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<ul><li><p> Audited Consolidated Financial Statements &amp; Reports Required by Government Auditing </p><p> Standards and OMB Circular A-133 </p><p> GOODWILL INDUSTRIES INTERNATIONAL, INC. AND RELATED ENTITY </p><p> December 31, 2011 </p></li><li><p>Goodwill Industries International, Inc. and Related Entity </p><p> Contents </p><p> Independent Auditors Report on the Consolidated Financial Statements and Supplementary Schedule of Expenditures of Federal Awards 1 Financial Statements </p><p>Consolidated statements of financial position 2 Consolidated statements of activities 3 Consolidated statements of cash flows 4 Notes to the consolidated financial statements 5 - 19 </p><p> Additional Information </p><p>Independent auditor's report on the additional information 20 Details of expense 21 </p><p>Reports Required by Government Auditing Standards and OMB Circular A-133 </p><p>Schedule of expenditures of federal awards 22 Notes to the schedule of expenditures of federal awards 23 Independent auditors report on internal control over financial reporting and on compliance and other matters based on an audit of financial statements performed in accordance with Government Auditing Standards 24 - 25 Independent auditors report on compliance with requirements that could have a direct and material effect on each major program on internal control over compliance in accordance with OMB Circular A-133 26 - 27 Schedule of findings and questioned costs 28 - 29 </p></li><li><p>2 0 2 1 L S t r e e t, N W</p><p>S u i t e 4 0 0</p><p>2 0 0 3 6</p><p> 1 </p><p>Independent Auditors Report on the Consolidated Financial Statements and Supplementary Schedule of Expenditures of Federal Awards To the Board of Directors Goodwill Industries International, Inc. and Related Entity </p><p> We have audited the accompanying consolidated statement of financial position of Goodwill Industries International, Inc. and Related Entity (the Organization) as of December 31, 2011 and, the related consolidated statements of activities and cash flows for the year then ended. These consolidated financial statements are the responsibility of the Organizations management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit. The prior year summarized comparative information has been derived from the Organization's 2010 consolidated financial statements and, in our report dated March 4, 2011, we expressed an unqualified opinion on those consolidated financial statements. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and, with respect to Goodwill Industries International, Inc. (GII), 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 consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated 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 2011 consolidated financial statements referred to above present fairly, in all material respects, the financial position of Goodwill Industries International. and Related Entity as of December 31, 2011, 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, February 23, 2012, on our consideration of Goodwill Industries International, Inc.s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, 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. Our audit was conducted for the purpose of forming an opinion on the basic consolidated financial statements. The accompanying schedule of expenditures of federal awards is presented for purposes of additional analysis as required by U.S. Office of Management and Budget Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations, and is not a required part of the basic consolidated financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the basic consolidated financial statements. The information has been subjected to the auditing procedures applied in the audit of the basic consolidated financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the consolidated financial statements or to the consolidated financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated, in all material respects, in relation to the basic consolidated financial statements taken as a whole. </p><p> Washington, DC February 23, 2012 </p></li><li><p>Goodwill Industries International, Inc. and Related Entity </p><p> Consolidated Statements of Financial Position </p><p>See notes to the consolidated financial statements. Certain 2010 amounts have been reclassified for comparative purposes. 2 </p><p>2011 2010Temporarily Permanently </p><p> December 31, Unrestricted Restricted Restricted Total Total </p><p>Assets</p><p>Cash and cash equivalents - Note B 2,062,368$ -$ -$ 2,062,368$ 1,374,484$ </p><p>Investments - Notes B, C, &amp; D 5,852,238 2,924,447 1,175,854 9,952,539 11,001,884 </p><p>Accounts and notes receivable - Note E 528,213 528,213 703,111 </p><p>Pledges receivable 292,530 292,530 40,269 </p><p>Grants receivable - Note F 3,061,825 3,061,825 5,195,134 </p><p>Prepaid expenses and other assets 594,500 594,500 486,611</p><p>Property and equipment - Notes G, H, &amp; I 8,679,903 8,679,903 8,627,902 </p><p>Total assets 20,779,047$ 3,216,977$ 1,175,854$ 25,171,878$ 27,429,395$ </p><p>Liabilities and Net Assets</p><p>Liabilities</p><p>Accounts payable 3,984,825$ -$ -$ 3,984,825$ 5,496,522$ </p><p>Accrued expense - Note D 1,468,741 1,468,741 1,530,840 </p><p>Deferred revenue 377,755 377,755 322,467 </p><p>Capital lease obligation - Note H 29,450 29,450 66,715 </p><p>Bonds payable - Note I 1,700,000 1,700,000 1,800,000 </p><p>Interest rate swap agreement - Notes B &amp; I 111,355 111,355 60,169 </p><p>Security deposit - Note M 21,883 21,883 21,883 </p><p>Total liabilities 7,694,009 - - 7,694,009 9,298,596 </p><p>Net assets - Notes J &amp; K 13,085,038 3,216,977 1,175,854 17,477,869 18,130,799 </p><p>Total liabilities and net assets 20,779,047$ 3,216,977$ 1,175,854$ 25,171,878$ 27,429,395$ </p></li><li><p>Goodwill Industries International, Inc. and Related Entity </p><p> Consolidated Statements of Activities </p><p>See notes to the consolidated financial statements. 3 </p><p>2011 2010Temporarily Permanently </p><p> Year Ended December 31, Unrestricted Restricted Restricted Total Total </p><p>Revenue and support</p><p>Federal awards - Note N 30,424,132$ -$ -$ 30,424,132$ 29,430,113$ </p><p>Membership dues 17,922,153 17,922,153 17,172,054 </p><p>Contributions - Note L 1,755,091 1,288,938 3,044,029 5,452,081 </p><p>Program services fees 2,430,117 2,430,117 2,094,709 </p><p>Rental - Note M 297,239 297,239 297,239 </p><p>Legacies and bequests 134,732 134,732 166,930 </p><p>Investment income - Note C 85,033 41,872 126,905 153,036 </p><p>Other income 12,373 12,373 16,325</p><p>Participation fees - - 196,553 </p><p>53,060,870 1,330,810 - 54,391,680 54,979,040</p><p>Net assets released from restriction - Note J 2,470,810 (2,470,810) - - </p><p>Total revenue and support 55,531,680 (1,140,000) - 54,391,680 54,979,040 </p><p>Expense</p><p>Program services</p><p>Sponsored programs and grants - Note N 32,777,301 32,777,301 30,571,540</p><p>Direct services to membership 12,810,872 12,810,872 12,562,942</p><p>Support services to membership 5,354,413 5,354,413 4,989,756</p><p>Total program services 50,942,586 50,942,586 48,124,238 </p><p>Management and general services</p><p>General and administrative 3,644,262 3,644,262 3,612,653</p><p>Resource development 479,458 479,458 473,040</p><p>Total management and general 4,123,720 4,123,720 4,085,693 </p><p>Total expense 55,066,306 - - 55,066,306 52,209,931 </p><p>Change in net assets from operations 465,374 (1,140,000) - (674,626) 2,769,109 </p><p>Net gain (loss) on investments - Note C 84,780 (1,550) (10,348) 72,882 401,763 </p><p>Unrealized loss on interest rate swap - Note I (51,186) (51,186) (60,169) </p><p>Guarantee reserve - 15,502</p><p>Change in net assets 498,968 (1,141,550) (10,348) (652,930) 3,126,205 </p><p>Net assets, beginning of year 12,586,070 4,358,527 1,186,202 18,130,799 15,004,594 </p><p>Net assets, end of year 13,085,038$ 3,216,977$ 1,175,854$ 17,477,869$ 18,130,799$ </p></li><li><p>Goodwill Industries International, Inc. and Related Entity </p><p> Consolidated Statements of Cash Flows </p><p>See notes to the consolidated financial statements. Certain 2010 amounts have been reclassified for comparative purposes. 4 </p><p>Year Ended December 31, 2011 2010</p><p>Cash flows from operating activitiesChange in net assets (652,930)$ 3,126,205$ Adjustments to reconcile change in net assets</p><p>to net cash provided by operating activities:Net gain on investments (72,882) (401,763) Uncollectible accounts 78,646 51,898 Depreciation and amortization 908,110 880,480 Unrealized loss on interest rate swap agreement 51,186 60,169 Changes in assets and liabilities:</p><p>Accounts and notes receivable 96,252 71,439 Pledges receivable (252,261) 7,236 Grants receivable 2,133,309 (2,751,657) Prepaid expenses and other assets (107,889) 37,274 Accounts payable (1,511,697) 2,464,131 Accrued expense (62,099) 225,412 Deferred revenue 55,288 (225,968) Guarantee reserve - (15,502) </p><p>Total adjustments 1,315,963 403,149 </p><p>Net cash provided by operating activities 663,033 3,529,354 </p><p>Cash flows from investing activiitesProceeds from sales of investments 1,465,191 25,578 Purchases of investments (342,964) (3,053,233) Purchases of property and equipment (960,111) (592,047) </p><p>Net cash provided by (used in) investing activities 162,116 (3,619,702) </p><p>Cash flows from financing activiitesPrincipal payment on bonds payable (100,000) (300,000) Principal payments on capital lease obligation (37,265) (35,100) </p><p>Net cash used in financing activities (137,265) (335,100) </p><p>Net increase (decrease) in cash and cash equivalents 687,884 (425,448) </p><p>Cash and cash equivalents, beginning of year 1,374,484 1,799,932 </p><p>Cash and cash equivalents, end of year 2,062,368$ 1,374,484$ </p><p>Supplemental disclosure of cash flow information:Cash paid during the year for interest 78,416$ 69,142$ </p></li><li><p>Goodwill Industries International, Inc. and Related Entity </p><p> Notes to the Consolidated Financial Statements </p><p>5 </p><p>A. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Organization: Goodwill Industries International, Inc. (GII) was established in 1902 and incorporated in 1910 to improve the quality of life of people with disabilities and other special needs. GIIs membership consists of local Goodwill Industries in the United States, Canada, and internationally. All GII members are autonomous, community-based, nonprofit corporations that provide rehabilitation services, training, placement, and employment for people with disabilities and other disadvantaged persons. GII provides its members with various services, including consulting for workforce development, retail, contracts, strategic planning, education/training, national public relations, and research. GII also represents its membership before the Federal government and international entities. 15810 Indianola Drive, LLC (Related Entity) was organized in 2004 for the purpose of operating, using, developing, improving, renovating, maintaining, managing, leasing, and, when applicable, selling, exchanging, or otherwise disposing of real, personal and mixed property. Related Entity is a single-member limited liability company owned entirely by GII. Principles of consolidation: The consolidated financial statements include the accounts of GII and Related Entity (together referred to as the Organization). Significant intra-entity accounts and transactions have been eliminated in consolidation. Income taxes: GII is exempt from the payment of income taxes on its exempt activities under Section 501(c)(3) of the Internal Revenue Code and has been classified by the Internal Revenue Service as other than a private foundation within the meaning of Section 509(a)(1) of the Internal Revenue Code. As a single-member limited liability company, Related Entity is treated as a dis...</p></li></ul>

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