Los ALTOS COMMUNITY FOUNDATJON

REPORT ON REvmw OF FINANCIAL S1;:JUE1\'tENTS

for the years ended June 30, 2010· and .20Q9

(RIC IlIdep"tlldulltAc(oflll!(l1lti Ru.vi01J1 Report)

DRAFT TENTATIVE & PRELIMINARY FOR DISCUSSION ONLY

Los ALTos COMMUNITY FOUNDATION

Independen tCC0U,1l rants' Review Report

Financial Statements:

Statements of Financial Position

Statement of Activities

Statements of Cash Flows.

Notes to Financial Statements

CON TEN T S

DRAFT TENTATIVE & PRELIMINARY FOR DISCUSSION ONLY

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INDEPENDENT ACCOUNTANTS' REVIEW REPORT

Los Altos Community Foundation Los Altos, California

We have reviewed the accompanying statement of financial position of Los Altos Community Foundation ("the Foundation') (a nonprofit organization) as of June 30, 2010, and the related statements of activities and cash flows for the year then ended, in accordance with Statements on Standards for Accounting and Review Services issued by the American Institute of Certified Public Accountants. All information included in these financial statements is the representation of the Foundation's management of Los Altos Community Foundation.

A review consists principally of inquiries of Foundation personnel and analytical procedures applied to financial data. It is substantially less in scope than an audit in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our review, we are not aware of any material modifications that should be made to the accompanying financial statements in order for them to be in conformity with accounting principles generally accepted in the United States of America.

________ , 2011

San Jose, California

DRAFT TENTATIVE & PRELIMINARY FOR DISCUSSION ONLY

Los ALTOS COMMUNITY FOUNDATION STATEMENTS OF FINANCIALPOSITION

June 30, 2010 and 2009

ASSETS

2010

2009

Current Assets:

Cash and cash equivalents Certificate of deposit

Note receivable, related party Total current assets

429,600 s

332,820 119,585

51,740

481,340

452,405

Land, property and equipment, net of accumulated depreciation Investments

Total assets

1,825,280 1,860,161

3,568,000 3,468,866

5,87 4,620 =$~==~5,=78=1=,4=32=

LIABILITIES AND NET ASSETS
Current Liabilities:
Line of credit s $ 150,000
Accounts payable 5,000 82,304
Note payable, related party 50,000
Total current liabilities 55,000 232,304
Net Assets:
Unrestricted 1,786,492 1,742,279
Temporarily restricted 4,033,158 3,806,849
Total net assets 5,819,650 5,549,128
Total liabilities and net assets $ 5,874,650 s 5,781,432 DRAFT TENTATIVE & PRELIMINARY FOR DISCUSSION ONLY

See accountants' review report and accompanying notes to the financial statements.

2

LoS ALTOS COMMUNITY FOUNDATION
STATEMENT OF ACTIVITIES
for the year ended June 30, 2010
With Summarized Financial Information for the year ended June 30, 2009
(For Comparative
Purposes Only)
Temporarily Total Total
Unrestricted Restricted 2010 2009
Revenue and Other Support:
Contributions S 152,480 $ 568,758 s 721,238 S 1,025,317
Donated services 86,000 86,000 86,000
Grants 38,700 161,300 200,000 75,000
Event income 57,688 50,918 108,606 33,256
Administrative income 47,032 47,032 42,280
Miscellaneous income and sales 2,457 82,441 84,898 6,516
Rental income 12,192 12,192 3,487
Investment income 16,544 27,514 44,058 76,862
Realized gain (loss) on investments (190) 86,084 85,894 (467,643)
Unrealized gain (loss) on investments 3,209 183,869 187,078 (388,148)
403,920 1,173,076 1,576,996 492,927
Net assets released from restrictions 946,767 ~946,767)
Total revenue and other support 1,350,687 226,309 1,576,996 492,927
Expenses:
Contributions to the community 534,932 534,932 843,158
Programs and projects 305,365 305,365 3,619
Office and administration 157,943 157,943 300,474
Staff expenses 94,176 94,176 77,875
Donated services expenses 86,000 86,000 86,000
Professional fees 66,092 66,092 149,317
Event expenses 47,849 47,849 28,262
Community house 14,117 14,117 6,979
Total e"'Penses 1,306,474 1,306,474 1,495,684
Change in net assets 44,213 226,309 270,522 (1,002,757)
Net assets, beginning of year 1,742,279 3,806,849 5,549,128 6,55'1,885
Net assets, end of year s 1,786,492 $ 4,033,158 $ 5,819,650 S 5,549,128 DRAFT T2N1ATIVE & PRELlM:r-\~ \'''t''Ill'} M-ISCUSSION OfF! "0:/

~:",! ':i'~ ~J ~ , ~; .. d

See accountants' review report and accompanying notes to the financial statements.

3

LOS ALTOS COMMUNITY FOUNDATION STATEMENTS OF CASH FLOWS

For the Years Ended June 30, 2010 and 2009

Cash flows from operating activities:

Increase (decrease) in net assets

Adjustments to reconcile change in net assets to net cash provided by operating activities:

Depreciation

Realized loss (gain) on sale of investments Unrealized (gain) loss on investments Dividends reinvested

Donation of investments

Increase (decrease) in operating liabilities:

Accounts payable Total adjustments

Net cash (used in) operating activities

Cash flows from investing activities:

Purchase of investments Proceeds on sale of investments Purchase of fixed assets

Proceeds on maturity of certificate of deposit Net cash provided by investing activities

Cash flows from financing activities:

Borrowings from note payable, related party Repayments on line of credit

Net cash (used in) financing activities Net increase (decrease) in cash

Cash, beginning of year

Cash, end of year

2()09

2010

270,522 $ (1,002,757)

-'- __ -'-"---'----!....

43,876 (86,084) (183,869)

40,497 467,643 388,148 (26,333) (70,556)

77,304

82,304

(148,773)

881,703

121,749

(121,054)

(8,995)
119,585
110,590
50,000
(150,000)
(100,000)
132,339
332,820
$ 465,159 $ (56,483) 201,273 (165,788) 111,272

90,274

(30,780) 363,600

332,820

Supplemental Disclosure of Cash Flow Information

1. Accounting Policy - The Foundation considers all certificates of deposit with a maturity of three months or less when purchased to be "cash equivalent".

2. Schedule of non-cash transactions:

2010

2009

Acquisition of investments Donated investments

$

(127,039) 70,556

$

(56,483)

I·

DRAFT TENTATIVE & PRELlMnt~.'~.

FOR D;SCUSSION ONL\

See accountants' review report and accompanying notes to the financial statements.

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LOS ALTOS COMMUNITY FOUNDATION

NOTES TO FINANCIAL STATEMENTS for the years ended June 30, 2010 and 2009

1. Business Description and Summary of Significant Accounting Policies

Los Altos Community Foundation (the "Foundation") is an endowment fund established in 1991 to build stronger community and enhance the quality of life in Los Altos and Los Altos Hills through support of philanthropic activities.

Basis of Presentation

Unrestricted net assets include those assets over which the Board of Directors has discretionary control in carrying out the operations of the Foundation.

Temporarily restricted net assets include those assets which are subject to a donor restriction and for which the applicable restriction was not met as of the end of the current reporting period.

Permanently restricted net assets include those assets which are subject to a non-expiring donor restriction, such as endowments. The Foundation does not have any permanently restricted net assets.

The financial statements include certain prior year summarized comparative information in total but not by net asset class. Such information does not include sufficient detail to constitute a presentation in conformity with accounting principles generally accepted in the United States of America. Accordingly, such information should be read in conjunction with the Foundation's financial statements for the year ended June 30, 2009, from which the summarized information was derived.

Basis of Accounting

The financial statements of the Foundation are prepared on the accrual basis of accounting.

Concentration of Credit Risk

The Foundation maintains its cash and cash equivalents in commercial checking and money market accounts. Periodically throughout the year, cash is maintained at the bank in excess of the insured (FDIC) amount of $250,000.

Fair Value Measurement

The Foundation defines fair value as the exchange price that would be received for an asset or paid to transfer a liability in the principal or most advantageous market forthe assets or liabilities in an orderly transaction between market participants on the measurementdate. Subsequent changes in fair value of these financial assets and liabilities are recognized in earnings when they occur. When determining the fair value measurements for assets and liabilities, which are required to be recorded at fair value, the Foundation considers the principal or most advantageous market in which the Foundation would transact and the market-based risk measurement or assumptions that market participants' would use in pricing the assets or liability, such as inherent risk, transfer restrictionsand credit risk.

The Foundation applies the following fair value hierarchy, which prioritizes the inputs used to measure fair value into three levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement:

Continued 5

LOS ALTOS COMMUNITY FOUNDATION

NOTES TO FINANCIAL STATEMENTS for the years ended June 30, 2010 and 2009

1. Business Description and Summary of Significant Accounting Policies,continued

Fair Value Measurement, continued

The fair value hierarchy consists of the following three levels:

• Level 1: instrument valuations are obtained from real-time quotes for transactions in active exchange markets involving identical assets.

• Level 2: instrument valuations are obtained from readily-available pricing sources for comparable instruments.

• Level 3: instruments valuations are obtained without observable market value and require a high level of judgment to determine the fair value.

Donated Services

Donated services, which require a specialized skill and which the Foundation would have paid for if not donated, are recorded at the estimated fair value at the time the services are rendered.

The Foundation has an objective measurable method to determine fair value. A number of unpaid professionals providing accounting and consulting services have made significant contributions of their time to the Foundation. The fair value of the contributed time of $86,000 has been reflected as a donated services contribution in these financial statements for the years ended June 30, 2ao and 2009.

The Foundation also receives donated services that do not require specific expertise but which are nonetheless essential to the Foundation's operations. These donated services are not reflected in the financial statements.

Investments

The Foundation carries investments in marketable securities with readily determinable fair values and all investments in debt securities at their fair values. in the statements of financial position. Unrealized gains and losses are included in the change in net assetsin the accompanying statement of activities

Investment securities are exposed to various risks, such as interest rate, market fluctuations and credit risks. Due to the level of risk associated with certain investment securities, it is at least reasonably possible that changes in risks will occur in the near term that could materially affect fair value and the amounts reported in the Statements of Financial Position and the Statement of Activities.

Income Tax

No provision has been made for income taxes as the Foundation is exempt from Federal and State income tax as an organization described in Sections SOl(c)(3) and 170(b) (1) (A) (vi) of the Internal Revenue Code and Section 23701 (d) of the California Revenue and Taxation Code.

Effective July 1, 2009, the Foundation began reviewing and assessing tax positions taken or expected to be taken against more-likely-than-not recognition threshold and measurement attributes for financial statement recognition.

Continued 6

DRAFT TENTATIVE s PREUMI~~,ARY FOR [);scnSS~O!'~ r~n.v

LOS ALTOS COMMUNITY FOUNDATION

NOTES TO FINANCIAL STATEMENTS for the years ended June 30, 2010 and 2009

1. Business Description and Summary of Significant Accounting Policies,continued

Income Tax, continued

The Foundation's policy for evaluating uncertain tax positions is a two step process. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more-likely-than-not that the position will be sustained upon audit, 'including resolution of related appeals or litigations processes, if any. The second step is to measure the tax benefit or liability as the largest amount that is more than 50% likely to be realized or incurred upon settlement. Based on an analysis prepared by the Foundation, it was determined that the tax positions taken or expected to be taken had no material effect on the recorded tax assets and liabilities of the Foundation.

Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets, 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.

2. Certificate of Deposit

In 2009, the Foundation had a certificate of deposit bearing interest at the rate of3.98% that matured in December 2010. At maturity, the certificate of deposit was transferred to cash. The certificate of deposit was held as security for the line of credit with Northern Trust/see Note 6).

3. Note Receivable

The note receivable at June 30, 2010 and 2009 consisted of the following:

2010

2009

Baer

5'1,714 =$=======

4. Investments

Investments as ofJune 30, 2010 and 2009 consisted of the following:

2010

2009

Temporarily Restricted:

Mutual Funds Cash

Stock

2,567,878 $ 2,551,633

982,945 904,252

17,177 12,981

3,568,000 $ 3,468,866

====::::::::=====

$

Continued 7

LOS ALTOS COMMUNITY FOUNDATION

NOTES TO FINANCIAL STATEMENTS for the years ended June 30, 2010 and 2009

4. Investments, continued

Temporarily
Unrestricted Restricted
2010
Interest and dividends $ 16,544 $ 27,514
Realized gain (loss) (190) 86,084
Unrealized (gain) 3,209 183,869
Total investment gain $ 19,563 $ 297,467
2009
Interest and dividends $ $ 76,862
Realized (los s) (467,643)
Unrealized (loss) ~388,148d
Total investment (loss) $ $ (778,929)
5. Land, Property and Equipment Total

$ 44,058

85,894 187,078

$ 317,030

$ 76,862

(467,643) (388,148)

$ (778,929)

The Foundation records purchased property and equipment at cost in excess of $1,000. Depreciation is computed using accelerated and straight-line methods over the estimated useful lives of the assets, which range from five to thirty-nine years.

Land, property and equipment at June 30, 2mo and 2009 consisted of the following:

2010 2009
Land $ 1,065,659 $ 1,065,659
Buildings 900,281 891,286
Equipment 9,697 9,697
1,975,637 1,966,642
Accumulated depreciation ~150,357d ~106,4812
$ 1,825,280 $ 1,860,161
6. Accounts Payable
Accounts payable as of June 30, 2010 and 2009 consisted of the following: 2010

2009

Neutra House construction payable Other payables

$

82,304

$

5,000

$

5,000 =$======8=2=,3=04=

DRAFT TENTATIVE & PREUM~N~J{Y FOR DISCUSSH1N C~H.v

Continued 8

LOS ALTOS COMMUNITY FOUNDATION

NOTES TO FINANCIAL STATEMENTS for the years ended June 30, 2010 and 2009

7. Line of Credit

The Foundation had a $150,000 line of credit agreement with Northern Trust, with interest at a fixed rate of 5% on amounts drawn up to $110,000 and then prime rate on amounts drawn that exceed $110,000. The line was secured by a certificate of deposit. The line of credit agreement matured in December 2009 and was not renewed. Borrowings at June 30, 20m were $150,000.

8. Note Payable, Related Party

The note payable, related party at June 30, 2010 and 2009 consisted of the following:

2010

2009

Note Payable, related party, no interest, unsecured, due on demand

$

50,000 =$=======

9. Functional Expenses

Funds from donors to their advised funds are recorded as temporarily restricted until such time as the donor advises contribution or expenses are incurred related to the donor fund. Grant-making funds are recorded as temporarily restricted until expenses are incurred related to the grant-making funds. Donoradvised and grant-making contributions and expenses are reported as unrestricted expenses and the corresponding funds are released from restriction.

Foundation expenses are paid out of unrestricted funds from contributions to the Foundation and the administrative fees from the donor advised funds.

The allocation of functional expenses for the year ended June 30, 2(10 is as follows:

Donor Advised
and
Foundation Grant Making Total
Contributions to the community $ 565 $ 534,367 $ 534,932
Programs and projects 640 304,725 305,365
Office and administration 108,216 49,727 157,943
Staff expenses 94,176 94,176
Donated services expenses 86,000 86,000
Professional fees 22,680 43,412 66,092
Event expenses 39,143 8,706 47,849
Community house 8,286 5,831 14,117
Total functional expenses $ 359,706 $ 946,768 $ 1,306,474 Continued 9

LOS ALTOS COMMUNITY FOUNDATION

NOTES TO FINANCIAL STATEMENTS for the years ended June 30, 2010 and 2009

10. Temporarily Restricted Net Assets

Temporarily restricted net assets are available for the following purposes at June 30, 2010 and 2009 as follows:

2010 2009
Education and community $ 722,691 $ 686,345
Community building projects 103,183 171,254
Scholarship 131,776 148,825
Facilities 750,621 709,876
Other 2,324,887 2,090,549
$ 4,033,158 $ 3,806,849 Net assets were released from restrictions by incurring expenses satisfying the restricted purpose or by the expiration of time as follows:

2010

$ 946,767

11. Borrowing of Donor Advised Funds

In June 2008, the Foundation entered into a promissorynote agreement in order to reimburse borrowed donor advised funds. The agreement provided that $575,000 will be reimbursed to the donor advised funds on or before June 30, 2010 with interest at 6% per annum. In December 2009, the Foundation borrowed an additional $250,000 of donor advised funds and the promissoryagreement was revised. The revised agreement provides that $510,768 will be reimbursed to the donor advised funds on or before December 1, 2012 with interest at the prime rate. As the promissory note agreement is an internal agreement, there is no affect on the Statement of Financial Position or on the Statement of Activities at June 30, 2010 or 2009.

Continued 10

LOS ALTOS COMMUNITY FOUNDATION

NOTES TO FINANCIAL STATEMENTS for the years ended June 30, 2010 and 2009

12. Fair Value Measurement

The following table summarizes the Foundation's financial assets and liabilities measured at fair value on a recurring basis:

Assets at Fair Value as of June 30, 2010

Levell

Total

$

229,758 $ 229,758

3,568,000 3,568,000

3,797,758 $ 3,797~758

=============

Money Market Mutual Funds

Money Market Ml!tual Funds

Assets at Fair Value as of June 30, 2009

Level 1 Total

$ 334,813 $ 334,813

3,468,866 3,468,866

----------~~---

$ 3,803,679 $ 3,803,679

There are no level 2 or 3 assets or liabilities at June 30, 2010 or 2009.

13. Subsequent Events

The Foundation evaluated subsequentevents for recognition and disclosure through ,2011, the date which these financial statements were available to be issued. Management concluded that no material subsequent events have occurred since June 30, 2010 that require recognition or disclosure in such financial statements.

DRAFT TENTATIVE & PREUMUU\RY FOR DISCUSSHlN ONLY

11