AIGA Financial Statement FY2012 | Fair Value | Audit

AMERICAN INSTITUTE OF GRAPHIC ARTS FINANCIAL STATEMENTS YEARS ENDED SEPTEMBER 30, 2012 AND 2011 AND INDEPENDENT AUDITORS’

REPORT

AMERICAN INSTITUTE OF GRAPHIC ARTS

TABLE OF CONTENTS Page Independent Auditors’ Report Financial Statements Statements of Financial Position Statements of Activities Statements of Cash Flows Notes to Financial Statements 2 3 4 5 1

INDEPENDENT AUDITORS’ REPORT

To the Board of Directors American Institute of Graphic Arts We have audited the accompanying statement of financial position of the American Institute of Graphic Arts (“AIGA”) as of September 30, 2012, and the related statements of activities and cash flows for the year then ended. These financial statements are the responsibility of AIGA’s management. Our responsibility is to express an opinion on these financial statements based on our audit. The prior year’s summarized comparative information has been derived from AIGA’s fiscal 2011 financial statements and, in our report dated January 23, 2012, we expressed an unqualified opinion on those financial statements. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of AIGA’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, 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 2012 financial statements referred to above present fairly, in all material respects, the financial position of the American Institute of Graphic Arts as of September 30, 2012, and the changes in its net assets and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.

February 4, 2013

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AMERICAN INSTITUTE OF GRAPHIC ARTS STATEMENTS OF FINANCIAL POSITION

September 30, 2012 2011 ASSETS Cash and cash equivalents Accounts receivable Prepaid expenses and deposits Investments Property and equipment, net Mortgage financing cost, net $ 134,970 $ 754,085 94,419 213,343 266,758 316,265 2,657,309 2,422,069 2,257,390 2,340,195 44,106 49,922 $ 5,454,952 $ 6,095,879

LIABILITIES AND NET ASSETS Liabilities Line of credit payable Accounts payable and accrued expenses Deferred revenue Loan payable Mortgage payable

$

249,900 $ 326,900 388,234 624,291 1,565,264 2,340,665 72,979 1,192,931 1,309,846 3,469,308 4,601,702

Net assets Unrestricted Undesignated Board designated

1,276,702 340,573 1,617,275

777,896 339,000 1,116,896

Temporarily restricted Permanently restricted Total net assets

268,369 277,281 100,000 100,000 1,985,644 1,494,177 $ 5,454,952 $ 6,095,879

See notes to financial statements. 2

AMERICAN INSTITUTE OF GRAPHIC ARTS STATEMENTS OF ACTIVITIES (With summarized comparative amounts for 2011)

Year Ended September 30, 2012 Temporarily Permanently Unrestricted Restricted Restricted Revenues Membership dues Programs Publications Grants and contributions Special events (net of direct donor benefits of $40,710) Investment return Miscellaneous Net assets released from restrictions satisfaction of program restrictions Total revenues Expenses Program services Management and general Fund raising Total expenses Change in net assets Net assets Beginning of year End of year $ 3,188,136 2,475,911 122 85,525 $ 22,620 1,574 24,194 (33,106) (8,912) $ -

Total

2011 $ 3,323,885 2,058,947 19,061 18,044 141,050 (8,084) 162,028 5,714,931 5,714,931

$ 3,188,136 2,475,911 122 108,145 90,691 439,840 157,145 6,459,990 6,459,990

90,691 438,266 157,145 6,435,796
33,106 6,468,902

5,025,545 537,136 405,842 5,968,523 500,379

(8,912)

-

5,025,545 537,136 405,842 5,968,523 491,467

4,983,120 711,726 515,702 6,210,548 (495,617)

1,116,896 $ 1,617,275

$

277,281 268,369

$

100,000 100,000

1,494,177 $ 1,985,644

1,989,794 $ 1,494,177

See notes to financial statements. 3

AMERICAN INSTITUTE OF GRAPHIC ARTS STATEMENTS OF CASH FLOWS

Year Ended September 30, 2012 2011 Cash flows from operating activities Change in net assets Adjustments to reconcile change in net assets to net cash provided by (used in) operating activities Depreciation and amortization Net realized and unrealized (gain) loss on investments Changes in operating assets and liabilities Accounts receivable Prepaid expenses and deposits Accounts payable and accrued expenses Deferred revenue Net cash provided by (used in) operating activities Cash flows from investing activities Proceeds from sale of investments Purchase of investments Acquisition of property and equipment Net cash provided by investing activities Cash flows from financing activities Principal payments on line of credit Proceeds from loan payable Principal payments on loan payable Principal payments on mortgage Net cash used in financing activities Net increase (decrease) in cash and cash equivalents Cash and cash equivalents, beginning of year Cash and cash equivalents, end of year Supplemental cash flow disclosure Cash paid for interest
See notes to financial statements. 4

$

491,467 $ (495,617)

140,754 (362,788) 118,924 49,507 (236,057) (775,401) (573,594)

143,171 82,112 (170,294) (151,899) 230,688 511,319 149,480

1,429,036 (1,301,488) (52,133) 75,415

643,935 (567,962) (13,401) 62,572

(77,000) 75,000 (2,021) (116,915) (120,936) (619,115) 754,085 134,970 $

(109,369) (109,369) 102,683 651,402 754,085

$

$

97,634 $

105,109

AMERICAN INSTITUTE OF GRAPHIC ARTS NOTES TO FINANCIAL STATEMENTS

1 - ORGANIZATION American Institute of Graphic Arts (“AIGA”), the professional association for design, was founded in 1914. Its mission is to advance designing as a professional craft, strategic tool and vital cultural force. It provides leadership in the exchange of ideas and information, the encouragement of critical analysis and research, and the advancement of education and ethical practice. As of October 1, 2011, AIGA had 24,895 members: 8,551 professional members, 863 educators, 2,788 associate members and 12,693 student members. AIGA had 66 chapters as of October 1, 2011. The accompanying financial statements do not include the financial position or the change in net assets and cash flows of these chapters, each of which is an autonomous corporation organized under the laws of the state in which it is located. AIGA’s revenues are primarily derived from membership dues and various programmatic activities it carries out. AIGA offered the following programs during its 2012 fiscal year: ● “Pivot: AIGA Design Conference”, October 13-16, 2011, Phoenix (1,490 attendees) ● “Bright Lights: The AIGA Awards”, April 19, 2012, New York (282 guests) ● AIGA Leadership Retreat, May 31-June 2, 2012, Salt Lake City (242 attendees) ● "Good Leadership: Social Innovation, Leadership and Entrepreneurship for Designers”, July 19-20, 2012, New York (38 attendees) ● “Business Perspectives for Creative Leaders”, July 22-27, 2012, Yale School of Management (36 attendees) AIGA offered three webinar series for members during 2011-2012: ● ● ● “Breakthroughs: Where Inspiration and Technology Meet”, five sessions “Ask Aquent”, live Q&A with career experts, four sessions “Industry Insights”, career development webinars, three sessions

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AMERICAN INSTITUTE OF GRAPHIC ARTS NOTES TO FINANCIAL STATEMENTS

1 - ORGANIZATION (Continued) Deferred revenue and prepaid expenses were recorded for “Gain: Design for Social Value Conference” held in San Francisco on October 9-10, 2012. “Justified: AIGA Design Competitions” received 381 entries; 18 were selected for publication on AIGA.org. Exhibitions in AIGA’s gallery included:

● “365: Design Effectiveness”, September 15 - November 23, 2011 ● “50 Books/50 Covers of 2010”, December 8, 2011 - May 11, 2012 ● AIGA/NY 30th Anniversary Poster Exhibition, June 1 - August 1, 2012 ● “The Texas Show”, August 3 - September 28, 2012
National sponsors for the year were Adobe Systems, the official sponsor for design solutions; Aquent, the official sponsor for professional development; and Shutterstock, the official sponsor for creative inspiration.

2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Accounting and Presentation AIGA’s net assets, revenues, expenses, gains and losses are classified, based on the existence or absence of donor-imposed restrictions, into the following three categories: Unrestricted net assets - Unrestricted net assets represent the portion of expendable funds available for the support of all AIGA’s operations. Temporarily restricted net assets - Net assets subject to donor-imposed stipulations that may or will be met, either by action of AIGA and/or the passage of time. When a restriction expires, that is, when a stipulated time restriction ends or purpose restriction is accomplished, temporarily restricted net assets are reclassified to unrestricted net assets and reported in the statement of activities as net assets released from restrictions.

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AMERICAN INSTITUTE OF GRAPHIC ARTS NOTES TO FINANCIAL STATEMENTS

2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Basis of Accounting and Presentation (Continued) Permanently restricted net assets - Net assets subject to donor-imposed stipulations that must be maintained permanently by AIGA. Generally, the donors of these assets would permit AIGA to use all or part of the income earned on any related investments for general or specific purposes. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates. Cash and Cash Equivalents Cash balances in banks are insured by the Federal Deposit Insurance Corporation subject to certain limitations. For purposes of the statement of cash flows, AIGA considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. Investments Investments are stated at fair value. GAAP establishes a framework for measuring fair value. That framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). Under GAAP, the three levels of the fair value hierarchy are described below: Level 1: Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that AIGA has the ability to access. Level 2: Inputs to the valuation methodology include: ● Quoted prices for similar assets or liabilities in active markets; ● Quoted prices for identical or similar assets or liabilities in inactive markets; ● Inputs other than quoted prices that are observable for the asset or liability; ● Inputs that are derived principally from or corroborated by observable market data by correlation or other means.

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AMERICAN INSTITUTE OF GRAPHIC ARTS NOTES TO FINANCIAL STATEMENTS

2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) If the asset or liability has a specified (contractual) term, the Level 2 input must be observable for substantially the full term of the asset or liability. Level 3: Unobservable inputs that reflect management’s own assumptions. Property and Equipment Property and equipment are stated at cost or, if donated, at the estimated fair market value of the assets at the date of donation. Costs for repairs and maintenance are charged to expense as incurred. All plant assets, other than land, are depreciated over their estimated useful lives using the straight-line method. Estimated useful lives used to calculate depreciation are as follows: Building and improvements Furniture, fixtures and equipment Computer equipment 30 years 5 years 3 years

Deferred Revenue and Related Expenses Revenue received and expenses paid in the current period for publications, conferences, exhibitions, programs and other events scheduled to take place in the subsequent period are deferred on the statement of financial position. The majority of non-membership deferred revenue and related expenses relate to the national conference which is held in October, subsequent to the fiscal year. Membership dues are allocated to the period to which they relate and are recognized accordingly. Membership dues billed and received in advance are reflected as deferred revenue in the statement of financial position. Donated Materials and Services Donated materials, generally printing and paper supplies, are estimated at $438,612 and $413,091 for the years ended September 30, 2012 and 2011, respectively. Such donations are recorded in the statements of activities as program revenue, with an offset to program expenses as donors of such items receive commensurate value in return. Volunteer officers and committees which serve without remuneration play an important role in the functioning of AIGA. No amounts have been reflected in the financial statements for such donated services, as they do not meet the criteria for recognition.

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AMERICAN INSTITUTE OF GRAPHIC ARTS NOTES TO FINANCIAL STATEMENTS

2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Functional Allocation of Expenses Expenses have been charged to program or supporting services, either directly when identifiable, or indirectly based on management’s estimation of the services benefited. Summarized Comparative Information The financial statements include certain prior-year summarized comparative information in total but not by net asset class. Such information does not include sufficient detail to constitute a presentation in conformity with GAAP. Accordingly, such information should be read in conjunction with AIGA’s financial statements for the year ended September 30, 2011 from which the summarized information was derived. Income Taxes AIGA is exempt from federal income tax under Section 501(c)(3) of the Internal Revenue Code and is classified as a publicly supported organization as described in Section 509(a). AIGA’s tax filings prior to 2009 are no longer subject to examination by tax authorities. Subsequent Events These financial statements were approved by management and available for issuance on February 4, 2013. Management has evaluated subsequent events through this date.

3 - PREPAID EXPENSES AND DEPOSITS Prepaid expenses and deposits consisted of the following: September 30, 2012 2011 “Gain: AIGA Business and Design Conference” “Pivot: AIGA Design Conference” Other conferences Other prepayments $ 208,997 12,166 45,595 $ 266,758 258,157 58,108 $ 316,265 $

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AMERICAN INSTITUTE OF GRAPHIC ARTS NOTES TO FINANCIAL STATEMENTS

4 - INVESTMENTS AND INVESTMENT RETURN AIGA’s investments, which are considered to be Level 1, consisted of the following: September 30, 2012 2011 Common stock Fixed income Preferred stock Mutual funds Short-term deposits $ 1,584,417 332,330 667,574 72,988 $ 2,657,309 $ 1,746,659 446,529 152,060 76,821 $ 2,422,069

The investment return is summarized as follows: Year Ended September 30, 2012 2011 Interest and dividends Net unrealized gain (loss) on investments Net realized gain on sale of investments 77,052 221,777 141,011 $ 439,840 $ 74,028 (139,866) 57,754 $ (8,084) $

AIGA invests in various investment securities in accordance with a board-adopted investment risk strategy. Investment securities are exposed to various risks such as interest rate, market and credit risks. Due to the level of risk associated with certain investment securities, it is at least reasonably possible that changes in the values of investment securities will occur in the near term and that such changes could materially affect the amounts reported in the statement of financial position.

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AMERICAN INSTITUTE OF GRAPHIC ARTS NOTES TO FINANCIAL STATEMENTS

5 - PROPERTY AND EQUIPMENT Property and equipment consisted of the following: September 30, 2012 2011 Land Building Building improvements Office machinery and equipment Furniture and fixtures Less - Accumulated depreciation 388,800 806,200 2,683,830 642,245 303,194 4,824,269 2,566,879 $ 2,257,390 $ 388,800 806,200 2,679,581 599,887 297,668 4,772,136 2,431,941 $ 2,340,195 $

6 - MORTGAGE FINANCING COST Mortgage financing cost, which represents the unamortized balance of expenses incurred associated with the March 2006 refinancing, is amortized over the life of the loan and consisted of the following: September 30, 2012 2011 Legal fees Other Less - Accumulated amortization $ $ 5,073 82,168 87,241 43,135 44,106 $ 5,073 82,168 87,241 37,319 49,922

$

Amortization expense for each of the years ended September 30, 2012 and 2011 was $5,816.

7 - LINE OF CREDIT PAYABLE In fiscal 2012, AIGA modified its line of credit with a bank to $250,000, payable on demand. Interest is determined based on the prime rate plus 1%. The interest rate at both September 30, 2012 and 2011 was 4.25%. The amount outstanding at September 30, 2012 and 2011 was $249,900 and $326,900. Interest expense for fiscal 2012 and 2011 was $13,661 and $14,086, respectively. 11

AMERICAN INSTITUTE OF GRAPHIC ARTS NOTES TO FINANCIAL STATEMENTS

8 - LOAN PAYABLE In June 2012, AIGA executed a term loan agreement with a bank in the amount of $75,000 with principal and interest payments over a 36-month period at a fixed interest rate of $4.25%. The amount outstanding at September 30, 2012 was $72,979. Principal payments of $24,765, $25,833 and $22,381 are due in fiscal 2013, 2014 and 2015, respectively. Interest expense in fiscal 2012 was $538.

9 - DEFERRED REVENUE Deferred revenue consisted of the following: September 30, 2012 2011 Conferences Membership dues $ 415,988 1,149,276 $ 1,565,264 $ 998,432 1,342,233 $ 2,340,665

10 - MORTGAGE PAYABLE AIGA has a 15-year mortgage loan agreement with Citibank, N.A. for $1,900,000, at a fixed interest rate of 6.69% that matures on April 1, 2020. Future annual principal payments are as follows:

Year Ending September 30, 2013 2014 2015 2016 2017 Thereafter $ 124,981 133,603 142,820 152,673 163,206 475,648 $ 1,192,931

Interest expense on the mortgage debt for the years ended September 30, 2012 and 2011 was $83,435 and $91,023, respectively. 12

AMERICAN INSTITUTE OF GRAPHIC ARTS NOTES TO FINANCIAL STATEMENTS

11 - AIGA LEGACY CAMPAIGN The AIGA Legacy Campaign is the banner under which a variety of funds have been created to channel charitable gifts toward the challenges facing the profession. The funds to which people giving to the campaign can commit their donations include funds in support of AIGA’s archives and scholarship programs, as well as the AIGA Legacy Fund (for special projects), the Legacy Endowment (to secure the future of AIGA), the Diversity Fund, the Winterhouse Design Writing and Criticism Awards and the AIGA Disaster Relief Fund. Board-designated net assets consisted of the following: September 30, 2012 2011 AIGA Legacy Fund Archives Funds Scholarship Funds Legacy Endowment Diversity Fund Denver Archives $ 105,924 38,007 50,615 44,300 14,577 87,150 $ 340,573 $ 105,924 38,007 49,042 44,300 14,577 87,150 $ 339,000

12 - TEMPORARILY RESTRICTED NET ASSETS Temporarily restricted net assets consisted of the following: Program Scholarship Funds Disaster Relief Fund Winterhouse Design Writing and Criticism Awards Archives Funds AIGA Legacy Fund Diversity Fund Legacy Endowment Total $ September 30, 2012 2011 39,562 9,087 $ 37,136 9,087

1,984 215,660 975 1,101 $ 268,369

33,106 1,575 194,301 975 1,101 $ 277,281

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AMERICAN INSTITUTE OF GRAPHIC ARTS NOTES TO FINANCIAL STATEMENTS

13 - PERMANENTLY RESTRICTED NET ASSETS Permanently restricted net assets are restricted to investments held in perpetuity, the income from which is expendable to support the Henry Wolf AIGA Scholarships.

14 - RETIREMENT PLAN AIGA has a defined contribution retirement plan that covers substantially all full-time employees. Contributions, which are made entirely by AIGA, will vary each year and are determined by the Executive Director, as part of AIGA’s budget, approved annually at the Board of Directors’ meeting. Expense for the years ended September 30, 2012 and 2011 was $65,021 and $63,716, respectively.

15 - RELATED PARTY TRANSACTIONS AIGA provides management and personnel services to AIGA’s New York Chapter. Fees and expenses billed by AIGA were as follows: Year Ended September 30, 2012 2011 Management fees Payroll and related benefits 12,000 161,409 $ 173,409 $ 12,000 159,356 $ 171,356 $

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