AMERICAN DIABETES ASSOCIATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2010
(with comparative information as of and for the year ended December 31, 2009)
________
(continued)
12
corporations and derives monthly rental income that is reported in investment income in
the consolidated statement of activities.
Investment income for the year ended December 31, 2010 and 2009, includes (in
thousands):
2010 2009
Property rental income 1,172$ 1,622$
Net realized and unrealized gain 1,283 1,989
Interest and dividends 773 986
Investment fees (130) (186)
Total investment income, net 3,098$ 4,411$
5. Fair value measurements
Fair value is defined as the exchange price that would be received for an asset or paid to
transfer a liability in the principal or most advantageous market for the asset or liability
in an orderly transaction between market participants on the measurement date. Assets
and liabilities reported at fair value use inputs that are classified in the following
hierarchy:
Level 1: Quoted prices in active markets for identical assets or liabilities.
AMERICAN DIABETES ASSOCIATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2010
(with comparative information as of and for the year ended December 31, 2009)
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(continued)
13
The following table presents the fair value hierarchy for the Association’s financial assets
and liabilities that are measured at fair value on a recurring basis as of December 31,
2010 (in thousands).
Total Level 1 Level 2 Level 3
Financial Assets:
Investments
Fixed income mutual funds 6,626 6,626 – –
Certificates of deposit 5,055 5,055 – –
Equity mutual funds 2,428 2,428 – –
AMERICAN DIABETES ASSOCIATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2010
(with comparative information as of and for the year ended December 31, 2009)
________
The following table presents the fair value hierarchy for the Association’s financial assets
and liabilities that are measured at fair value on a recurring basis as of December 31,
2009 (in thousands).
Total Level 1 Level 2 Level 3
Financial Assets:
Investments:
Fixed-income mutual funds 6,064 6,064 – –
Corporate equities 1,144 1,144 – –
U.S. government securities 126 126 – –
Interest in perpetual trusts 3,725 – – 3,725
Financial Liabilities:
Split interest obligations 2,010 – 2,010 –
6. Accounts receivable
Accounts receivable are reported net of an allowance for doubtful accounts of
approximately $2,334,000 and $1,766,000 as of December 31, 2010 and 2009,
respectively. The Association’s receivables consist of amounts due for program service
fees, publications, advertising, land rental and other exchange transactions.
AMERICAN DIABETES ASSOCIATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2010
(with comparative information as of and for the year ended December 31, 2009)
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(continued)
15
7. Contributions receivable
Contributions receivable consist of the following amounts due as of December 31, 2010
and 2009 (in thousands):
2010 2009
Within one year 35,763$ 33,573$
In one to five years 6,644 5,446
In more than five years 313 424
Total contributions receivable 42,720 39,443
8. Fixed assets
Fixed assets consist of the following as of December 31, 2010 and 2009 (in thousands):
2010 2009
Land 67$ 67$
Leasehold improvements 1,232 1,200
Software 16,983 16,222
AMERICAN DIABETES ASSOCIATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2010
(with comparative information as of and for the year ended December 31, 2009)
________
9. Temporarily restricted net assets
Net assets were temporarily restricted for the following as of December 31, 2010 and
2009 (in thousands):
10. Permanently restricted net assets
In accordance with donor stipulations, permanently restricted net assets are held (and
invested) in perpetuity. The income derived from these net assets at December 31, 2010
and 2009, is to be used as follows (in thousands):
11. Endowment
The Association’s endowment consists of individual donor-restricted endowment funds
and donor-restricted term endowment funds established for a variety of purposes. The
Association has no board designated endowment funds.
AMERICAN DIABETES ASSOCIATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2010
(with comparative information as of and for the year ended December 31, 2009)
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(continued)
17
net assets. The portion of a donor-restricted endowment fund that is not classified as
permanently restricted net assets and the term endowment funds are classified as
temporarily restricted net assets until appropriated for expenditure.
At times, the fair value of assets associated with an individual donor-restricted
endowment fund may fall below the historic dollar value of the fund. Such deficiencies
are reported in unrestricted net assets.
Changes in endowment net assets for the years ended December 31, 2010 and 2009
Temporarily Permanently
Unrestricted Restricted Restricted Total
Endowment net assets,
December 31, 2008 (2,260)$ 17,904 3,639 19,283
Investment return:
December 31, 2009 (1,268) 18,243 3,685 20,660
Investment return:
Investment income 1,290 232 – 1,522
Net appreciation 539 62 – 601
Contributions – – 526 526
Appropriation for expenditure (1,173) (280) – (1,453)
AMERICAN DIABETES ASSOCIATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2010
(with comparative information as of and for the year ended December 31, 2009)
________
The Association has adopted an investment policy for endowment assets that provides
continued financial stability for the Association and a revenue stream for spending on the
Association’s mission.
12. Contributed services and in-kind contributions
The Association recognizes as contribution revenue and as professional fees expense the
fair value of services donated by volunteers in conjunction with the peer review process
by the Grant Review Panel of the American Diabetes Association Research Foundation,
Inc. and medical services provided in conjunction with the Association’s program
activities, primarily camp. Contributed services for the production of public service
announcements and for occupancy are recorded in printing and publications and
occupancy expenses, respectively. The Association recognized approximately
$2,744,000 and $3,720,000, in donated services provided in conjunction with the
Association’s activities during the years ended December 31, 2010 and 2009,
respectively.
AMERICAN DIABETES ASSOCIATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2010
(with comparative information as of and for the year ended December 31, 2009)
________
13. Allocation of joint costs
The Association conducts activities to distribute information related to diabetes and a call
to action, such as understanding the risks and seeking appropriate health services, as well
as an appeal for funds. The joint costs incurred through these activities for the years
ended December 31, 2010 and 2009, were allocated as follows (in thousands):
14. Pension plan
15. Self-insured benefits
The Association self-insures its employee medical and dental benefits. Losses from
claims identified under the incident reporting system, as well as provisions for estimated
losses for incurred but not reported incidents, are accrued based on estimates that
incorporate the past experience of the Association, as well as other considerations,
including the nature of the claims or incidents and relevant trend factors.
AMERICAN DIABETES ASSOCIATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2010
(with comparative information as of and for the year ended December 31, 2009)
________
respectively. The benefit expense includes claims paid and changes to the reserve for
future claims.
16. Line of credit
The Association has an unsecured line of credit with a bank at interest rates calculated as
a factor of the London Interbank Offered Rate (LIBOR). The line of credit ($10,000,000)
is subject to review and approval by the bank in August 2011. The Association expects
to renew the line of credit each year. The outstanding balance on the line of credit as of
December 31, 2010 and 2009, was $6,080,000 and $1,320,000, respectively. Interest and
fees for the years ended December 31, 2010 and 2009, were approximately $72,000 and
$68,000, respectively.
17. Lease commitments
Operating leases
The Association is obligated under various noncancelable operating lease agreements for
headquarter and field office facilities expiring at various dates between January 2011 and
December 2019. Many of these agreements contain cost escalations providing for
increases in rental rates. The Association recognizes rent expense on a straight-line basis
over the life of the lease. The Association is also obligated under noncancelable
operating leases for telephone and other equipment through March 2015.
AMERICAN DIABETES ASSOCIATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2010
(with comparative information as of and for the year ended December 31, 2009)
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(continued)
21
As of December 31, 2010, the future minimum lease payments under operating leases
with noncancelable lease terms in excess of one year were (in thousands):
Year ending December 31,
2011 7,973$
2012 6,382
2013 5,036
2014 4,582
2015 3,890
2016 and thereafter 4,251
Total minimum lease payments 32,114$
Rent expense totaled approximately $7,180,000 and $7,832,000 for the years ended
December 31, 2010 and 2009, respectively.
Capital leases
The Association leases computer equipment under capital lease agreements expiring on
various dates through 2014. New assets were acquired under capital lease during the
year ended December 31, 2010, in the amount of $30,000. Assets under capital lease
were approximately $2,453,000 and $5,169,000 and accumulated amortization on those
assets was approximately $1,511,000 and $3,887,000 as of December 31, 2010 and 2009,
respectively.
As of December 31, 2010, the future minimum lease payments under capital leases were
(in thousands):
Year ended December 31,
2011 378$
2012 378
2013 206
2014 6
Less: Amount representing interest (26)
Total minimum lease payments 942$
18. Lease payments receivable
The Association holds leases on land that was donated in 1999 through a bequest. As
part of the bequest, the donor restricted the Association from selling the land for 25 years
from the date of the donation. As of December 31, 2010, the future minimum lease
payments due to the Association under these leases were (in thousands):
19. Subsequent events
For the year ended December 31, 2010, the Association evaluated subsequent
events through May 31, 2011, which is the date the financial statements were
available for issuance.