAL – USA
NOTES TO FINANCIAL STATEMENTS
Page 3 of 11
SUMMARY OF SIGNIFICANT ACCO...
11
RURAL ADVANCEMENT FOUNDATION INTERNATIONAL – USA
NOTES TO FINANCIAL STATEMENTS
Page 4 of 11
SUMMARY OF SIGNIFICANT ACCO...
12
RURAL ADVANCEMENT FOUNDATION INTERNATIONAL – USA
NOTES TO FINANCIAL STATEMENTS
Page 5 of 11
CHARITABLE GIFT ANNUITY
In ...
13
RURAL ADVANCEMENT FOUNDATION INTERNATIONAL – USA
NOTES TO FINANCIAL STATEMENTS
Page 6 of 11
FAIR VALUE OF ASSETS (CONTI...
14
RURAL ADVANCEMENT FOUNDATION INTERNATIONAL – USA
NOTES TO FINANCIAL STATEMENTS
Page 7 of 11
CONTRACTS RECEIVABLE
Contra...
15
RURAL ADVANCEMENT FOUNDATION INTERNATIONAL – USA
NOTES TO FINANCIAL STATEMENTS
Page 8 of 11
DEFERRED COMPENSATION
After...
16
RURAL ADVANCEMENT FOUNDATION INTERNATIONAL – USA
NOTES TO FINANCIAL STATEMENTS
Page 9 of 11
LEASE COMMITMENTS (CONTINUE...
17
RURAL ADVANCEMENT FOUNDATION INTERNATIONAL – USA
NOTES TO FINANCIAL STATEMENTS
Page 10 of 11
TEMPORARILY RESTRICTED NET...
18
RURAL ADVANCEMENT FOUNDATION INTERNATIONAL – USA
NOTES TO FINANCIAL STATEMENTS
Page 11 of 11
RESTATEMENT
During the cur...
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FY 2012 Financial Audit for Rural Advancement Foundation International-USA

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Financial audit conducted for Rural Advancement Foundation International-USA for fiscal year 2012 (January 1 - December 31, 2013).

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FY 2012 Financial Audit for Rural Advancement Foundation International-USA

  1. 1. RURAL ADVANCEMENT FOUNDATION INTERNATIONAL - USA . Pittsboro, North Carolina . AUDITED FINANCIAL STATMENTS . FOR THE YEAR ENDED DECEMBER 31, 2012 (With Comparative Totals for the Year Ended December 31, 2011)
  2. 2. CONTENTS Pages Independent Auditor's Report 2-3 Financial Statements - Exhibits: "A" Statements of Financial Position 4 "B" Statement of Activities 5 "C" Statement of Functional Expenses 6 "D" Statements of Cash Flows 7 Notes to Financial Statements 8-18
  3. 3. INDEPENDENT AUDITOR'S REPORT Page 1 of 2 Board of Directors Rural Advancement Foundation International - USA Pittsboro, North Carolina We have audited the accompanying financial statements of Rural Advancement Foundation International - USA (a nonprofit organization), which comprise the statement of financial position as of December 31, 2012, and the related statements of activities, functional expenses, and cash flows for the year then ended, and the related notes to the financial statements. The prior year summarized comparative information has been derived from the Organization’s 2011 audited financial statements and, in our report dated May 2, 2012, we expressed an unqualified opinion on those financial statements. Management’s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor’s Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
  4. 4. 3 Page 2 of 2 Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Rural Advancement Foundation International - USA as of December 31, 2012, and the changes in its net assets and its cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America. Chapel Hill, North Carolina March 18, 2013
  5. 5. 4 EXHIBIT A 2012 2011 CURRENT ASSETS: Cash and equivalents 438,157$ 403,219$ Charitable gift annuity 11,172 10,083 Receivables: Grants 421,784 440,359 Contracts 60,483 28,890 Other 544 1,849 Unconditional promises to give 75,000 1,799 Prepaid expenses and deposits 4,483 9,987 TOTAL CURRENT ASSETS 1,011,623 896,186 PROPERTY AND EQUIPMENT: Land 168,229 168,229 Building 908,720 908,720 Office equipment 37,486 40,572 Furniture and fixtures 10,911 10,911 1,125,346 1,128,432 Less: accumulated depreciation (316,546) (290,135) TOTAL PROPERTY AND EQUIPMENT 808,800 838,297 NONCURRENT ASSETS: Other assets 9,146 9,146 Unconditional promises to give, net 219,706 - ASSETS RURAL ADVANCEMENT FOUNDATION INTERNATIONAL - USA STATEMENTS OF FINANCIAL POSITION December 31, 2012 and 2011 TOTAL NONCURRENT ASSETS 228,852 9,146 TOTAL ASSETS 2,049,275$ 1,743,629$ CURRENT LIABILITIES: Accounts payable 30,333$ 36,349$ Security deposits 830 830 Charitable gift annuity 1,071 1,071 Line of credit 100,000 150,000 Deferred compensation - current maturity 10,152 1,738 TOTAL CURRENT LIABILITIES 142,386 189,988 OTHER LIABILITIES: Deferred compensation - net of current maturity 72,160 65,042 TOTAL LIABILITIES 214,546 255,030 NET ASSETS: Unrestricted 1,027,615 802,692 Temporarily restricted 807,114 685,907 TOTAL NET ASSETS 1,834,729 1,488,599 TOTAL LIABILITIES AND NET ASSETS 2,049,275$ 1,743,629$ LIABILITIES AND NET ASSETS The accompanying Notes to Financial Statements are an integral part of these statements.
  6. 6. 5 EXHIBIT B Temporarily 2012 2011 Unrestricted Restricted Totals Totals REVENUES AND PUBLIC SUPPORT: Private foundations and public funds 353,579$ 875,498$ 1,229,077$ 727,205$ Service contracts and honoraria 402,663 - 402,663 231,589 Individual contributions 153,293 - 153,293 90,705 Corporate contributions 26,036 - 26,036 21,222 Rental income 18,520 - 18,520 22,125 In-kind contributions - - - 88,939 Interest and dividends 164 46 210 2,536 Change in value of charitable gift annuity 2,001 - 2,001 (1,825) Realized gain (loss) on donated stock 53 - 53 (366) Registration fees 1,750 - 1,750 7,448 958,059 875,544 1,833,603 1,189,578 Net assets released from restrictions 754,337 (754,337) - - TOTAL REVENUES AND PUBLIC SUPPORT 1,712,396 121,207 1,833,603 1,189,578 EXPENSES: PROGRAM SERVICES: Just Foods 365,696 - 365,696 403,633 Tobacco Communities and Ag Enterprise Development 433,568 - 433,568 2,482,323 Contract Agriculture Reform 168,011 - 168,011 170,435 (With Comparative Totals for the Year Ended December 31, 2011) RURAL ADVANCEMENT FOUNDATION INTERNATIONAL - USA STATEMENT OF ACTIVITIES For the Year Ended December 31, 2012 The accompanying Notes to Financial Statements are an integral part of these statements. Contract Agriculture Reform 168,011 - 168,011 170,435 Farm Sustainability 252,749 - 252,749 578,080 TOTAL PROGRAM SERVICES 1,220,024 - 1,220,024 3,634,471 SUPPORTING SERVICES: General and administrative 201,734 - 201,734 166,513 Fundraising 65,715 - 65,715 181,881 TOTAL SUPPORTING SERVICES 267,449 - 267,449 348,394 TOTAL EXPENSES 1,487,473 - 1,487,473 3,982,865 CHANGES IN NET ASSETS 224,923 121,207 346,130 (2,793,287) NET ASSETS - BEGINNING OF YEAR (AS RESTATED) 802,692 685,907 1,488,599 4,281,886 NET ASSETS - END OF YEAR 1,027,615$ 807,114$ 1,834,729$ 1,488,599$ The accompanying Notes to Financial Statements are an integral part of these statements.
  7. 7. 6 EXHIBIT C Tobacco Communities and Ag Contract Just Enterprise Agriculture Farm General and 2012 2011 Foods Development Reform Sustainability Administrative Fundraising Totals Totals Salaries 96,896$ 64,510$ 76,187$ 153,514$ 101,050$ 44,970$ 537,127$ 863,907$ Organizational contracts - 313,000 - - - - 313,000 1,988,501 Consultants 153,297 11,776 48,301 6,339 24,492 297 244,502 551,234 Employee benefits 40,483 20,251 24,028 45,442 26,804 17,031 174,039 228,738 Travel 29,745 5,349 1,697 18,896 1,273 442 57,402 100,247 Depreciation 3,666 3,666 3,666 3,666 14,433 - 29,097 29,921 Professional fees 4,091 5,265 3,721 4,321 5,288 - 22,686 48,017 Occupancy 2,706 2,406 2,706 2,818 9,846 863 21,345 20,704 Memberships and subscriptions 17,290 - 500 535 70 130 18,525 6,526 Communications 2,842 2,671 2,371 5,900 803 1,069 15,656 22,798 Meetings and conferences 5,066 413 603 3,426 6,026 - 15,534 53,009 Equipment maintenance and repairs 1,003 996 1,012 1,259 2,665 - 6,935 14,302 Printing and copying 4,529 533 320 2,097 (740) - 6,739 27,695 Technology 1,571 574 1,091 1,904 1,411 - 6,551 - Insurance 1,278 590 1,278 1,278 1,278 - 5,702 5,339 Supplies 1,113 707 235 1,275 1,631 92 5,053 10,627 Postage and shipping 120 861 295 103 3,621 - 5,000 10,690 Interest - - - - 2,204 - 2,204 - Miscellaneous - - - (24) (421) 821 376 610 TOTAL EXPENSES 365,696$ 433,568$ 168,011$ 252,749$ 201,734$ 65,715$ 1,487,473$ 3,982,865$ Supporting Services RURAL ADVANCEMENT FOUNDATION INTERNATIONAL - USA STATEMENT OF FUNCTIONAL EXPENSES For the Year Ended December 31, 2012 (With Comparative Totals for the Year Ended December 31, 2011) Program Services The accompanying Notes to Financial Statements are an integral part of these statements.
  8. 8. 7 EXHIBIT D 2012 2011 CASH FLOWS FROM OPERATING ACTIVITIES: Changes in net assets 346,130$ (2,793,287)$ Adjustments to reconcile changes in net assets to net cash provided by (used in) operating activities: Change in fair value of charitable gift annuity (2,001) 1,825 Realized (gain) loss on donated stock (53) 366 Donated stock (10,036) (10,442) Depreciation 29,097 29,921 Loss on disposal of assets 400 418 Increase (decrease) in cash arising from changes in assets and liabilities: Grants receivable 18,575 2,520,801 Contracts receivable (31,593) (18,392) Other receivables 1,305 1,241 Unconditional promises to give, net (292,907) (1,299) Prepaid expenses and deposits 5,504 1,542 Other assets - (9,146) Accounts payable (6,016) (72,781) Security deposits - (1,500) Deferred compensation 15,532 (2,942) NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 73,937 (353,675) For the Years Ended December 31, 2012 and 2011 RURAL ADVANCEMENT FOUNDATION INTERNATIONAL - USA STATEMENTS OF CASH FLOWS The accompanying Notes to Financial Statements are an integral part of these statements. NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 73,937 (353,675) CASH FLOWS FROM INVESTING ACTIVITIES: Net charitable gift annuity activity 912 1,030 Net proceeds from sale of donated stock 10,089 10,076 NET CASH PROVIDED BY INVESTING ACTIVITIES 11,001 11,106 CASH FLOWS FROM FINANCING ACTIVITIES: Payments on line of credit (170,000) - Proceeds from line of credit 120,000 150,000 NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES (50,000) 150,000 NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS 34,938 (192,569) CASH AND EQUIVALENTS AT BEGINNING OF YEAR 403,219 595,788 CASH AND EQUIVALENTS AT END OF YEAR 438,157$ 403,219$ OTHER DISCLOSURES: In-kind donations -$ 88,939$ The accompanying Notes to Financial Statements are an integral part of these statements.
  9. 9. 8 RURAL ADVANCEMENT FOUNDATION INTERNATIONAL – USA NOTES TO FINANCIAL STATEMENTS Page 1 of 11 NATURE OF ACTIVITIES Rural Advancement Foundation International - USA (the “Organization”) is a nonprofit organization promoting community, equity, and diversity in agriculture. Rural Advancement Institute (RAI), a supporting organization of Rural Advancement Foundation International - USA, was incorporated in 2002 to exclusively operate for the benefit of, to perform the functions of, and to carry out the purposes of the Organization. RAI had no activity for the years ended December 31, 2012 and 2011. Activities of the Organization are organized as follows: Just Foods. This program works to revitalize public plant and animal breeding to increase the availability of seeds and animals suitable for sustainable agriculture. It educates farmers and other citizens about agricultural biotechnology. The program encourages the development of meaningful standards for food labels and proper implementation of labeling and certification programs. It also promotes new and expanded production, marketing, and research opportunities for organic farmers. Tobacco Communities and Agriculture Enterprise Development. This program serves as a resource for farmers and communities seeking to survive changes in the farm economy. It documents the impacts and promotes the model of the Tobacco Communities Reinvestment Fund as a way for state and private agencies to support agricultural enterprise development. Contract Agriculture Reform. This program promotes fair and equitable contract arrangements between individual farmers and processors. The program provides educational materials and trainings for farmers and community groups about contract agriculture, supports policy and administrative action related to fair contract standards, and serves as a resource and reference for contract farmers in crisis. Farm Sustainability. This program assists farmers and communities in adapting to changes in agriculture with sustainable solutions. The program provides skilled, in-depth farm planning and financial counseling, assists farmers with access to federal agriculture programs, provides research and analysis of farm policy impacts on farms and rural communities, and advises independent marketing and conservation initiatives aimed at assisting small and mid- scale farmers. It also trains farmers, communities, and churches in disaster assistance and addressing community issues resulting from disasters and farm loss.
  10. 10. 9 RURAL ADVANCEMENT FOUNDATION INTERNATIONAL – USA NOTES TO FINANCIAL STATEMENTS Page 2 of 11 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A. Basis of Accounting. The Organization’s financial statements are presented on the accrual basis of accounting in conformity with accounting principles generally accepted in the United States of America (U.S. GAAP), which require the use of certain estimates made by the Organization’s management. Accordingly, revenues are recognized when earned, and expenses are recognized when the obligation is incurred. The Organization reports gifts of cash and other assets as restricted support if they are received with donor stipulations that limit the use of the donated assets. When a donor restriction expires, that is, when a stipulated time restriction ends or purpose restriction is accomplished, temporarily restricted net assets are reclassified to unrestricted net assets and reported in the statement of activities as net assets released from restrictions. If the Organization receives and spends restricted monies within the same year, it is treated as unrestricted revenues. B. Cash and Equivalents. Cash and equivalents consist of monies on deposit at financial institutions and other highly liquid investments with maturities of three months or less. At times, the Organization places deposits with high-quality financial institutions that may be in excess of federally insured amounts. The Organization has not experienced any financial loss related to such deposits. C. Investments. Investments in marketable securities are stated at their fair market value. Donated securities are recorded at their fair market value at the date of the gift. D. Promises to Give. Unconditional promises to give are recorded at their net realizable value and are recognized as support and assets in the period received. Conditional promises to give are recognized when the conditions upon which they depend are substantially met. The Organization provides an allowance for doubtful accounts equal to the estimated losses that are expected to be incurred in their collection. No allowance is deemed necessary at December 31, 2012 and 2011.
  11. 11. 10 RURAL ADVANCEMENT FOUNDATION INTERNATIONAL – USA NOTES TO FINANCIAL STATEMENTS Page 3 of 11 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) E. Grants and Contracts Receivable. Grants and contracts receivable are carried at the estimated collectible amount. The Organization uses the reserve method to account for bad debts. An allowance is recorded based on management’s estimates of the collectability of the grants and contracts receivable balances. No allowance is deemed necessary at December 31, 2012 and 2011. F. Property and Equipment. Property and equipment are stated at cost for purchased assets and at market value on the date of the gift for donated assets. Property and equipment are capitalized if their life is expected to be greater than one year and if their cost exceeds $1,000. Depreciation is calculated using the straight-line method over estimated lives of 3 to 5 years for office equipment, 5 to 7 years for furniture and fixtures, 7 years for building improvements, and 40 years for building. The Organization reports gifts of land, buildings, and equipment as unrestricted support unless explicit donor stipulations specify how the donated assets must be used. Gifts of long-lived assets with explicit restrictions that specify how the assets are to be used and gifts of cash or other assets that must be used to acquire long-lived assets are reported as restricted support. Absent explicit donor stipulations about how long those long-lived assets must be maintained, the Organization reports expirations of donor restrictions when the donated or acquired long-lived assets are placed in service. G. Net Assets. Unrestricted - Resources of the Organization that are not restricted by donors or grantors as to use or purpose. These resources include amounts generated from operations, undesignated gifts, and investments in property and equipment. Temporarily Restricted - Resources that carry a donor-imposed restriction requiring the Organization to use or expend the donated assets as specified. The restrictions are satisfied by the passage of time or by actions of the Organization. Permanently Restricted - Resources that carry a donor-imposed restriction that stipulates that donated assets be maintained in perpetuity, but may permit the Organization to use or expend part or all of the income derived from the donated assets.
  12. 12. 11 RURAL ADVANCEMENT FOUNDATION INTERNATIONAL – USA NOTES TO FINANCIAL STATEMENTS Page 4 of 11 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) H. Fair Value of Financial Instruments. U.S. GAAP requires the Organization to disclose estimated fair values for its financial instruments. The carrying amount of financial instruments approximates fair value because of the short maturities of the instruments held. I. Marketing and Promotion Costs. Marketing and promotion costs are expensed as incurred. J. Income Taxes. The Organization is an exempt organization under Section 501(c)(3) of the Internal Revenue Code, and is classified as other than a private foundation. The Organization evaluates all tax positions to identify those that may be considered uncertain. All identified material tax positions are assessed and measured by a “more- likely-than-not” threshold to determine whether the benefit of any uncertain tax position should be recognized in the financial statements. Any changes in the amount of a tax position are recognized in the period the change occurs. The Organization’s Form 990 information returns are subject to examination by the Internal Revenue Service for a period of three years after the respective filing deadlines. K. Estimates. The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect 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. Accordingly, actual results could differ from those estimates.
  13. 13. 12 RURAL ADVANCEMENT FOUNDATION INTERNATIONAL – USA NOTES TO FINANCIAL STATEMENTS Page 5 of 11 CHARITABLE GIFT ANNUITY In 2002, the Organization was named a recipient of a charitable gift annuity with a market value at the date of gift totaling approximately $11,000. The trust agreement specifies that payments be made to another beneficiary over the life of that beneficiary. At the termination of the agreement, the remaining assets will pass to the donee organization. The fair market value of net assets held in the charitable gift annuity totaled $11,172 and $10,083, at December 31, 2012 and 2011, respectively. A corresponding liability was recorded for the payment of $1,071 to the beneficiary at December 31, 2012 and 2011, utilizing present value techniques and a discount rate of 0% based on actuarial assumptions, including life expectancy. FAIR VALUE OF ASSETS U.S. GAAP 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. It also establishes a fair value hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are those that market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Organization. Unobservable inputs reflect the Organization’s assumptions about the inputs market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. The fair value hierarchy is categorized into three levels based on the inputs as follows: Level 1 – Valuations based on adjusted quoted prices in active markets for identical assets as of the reporting date. Level 2 - Valuations based on inputs other than quoted prices included, which are either directly or indirectly observable as of the reporting date, are valued at prices for similar assets or liabilities in markets not active, or determined through the use of models or other valuation methodologies. Level 3 - Pricing inputs are unobservable and include situations where there is little, if any, market activity for the asset. Fair value for these assets is determined using valuation methodologies that consider a range of factors, including but not limited to the price at which the asset was acquired, the nature of the asset, local market conditions, trading values on public exchanges for comparable securities, current and projected operating performance, and financing transactions subsequent to the acquisition of the asset. The inputs into the determination of fair value require significant management judgment. Due to the inherent uncertainty of these estimates, these values may differ materially from the values that would have been used had a ready market for these assets existed.
  14. 14. 13 RURAL ADVANCEMENT FOUNDATION INTERNATIONAL – USA NOTES TO FINANCIAL STATEMENTS Page 6 of 11 FAIR VALUE OF ASSETS (CONTINUED) The Organization’s charitable gift annuity is classified as Level 1. No assets or liabilities were classified as Level 2 or Level 3. There were no changes during the year ended December 31, 2012, to the Organization’s valuation techniques used to measure asset values on a recurring basis. The following tables summarize the assets of the Organization for which fair values are determined on a recurring basis at December 31, 2012 and 2011. As required by U.S. GAAP, assets are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. Level 1 Level 2 Level 3 Total December 31, 2012 Charitable gift annuity: Smallcap World Fund Class A: 11,172$ -$ -$ 11,172$ Level 1 Level 2 Level 3 Total December 31, 2011 Charitable gift annuity: Smallcap World Fund Class A: 10,083$ -$ -$ 10,083$ GRANTS RECEIVABLE Grants receivable consists of the following at December 31, 2012 and 2011: 2012 2011 The N.C. Tobacco Trust Fund Commission 296,534$ 277,784$ Duke Endowment/United Conference of Methodists 50,000 25,000 Stonyfield Foundation 30,000 - The Hillsdale Fund 20,000 - Golden Leaf 15,250 61,000 Branch Banking and Trust Company 10,000 20,000 Lawson Valentine Foundation - 25,000 The Rural Economic Development Center, Inc. - 11,575 Tides Foundation - 10,000 Mary Lynn Richardson Fund - 10,000 421,784$ 440,359$
  15. 15. 14 RURAL ADVANCEMENT FOUNDATION INTERNATIONAL – USA NOTES TO FINANCIAL STATEMENTS Page 7 of 11 CONTRACTS RECEIVABLE Contracts receivable consists of the following at December 31, 2012 and 2011: 2012 2011 North Carolina State University 14,308$ 4,513$ North Carolina Department of Agriculture 8,130 - Equal Exchange 6,500 - Northeast Organic Dairy Producers Alliance 6,000 - Beyond Pesticides 5,000 - Organically Grown 4,500 - Union of Concerned Scientists 4,000 - Southern Risk Management Education Center 3,540 23,877 Northeastern Organic Farming Association 2,755 - Organic Seed Alliance 2,500 - Maine Organic Farmers & Gardeners Association 2,000 - Center for Food Safety 1,250 - Farmers Legal Action Group - 500 60,483$ 28,890$ PROMISES TO GIVE Promises to give consist of the following at December 31: 2012 2011 Receivable in less than one year 75,000$ 1,799$ Receivable in one to five years 225,000 - Total gross promises to give 300,000 1,799 Discount at a rate of 1.20% (5,294) - Net present value of promises to give 294,706$ 1,799$ LINE OF CREDIT The Organization has a $150,000 line of credit with a financial institution secured by real estate. The interest rate is at prime with a minimum rate of 4.00% and a maximum rate of 8.00%. The rate at December 31, 2012 and 2011, was 4.00%. The outstanding balance at December 31, 2012 and 2011, is $100,000 and $150,000, respectively.
  16. 16. 15 RURAL ADVANCEMENT FOUNDATION INTERNATIONAL – USA NOTES TO FINANCIAL STATEMENTS Page 8 of 11 DEFERRED COMPENSATION After seven years of service, and upon completion of each subsequent seven years of service, employees are entitled to a sabbatical leave of up to twelve weeks pay or twelve weeks paid time off. The Organization reserves the right to determine when the leave can be taken or paid. Sabbatical leave is classified as deferred compensation – current maturity and deferred compensation – net of current maturity in the statement of financial position based on the timing of the employees’ estimated time off. Employees with ten years of service receive a lump sum payment equal to 10% of their salary for future health insurance coverage and expenses upon retiring from service to the Organization. Health insurance assistance is classified as deferred compensation – current and deferred compensation – net of current maturity in the statement of financial position based on the timing of the employees’ expected retirement. Deferred compensation totaled $82,312 and $66,780, at December 31, 2012 and 2011, respectively. DONATED SERVICES The Organization recognizes donated services that create or enhance nonfinancial assets or that require specialized skills, and would typically need to be purchased if not provided by donation. The Organization did not recognize any donated professional services during the year ended December 31, 2012. The Organization recognized donated professional services totaling $88,939 during the year ended December 31, 2011. RETIREMENT PLAN Effective January 1, 2009, the Organization implemented a 401(k) plan. The plan covers all employees at the time of hire. The Organization can make a discretionary contribution as determined by the Board of Directors annually for employees who have reached 520 hours (13 weeks) of service. Contributions by the Organization for the years ended December 31, 2012 and 2011, totaled $16,037 and $25,551, respectively. LEASE COMMITMENTS The Organization leases a postage meter over a 27-month period, with quarterly payments of $380, expiring in October 2014. The Organization leases a copier over a 60-month period, with monthly payments of $471, expiring in June 2016. Total lease expense for the years ended December 31, 2012 and 2011, totaled $6,835 and $6,935, respectively.
  17. 17. 16 RURAL ADVANCEMENT FOUNDATION INTERNATIONAL – USA NOTES TO FINANCIAL STATEMENTS Page 9 of 11 LEASE COMMITMENTS (CONTINUED) Future minimum lease payments are as follows: Year ending December 31, 2013 7,172$ 2014 6,792 2015 5,652 2016 3,297 Total minimum lease payments 22,913$ In prior years, the Organization leased an office space in Washington, DC, with a one year term renewing each year. This space was subleased to a tenant with identical terms. The Organization cancelled this lease in March 2011. Rental income and expense for the leasing arrangement for the year ended December 31, 2011, totaled $3,769. The Organization also leases office space and the conference center to tenants under operating leases with one year and month-to-month terms. Rental income for the years ended December 31, 2012 and 2011, totaled $18,520 and $22,125, respectively. ALLOCATION OF EXPENSES Expenses, not specifically identified by type, are allocated between program, general and administrative, and fundraising expenses using the following methods. Expenses associated with occupancy are allocated based upon the square footage used by the program, management, and administrative personnel. All other expenses are allocated based upon estimates made by the Organization’s management. Functional expenses fluctuate annually based on the priorities of the Organization. CONTINGENCIES The Organization has received proceeds from state and private foundation grants. Periodic audits of these grants are possible, and certain costs may be questioned as not being appropriate under the grant agreements. Such audits could result in the refund of grant monies to the grantor agencies. Management believes that any required refunds are unlikely, and in any event would be immaterial. No provision has been made in the accompanying financial statements for the refund of grant monies due to questioned costs.
  18. 18. 17 RURAL ADVANCEMENT FOUNDATION INTERNATIONAL – USA NOTES TO FINANCIAL STATEMENTS Page 10 of 11 TEMPORARILY RESTRICTED NET ASSETS Temporarily restricted net assets are available for the following purposes at December 31, 2012 and 2011: 2012 2011 Purpose Restricted: Farm Sustainability 358,520$ 81,000$ Tobacco Communities and Ag Enterprise Development 275,000 446,583 Just Foods 143,580 82,302 Contract Agriculture Reform 30,014 15,000 General and administrative - board meetings - 8,223 807,114 633,108 Time Restricted: Unrestricted promises to give - 1,799 Grants receivable - 51,000 - 52,799 Total temporarily restricted net assets 807,114$ 685,907$ PRIOR YEAR INFORMATION The statements of activities and changes in net assets, and functional expenses include certain prior-year summarized comparative information in total but not by net asset class and functional category, respectively. 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 financial statements for the year ended December 31, 2011, from which the summarized information was derived.
  19. 19. 18 RURAL ADVANCEMENT FOUNDATION INTERNATIONAL – USA NOTES TO FINANCIAL STATEMENTS Page 11 of 11 RESTATEMENT During the current year, it was noted that prior year grant receivables and grant revenues were understated by $61,000. Additionally, $56,025 of net assets was improperly classified as temporarily restricted net assets. The following balances were restated as of December 31, 2012, to properly state beginning net assets. December 31, 2011 December 31, 2011 Originally Restated Reported Adjustments Balances Grants receivable 379,359$ 61,000$ 440,359$ Private foundations and public funds 666,205$ 61,000$ 727,205$ Unrestricted net assets 746,667$ 56,025$ 802,692$ Temporarily restricted net assets 680,932$ 4,975$ 685,907$ SUBSEQUENT EVENTS Management has evaluated subsequent events for recognition or disclosure through March 18, 2013, the date the financial statements were available to be issued. Management did not identify any events that occurred subsequent to year-end that require disclosure in the financial statements.

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