consolidated financial statements december 31, 2011 … · · 2012-06-28consolidated financial...

BOYS TOWN

Consolidated Financial Statements

December 31, 2011

(With Independent Auditors’ Report Thereon)

BOYS TOWN

Table of Contents

Page(s)

Independent Auditors’ Report 1

Consolidated Financial Statements as of and for the year ended December 31, 2011:

Consolidated Statement of Financial Position 2

Consolidated Statement of Activities 3

Consolidated Statement of Cash Flows 4

Consolidated Statement of Functional Expenses 5

Notes to Consolidated Financial Statements 6 – 34

Independent Auditors’ Report

The Board of Trustees Father Flanagan’s Boys’ Home

We have audited the accompanying consolidated statement of financial position of Father Flanagan’s Boys’ Home d/b/a Boys Town (Boys Town) as of December 31, 2011, and the related consolidated statements of activities, cash flows, and functional expenses for the year then ended. These consolidated financial statements are the responsibility of Boys Town’s management. Our responsibility is to express an opinion on these consolidated 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 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 Boys Town’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 consolidated financial statements referred to above present fairly, in all material respects, the financial position of Father Flanagan’s Boys’ Home d/b/a Boys Town as of December 31, 2011, and the changes in its net assets and its cash flows for the year then ended, in conformity with U.S. generally accepted accounting principles.

Omaha, Nebraska June 6, 2012

“

KPMG LLP Suite 1501 222 South 15th Street Omaha, NE 68102-1610 Suite 1600 233 South 13th Street Lincoln, NE 68508-2041

KPMG LLP is a Delaware limited liability partnership, the U.S. member firm of KPMG International Cooperative (“KPMG International”), a Swiss entity.

2

BOYS TOWN

Consolidated Statement of Financial Position

December 31, 2011

(Dollar amounts in thousands)

FatherBoys Town Flanagan’s

and Fund for Boys Townprogram-related Needy consolidated

Assets affiliates Children Eliminations total

Cash and cash equivalents $ 12,229 — — 12,229 Investment income receivable 41 566 — 607 Accounts receivable 20,645 — (21) 20,624 Inventories 1,128 — — 1,128 Notes receivable 105 — — 105 Prepaid expenses 1,971 — — 1,971 Other assets 1,619 — — 1,619 Pledges receivable 7,064 — — 7,064 Pension asset 41,109 — — 41,109 Investments 108,485 779,979 — 888,464 Beneficial interest in trust assets 71,094 — — 71,094 Interest in Father Flanagan’s

Fund for Needy Children 780,369 — (780,369) — Cash restricted for purchase of

long-term assets 2,117 — — 2,117 Land, buildings, and equipment, net 119,948 — — 119,948

Total assets $ 1,167,924 780,545 (780,390) 1,168,079

Liabilities and Net Assets

Liabilities:Accounts payable $ 15,775 — — 15,775 Accrued liabilities 33,560 176 (21) 33,715 Deferred revenue 2,142 — — 2,142 Notes payable 3,646 — — 3,646 Bonds payable 57,108 — — 57,108 Pension and postretirement

benefits liability 60,183 — — 60,183

Total liabilities 172,414 176 (21) 172,569

Net assets:Unrestricted 888,646 780,369 (780,369) 888,646

Less noncontrolling interest incontrolled entity deficit 1,176 — — 1,176

Total unrestricted 887,470 780,369 (780,369) 887,470

Temporarily restricted 43,262 — — 43,262 Permanently restricted 64,778 — — 64,778

Total net assets 995,510 780,369 (780,369) 995,510

Total liabilities andnet assets $ 1,167,924 780,545 (780,390) 1,168,079

See accompanying notes to consolidated financial statements.

3

BOYS TOWN

Consolidated Statement of Activities

Year ended December 31, 2011


FatherFlanagan’sFund for

Boys Town and program-related affiliates Needy Boys TownTemporarily Permanently Children consolidated

Unrestricted restricted restricted Total Unrestricted Eliminations total

Revenues, gains, and other support:Contributions $ 135,546 6,403 — 141,949 — — 141,949 Legacies and bequests 12,695 — 739 13,434 — — 13,434 Program service revenues 171,108 — — 171,108 — — 171,108 Other revenues 5,700 — — 5,700 81 — 5,781 Investment income 4,004 648 — 4,652 11,223 — 15,875 Realized and unrealized gains (losses) on investments, net (924) 155 — (769) (16,739) — (17,508) Loss on beneficial interest in trust assets — (3,458) (1,974) (5,432) — — (5,432) Net assets released from restrictions 1,189 (1,165) (24) — — — —

Total revenues, gains, and other support 329,318 2,583 (1,259) 330,642 (5,435) — 325,207

Expenses:Program services 332,743 — — 332,743 — — 332,743 Supporting services 39,297 — — 39,297 1,575 — 40,872

Total expenses 372,040 — — 372,040 1,575 — 373,615

Revenues, gains, and other supportover (under) expenses (42,722) 2,583 (1,259) (41,398) (7,010) — (48,408)

Change in net assets of Father Flanagan’s Fund forNeedy Children (48,643) — — (48,643) — 48,643 —

Support from Father Flanagan’s Fund for Needy Children 41,633 — — 41,633 (41,633) — — Pension-related changes other than net periodic pension cost (14,155) — — (14,155) — — (14,155)

Increase (decrease) in net assets (63,887) 2,583 (1,259) (62,563) (48,643) 48,643 (62,563)

Net assets, beginning of year 951,357 40,679 66,037 1,058,073 829,012 (829,012) 1,058,073 Net assets, end of year $ 887,470 43,262 64,778 995,510 780,369 (780,369) 995,510


4

BOYS TOWN

Consolidated Statement of Cash Flows



Cash flows from operating activities:Decrease in net assets $ (62,563) Adjustments to reconcile decrease in net assets to net cash flows used in operating activities:

Pension-related charges other than net periodic pension cost 14,155 Retiree pension expense (2,351) Postretirement benefits expense 1,885 Realized and unrealized losses on investments, net 17,508 Loss on beneficial interest in trust assets 5,432 Loss on sale of building and equipment 2,096 Depreciation 10,583 Amortization of discounted liabilities (4) Termination of annuity agreements (306) In-kind contributions (34) Contributions restricted for long-term investments (169) Net changes in assets and liabilities:

Decrease in investment income receivable 4 Decrease in accounts receivable 861 Decrease in inventories 32 Decrease in notes receivable 44 Increase in prepaid expenses (62) Decrease in other assets 4 Increase in pledges receivable (1,652) Increase in beneficial interest in trust assets (1,581) Increase in accounts payable 4,575 Increase in accrued liabilities 2,689 Increase in deferred revenue 1,047 Decrease in pension and postretirement benefit obligation (3,967)

Net cash flows used in operating activities (11,774)

Cash flows from investing activities:Purchases of buildings and equipment (12,682) Contributions restricted for investment in property and equipment (169) Purchases of assets restricted to investment in equipment and purchase of equipment (1,650) Sales of building and equipment 1,443 Proceeds from sale of investments 1,899,078 Purchases of investments (1,870,980)

Net cash flows provided by investing activities 15,040

Cash flows from financing activities:Proceeds from gift annuities issued 1,739 Contributions restricted for investment in property and equipment 169 Proceeds from notes payable 856 Payments on bonds payable (320) Payments on notes payable (2,239) Payments on annuity obligations (525) Payments on capital lease obligations (62)

Net cash flows used in financing activities (382)

Net increase in cash and cash equivalents 2,884

Cash and cash equivalents, beginning of year 9,345 Cash and cash equivalents, end of year $ 12,229

Supplemental disclosure of cash flow information:Cash paid during the year for:

Interest $ 2,555


5

BOYS TOWN

Consolidated Statement of Functional Expenses



Program services Supporting servicesBoys Town

Boys Town NationalNebraska Home Campus Programs National Hotline and Management

Iowa Educational across Research Public and TotalServices Program America Hospital Services Total general Fund-raising Total expenses

Salaries $ 28,731 6,455 33,463 39,274 1,924 109,847 7,144 3,391 10,535 120,382 Employee benefits 5,841 1,350 7,476 8,886 331 23,884 1,703 820 2,523 26,407 Payroll taxes 2,408 569 3,401 3,833 146 10,357 534 288 822 11,179

Total salaries and related expenses 36,980 8,374 44,340 51,993 2,401 144,088 9,381 4,499 13,880 157,968

Specific assistance to youth 2,854 32 2,061 178 — 5,125 — — — 5,125 Occupancy 2,439 1,095 2,736 2,546 90 8,906 310 126 436 9,342 Contract services 17,084 2,086 1,765 14,757 174 35,866 447 799 1,246 37,112 Supplies 1,592 630 1,052 8,407 239 11,920 151 273 424 12,344 Printing and publications 231 16 501 281 797 1,826 246 9,719 9,965 11,791 Postage 211 4 283 129 404 1,031 292 4,522 4,814 5,845 Equipment – rental and maintenance 373 97 544 1,553 43 2,610 325 199 524 3,134 Professional fees 1,047 88 985 3,274 96,310 101,704 2,462 271 2,733 104,437 Travel 1,067 49 1,426 415 16 2,973 81 140 221 3,194 Telephone 451 35 572 483 58 1,599 53 34 87 1,686 Interest 666 226 291 757 14 1,954 27 753 780 2,734 Other 215 48 922 1,928 15 3,128 4,922 270 5,192 8,320

Total expenses before depreciation 65,210 12,780 57,478 86,701 100,561 322,730 18,697 21,605 40,302 363,032

Depreciation of buildings and equipment 2,257 1,134 2,042 4,468 112 10,013 303 267 570 10,583 Total expenses $ 67,467 13,914 59,520 91,169 100,673 332,743 19,000 21,872 40,872 373,615


BOYS TOWN

Notes to Consolidated Financial Statements

December 31, 2011


6 (Continued)

(1) Nature of Operations

Father Flanagan’s Boys’ Home and its affiliates, a nonsectarian, not-for-profit organization governed by a volunteer board of trustees, operate as Boys Town. Boys Town’s mission is to change the way America cares for children, families, and communities by providing and promoting an Integrated Continuum of Care that instills Boys Town values to heal body, mind, and spirit. Boys Town accomplishes this by providing housing, care, treatment, support, and/or educational services for youth who are at-risk, wayward, troubled, or disadvantaged, or have otherwise demonstrated communication and learning disabilities, and to equip and prepare them to lead useful lives. Boys Town’s revenues are derived from contributions, contracts, program service fees, and support from Father Flanagan’s Fund for Needy Children.

A description of the major program services follows:

• Nebraska/Iowa Services consists of the Family Home Program, Intervention and Assessment Services, In-home Family Services, Foster Family Services, and Community Support Services including Common Sense Parenting®, and the Outpatient Center for Behavioral Health.

There are 68 family style Family Homes on the Home Campus, which is in the incorporated Village of Boys Town, Nebraska (the Village). These homes have a total capacity of 531 youth. Six to eight troubled boys or girls from throughout the United States of America, with ages generally ranging from 8 to 18, live in a home with a specially trained professional married couple called Family Teachers. The couple provides treatment planning, skill development, spiritual guidance, a family style environment, and love and care, with the help of an Assistant Family Teacher. Each home is monitored, evaluated, and advised by a Program Director and other support personnel. The homes are certified by the Council on Accreditation. Homes are not mixed by gender but are mixed by age, ethnic, and religious backgrounds. The program is also served by four Intervention and Assessment Homes, which provide crisis intervention for youth.

The Home Campus also operates a Center for Behavioral Health, which serves approximately 1,900 youth and families with behavioral problems on an outpatient basis and is a training center for doctoral level psychologists.

The Nebraska Families Collaborative (NFC) is a joint partnership between Boys Town, Child Savings Institute, Heartland Family Service, Nebraska Family Support Network, and OMNI Behavioral Health. The NFC receives cases from the Nebraska Department of Health and Human Services and is responsible for service coordination and management. They work very closely with the Nebraska Child and Family Service Specialist to develop and coordinate service plans for children and families. The NFC began serving children and families in November 2009 and served approximately 3,000 children and families during 2011.

• The Home Campus Educational Program consists of the Boys Town High School and the Wegner Middle School. The Village schools serve youth at Boys Town and provide academic and vocational training skills necessary for contemporary society. All Boys Town’s schools are fully accredited by the State of Nebraska and the North Central Association. These schools include the Boys Town

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Reading Center, which delivers reading programs to children at both schools. The Reading Center conducts applied research and then designs programs aimed at improving the reading and writing skills of at-risk adolescents. These research-based programs are disseminated to schools locally and around the country. A full range of special education services is provided to all youth who require this type of assistance.

The Boys Town Day School in the Village of Boys Town and the Duncan Day School in Columbus, Nebraska serve youth in kindergarten through twelfth grade who cannot receive education services in a public or alternative school setting due to behavioral problems and academic deficiencies. These schools meet all requirements of Level III schools under Nebraska Department of Education’s Rule 51. These schools currently educate students from multiple school districts in Nebraska and Iowa. These schools have also served parentally placed private youth and court placed youth.

• Programs across America directly served over 18,000 youth in eleven sites nationwide. These sites are: Nebraska/Iowa, Boys Town California, Boys Town Central Florida, Boys Town Chicago, Boys Town Louisiana, Boys Town Nevada, Boys Town New England, Boys Town New York, Boys Town North Florida, Boys Town South Florida, Boys Town Texas, and Boys Town Washington, DC.

Programs offered throughout the nation include Intervention and Assessment Services, Family Home Services, Foster Family Services, In-Home Family Services, and Community Support Services including Common Sense Parenting®, Outpatient Behavioral Health Services, and National Community Support Services.

Boys Town invests and emphasizes quality through staff training, evaluation, and outcomes research by having a department committed to the quality of Boys Town’s programs. The Training, Evaluation Department provides technical training, evaluation, and quality/control/quality assurance of Boys Town’s nationwide system of services.

National Community Support Services provides training, other services, and resources to parents, child care providers, and educators around the country. Services are offered through professional development seminars, comprehensive consulting services, books from the Boys Town Press, and training packages. In 2011, 5,168 parents, teachers, administrators, and professionals were trained allowing Boys Town to indirectly impact approximately 105,000 children through this training.

• Boys Town National Research Hospital (BTNRH) in Omaha, Nebraska, is recognized internationally as a leader in communication disorder research and as a referral center for children with disorders of the ear, hearing and balance, cleft lip and palate, speech, and voice, as well as related disabilities. BTNRH clinical programs served more than 51,000 children and adolescents in 2011 through a total of more than 204,000 patient visits.

Boys Town Pediatrics, BTNRH’s group of 31 general pediatricians, provides primary care pediatric medical services at six clinic locations in the Omaha area.

BTNRH also provides medically directed behavioral services. These services include three Specialized Treatment Group Homes located in the Village of Boys Town – two for 13 boys, and

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one for 14 girls. These homes are operated on a shift basis and are staff secured. BTNRH also operates an Intensive Residential Treatment Center for 47 boys and girls located on the downtown hospital campus.

The Lied Learning and Technology Center for Childhood Deafness and Vision Disorders, a separate 501(c)(3) corporation, is a research and treatment facility operated and occupied by BTNRH personnel. In addition to directly caring for children with these special needs, BTNRH staff trained over 11,000 medical professionals and educators during 2011 to impact approximately 109,000 children.

• Boys Town National Hotline and Public Services meets the informative and public service needs of youth, parents, teachers, youth care workers, and others who are involved directly or indirectly with helping youth; including homeless, abused, neglected, and handicapped youth.

The Boys Town National Hotline (the Hotline) at 1-800-448-3000 helps hundreds of thousands of children and families throughout all 50 states each and every year. The Hotline provides toll free phone, as well as web based, crisis service for troubled children and families. The Hotline received over 135,000 contacts in 2011. The Hotline operates 24 hours a day, seven days a week, with trained, skilled, professional operators. The Hotline is equipped to handle calls from people who speak a variety of languages.

In an effort to reach the highest number of youth in need of assistance, in a medium youth use more frequently, The Boys Town National Hotline launched a Web site mid 2009 called yourlifeyourvoice.org. In 2011, this Web site had over 523,000 visitors and over 37,000 youth contacted the Hotline professionals for assistance.

In addition to operating the Boys Town National Hotline, Boys Town also operates the Nebraska Family Helpline. The Nebraska Family Helpline was conceived when Nebraska lawmakers realized families needed one place to go to get help and answers to their questions. The Helpline counselors assist families in crisis, make referrals, help them navigate government systems, and follow up with families to ensure they received the help they needed. The Nebraska Family Helpline has been honored in the press and by the legislature for its effective service to Nebraska families. Over 3,600 families have sought help through the Helpline in 2011.

(2) Summary of Significant Accounting Policies

The following is a summary of significant accounting policies used in the preparation of the consolidated financial statements:

(a) Basis of Presentation

The accompanying consolidated financial statements include the accounts of Father Flanagan’s Boys’ Home, its affiliates (Boys Town California, Inc., Boys Town Central Florida, Inc., Boys Town North Florida, Inc., Boys Town Nevada, Inc., Boys Town New England, Inc., Boys Town Chicago, Inc., Boys Town Texas, Inc., Boys Town Louisiana, Inc., Boys Town New York, Inc., Boys Town Washington, D.C., Inc., and Father Flanagan’s Boys Town, Florida, Inc.), Father Flanagan’s Fund for Needy Children (FFFNC), the Lied Learning and Technology Center for Childhood Deafness and

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Vision Disorders, a separate 501(c)(3) corporation operating in support of BTNRH, and Nebraska Families Collaborative (NFC), a separate nonprofit corporation in which Boys Town has a controlling partnership interest. All intercompany balances and transactions have been eliminated in consolidation. The accumulated noncontrolling interest of NFC is recognized in the consolidated balance sheets as part of net assets. The noncontrolling interest of NFC related to increase in unrestricted net assets was ($147), for the year ended December 31, 2011.

(b) Basis of Accounting

The accompanying consolidated financial statements have been prepared on the accrual basis of accounting. Resources are reported for accounting purposes into separate classes of net assets based on the existence or absence of donor-imposed restrictions. Net assets that have similar characteristics have been combined into similar categories.

• The unrestricted net assets account for resources over which the governing board has discretionary control to use in carrying on the operations of Boys Town.

• The FFFNC support fund consists of unrestricted net assets, which the Board of Trustees have determined are to be retained for the exclusive purpose of providing financial support to the various Boys Town programs.

• The temporarily restricted net assets account for those resources currently available for use, but expendable only for purposes specified by the donor or grantor, or which will become available for use at a later time.

• The permanently restricted net assets represent the principal amount of gifts and bequests accepted with the donor stipulation that the principal be maintained intact and that only the income from investment thereof be expended either for general purposes or for purposes specified by the donor. Permanently restricted net assets also represent Boys Town’s interest in perpetual trusts held by other trustees but which benefits Boys Town.

(c) Cash and Cash Equivalents

Cash and cash equivalents include investments with an original maturity of three months or less except that such instruments purchased with endowment assets are classified as investments.

(d) Inventories

Inventories are valued at the lower of cost or market with cost determined principally on the first-in, first-out method.

(e) Interest in Net Assets of Father Flanagan’s Fund for Needy Children

Because of Boys Town’s relationship as FFFNC’s sole member and the overall financial interrelationship of the organization and FFFNC, Boys Town reports its interest in the net assets of FFFNC in the consolidated statement of financial position, with corresponding changes in those net assets reported in the accompanying consolidated statement of activities.

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(f) Investments

Investments, including equity and debt securities, are reported at fair value. Investments in securities traded on a national securities exchange are valued at the latest quoted market prices. Investments in closely held stock and real estate are estimated based on independent appraisals and information provided by the respective companies. For debt securities, if quoted market prices are not available, the fair values are estimated using pricing models, quoted prices of similar securities with similar characteristics, or discounted cash flows. For alternative investments in funds that do not have readily determinable fair values including private investments, hedge funds, real estate, and other funds, Boys Town estimates fair value using net asset value per share or its equivalent as a practical expedient to fair value.

Donated investments are reported at estimated fair value at the date of receipt. Realized gains and losses on sales of investments are recognized in the consolidated statement of activities as specific investments are sold. Interest is recognized as earned. Dividend income is recognized on the ex-dividend date. All realized and unrealized gains and losses and income arising from investments are recognized in the consolidated statement of activities as increases or decreases to unrestricted net assets unless their use is restricted by donor stipulation or law.

(g) Fair Value Measurements

Boys Town applies the provisions included in Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 820, Fair Value Measurements, for fair value measurements of financial assets and financial liabilities and for fair value measurements of nonfinancial items that are recognized or disclosed at fair value in the consolidated financial statements. Fair value is defined 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.

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(h) Fair Value of Financial Instruments

The following table presents the carrying amount and estimated fair values of Boys Town’s financial instruments at December 31, 2011:

Carryingamount Fair value

Financial assets:Cash and cash equivalents $ 12,229 12,229 Investment income receivable 607 607 Accounts receivable 20,624 20,624 Notes receivable 1,128 1,128 Prepaid expenses 105 105 Pledges receivable 1,971 1,971 Investments 888,464 888,464 Cash restricted for purchase of long-term assets 2,117 2,117 Beneficial interest in trust assets 71,094 71,094

Financial liabilities:Accounts payable $ 15,775 15,775 Accrued liabilities 33,715 33,715 Deferred revenue 2,142 2,142 Notes payable 3,646 3,646 Bonds payable 57,108 57,108

The following methods and assumptions were used to estimate the fair value of each class of financial instruments:

Cash and cash equivalents, investment income receivable, accounts receivable, prepaid expenses, cash restricted for purchase of long-term assets, accounts payable, accrued liabilities, and deferred revenue: The carrying amounts approximate fair value because of the short maturity of these instruments. The carrying value of notes receivable approximates the fair value as the terms reflect current market terms for similar notes. Investments are stated at fair value as discussed in note 2(f), note 3 and note 4. The carrying value of pledges receivable approximates fair value as the majority of these pledges were obtained in current or previous year and the discounted cash flows are reflective of current market rates for similar periods. The carrying value of notes payable approximates fair value since interest rates closely reflect market rates.

Beneficial interest in trust assets represents Boys Town’s interest in assets held in perpetuity and remainder trust controlled by independent trustees. The estimated value is Boys Town’s percentage interest in the fair value of the underlying investments as reported by the independent trustees.

Bonds payable were valued using quoted market prices for specific bonds. For bonds that did not have a quoted market price available, the fair value was determined using the rate observed for a similar bond issued by Boys Town with similar terms that had quoted market prices. At

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December 31, 2011, the carrying value of bonds payable did not differ materially from its estimated fair value.

(i) Land, Buildings, and Equipment

Land, buildings, and equipment are stated at cost, including capitalized interest when applicable. For the year ended December 31, 2011, Boys Town capitalized $43 in interest. Provisions for depreciation are computed using the straight-line method based on the estimated useful lives of the assets.

Gifts of long-lived assets such as land, buildings, or equipment are reported 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, expirations of donor restrictions are reported when the donated or acquired long-lived assets are placed into service. Contributions restricted to the purchase of property and equipment in which restrictions are met within the same year as received are reported as increases in unrestricted net assets.

(j) Impairment of Long-Lived Assets

Long-lived assets, such as property and equipment, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized to the extent the carrying amount of the asset exceeds its fair value.

(k) Contributions

Donated properties and materials are recorded as public support at their estimated fair value at date of donation. Donated advertising and air time that are recorded as revenues (and as a program expense) at their estimated fair value of $96,036, as recorded in professional fees in the consolidated statement of functional expenses. All contributions are considered to be available for unrestricted use unless specifically restricted by the donor. Amounts received that are designated for future periods or restricted by the donor for specific purposes are reported as temporarily restricted or permanently restricted support that increases those net asset classes. However, if a restriction is fulfilled in the same time period in which the contribution is received, Boys Town reports the support as unrestricted.

Contributions of services are recognized if the services received 1) create or enhance nonfinancial assets or 2) require specialized skills, are provided by individuals possessing those skills, and would typically need to be purchased if not provided by donation. In 2011, $14 of contributed services was recognized.

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(l) Net Patient Service Revenue

BTNRH has agreements with third-party payors that provide for payments at amounts different from its established rates. Payment arrangements include prospectively determined rates per discharge, reimbursed costs, discounted charges, and per diem payments. Net patient service revenue is reported at the estimated net realizable amounts from patients, third-party payors, and others for services rendered.

(m) Income Taxes

Boys Town and its affiliates are exempt from federal income taxes under Section 501(c)(3) of the Internal Revenue Code. Boys Town accounts for uncertainties in accounting for income tax assets and liabilities using the guidance included in FASB ASC Topic 740, Income Taxes. Boys Town recognizes the effect of income tax positions only if those positions are more likely than not of being sustained. At December 31, 2011, Boys Town had no uncertain tax positions accrued.

(n) Pension and Other Postretirement Plans

Boys Town has two defined benefit pension plans consisting of one for employees who retired prior to January 1, 1998, and the other for active employees as of January 1, 1998. Boys Town also provides health care benefits for substantially all retired employees.

Boys Town records annual amounts relating to its pension and postretirement plans based on calculations that incorporate various actuarial and other assumptions, including discounts rates, mortality, assumed rates of return, compensation increases, turnover rates, and healthcare cost trend rates. Boys Town reviews its assumptions on an annual basis and makes modifications to the assumptions based on current rates and trends when it is appropriate to do so. The effect of modifications to those assumptions is recorded in pension-related changes other than net periodic pension cost and amortized to net periodic cost over future periods using the corridor method. Boys Town believes that the assumptions utilized in recording its obligations under its plans are reasonable based on its experience and market conditions.

(o) Use of Estimates

The preparation of consolidated financial statements in conformity with U.S. generally accepted accounting principles (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

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(3) Fair Value Measurements

ASC Topic 820 establishes 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 measurements involving significant unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are as follows:

• Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that Boys Town has the ability to access at the measurement date.

• Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.

• Level 3 inputs are unobservable inputs for the asset or liability.

The level in the fair value hierarchy within which a fair value measurement in its entirety falls is based on the lowest level input that is significant to the fair value measurement in its entirety.

The following table presents assets and liabilities that are measured at fair value on a recurring basis at December 31, 2011:

December 31,2011 Level 1 Level 2 Level 3

Cash and cash equivalents $ 12,229 12,229 — — Investments (note 4) 888,464 235,792 240,399 412,273 Beneficial interest in trust

assets 71,094 140 — 70,954 Cash restricted for purchase

of long-term assets 2,117 2,117 — — Total $ 973,904 250,278 240,399 483,227

Certain investments classified in Levels 2 and 3 consist of shares or units in investment funds as opposed to direct interests in the funds’ underlying holdings, which may be marketable. Because the net asset value reported by each fund is used as a practical expedient to estimate the fair value of Boys Town’s interest therein, its classification in Level 2 or 3 is based on Boys Town’s ability to redeem its interest at or near the date of the consolidated statement of financial position. If the interest can be redeemed in the near term, the investment is classified in Level 2. The classification of investments in the fair value hierarchy is not necessarily an indication of the risks, liquidity, or degree of difficulty in estimating the fair value of each investment’s underlying assets and liabilities.

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The following table presents Boys Town’s activity for assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the year ended December 31, 2011:

Balance at December 31, 2010 $ 478,268 Total realized and unrealized gains and

losses included in changes innet assets, net (3,801)

Purchases 98,901 Sales — Settlements (89,413) Transfers into and/or out of Level 3 (728)

Balance at December 31, 2011 $ 483,227

Realized and unrealized gains (or losses) included in the increase of net assets for 2011 for assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) are reported in the consolidated statement of activities:

Total realized gains $ 5,614 Change in unrealized gains or losses

relating to assets still held (8,989) Loss on beneficial interest in trust assets (426)

$ (3,801)

During 2011, there were no transfers between Levels 1 and 2. The consolidated financial statements as of December 31, 2011 include a nonrecurring fair value measurement relating to property valued at $200 using Level 3 inputs.

(4) Investments

The primary management of all investments is performed by seven professional investment advisors, eighty-eight limited partnerships, five mutual funds, and four commingled trusts. Investment income is reported net of management fee expense of $1,416.

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The estimated fair value of investments and their level within the fair value hierarchy at December 31, 2011 is as follows:

Total Level 1 Level 2 Level 3

Short-term securities $ 76,222 68,952 7,270 — Long-term investments:

Equities:Domestic 54,271 54,271 — —

Fixed income:U.S. Treasury securities 16,262 16,262 — — Asset backed 48,343 — 48,343 — Corporate and agency 38,400 308 38,092 —

Mutual funds:Equity 9,083 9,083 — — Fixed income 5,883 5,883 — — International 54,782 54,782 — — Emerging markets 25,868 25,868 — —

Alternative investments:Domestic equity funds 127,079 — 25,023 102,056 Absolute return funds 132,482 — — 132,482 International equity 111,978 — 102,160 9,818 Private equity funds 87,967 — — 87,967 Fixed income 20,973 — 13,254 7,719 Real assets 72,614 383 — 72,231

Real estate 6,257 — 6,257 —

Total long-terminvestments 812,242 166,840 233,129 412,273

Total $ 888,464 235,792 240,399 412,273

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17 (Continued)

The estimated value of certain alternative investments and nonmarketable securities, such as partnerships, and closely held stock was provided by the respective companies and independent appraisals. For these alternative investments, Boys Town used the net asset value (or its equivalent) reported by the underlying fund to estimate the fair value of the investment. Below is a summary of investments accounted for at net asset value:

* Redemptionfrequency Redemption

Unfunded (if currently noticeFair value commitments eligible) period

Domestic equity funds (a) $ 127,079 — m/q/sa/a 15-90 daysAbsolute return funds (b) 132,482 — m/q/sa/a 7-180 daysInternational equity (c) 111,978 — monthly 10-30 daysPrivate equity funds (d) 87,967 55,429 N/A N/AFixed income (e) 20,973 — daily dailyReal assets (f) 72,614 15,864 N/A N/A

$ 553,093 71,293

* m – monthly, q – quarterly, sa – semiannual, a – annual

(a) This class includes investments in funds that primarily invest in U.S. common stocks. Of this class, $71 million employ a long-short strategy. Of this balance, $12 million is restricted for the next 13 months at which time it will be available annually subject to a 45-day redemption notice.

(b) The class includes investments in funds that invest in a mix of securities including equities and fixed income. The funds are primarily multi-strategy in their approach and may include such tactics as risk arbitrage, distressed credit, and other long-short strategies.

(c) This class includes investments in funds that primarily invest in international common stocks. Of this class, $6 million of this class employ a long-short strategy.

(d) This class includes investments in private equity funds that invest primarily in private companies at various stages of development and maturity. These include funds pursuing a leveraged buyout, growth equity, or venture capital strategy through investments across the capital structure. The fair values of the investment in this class have been estimated using the net asset value of Boys Towns’ ownership interest in partners’ capital. These investments can never be redeemed with the fund. Distributions from each fund will be received as the underlying investments of the funds are liquidated. It is estimated that the underlying assets of the fund will be liquidated over the next 4 to 6 years.

(e) This class includes investments in funds that primarily invest in fixed-income securities of U.S. government and federal agencies and U.S. or developed nations listed companies. They may also include private placement securities of corporate borrowers and structured securities such as mortgage-backed securities or other asset-backed securities investments.

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(f) This class includes real estate funds that employ a value-add strategy across multiple property types including multifamily, office, industrial, and retail. It also includes energy funds that invest primarily in interests of oil and gas properties. The fair values of the investments in the real estate funds have been estimated using the net asset value of the Boys Town’s ownership interest in partners’ capital. These investments can never be redeemed with the fund. Distributions from real estate funds will be received as the underlying investments of the funds are liquidated, and distributions from energy funds will be received from the production and marketing of oil and gas and upon final sale of the underlying interests in the properties. It is estimated that the underlying assets of the fund will be liquidated over the next 4 to 7 years.

Due to the nature of the investments held by the funds, changes in market conditions and the economic environment may significantly impact the net asset value of the funds and, consequently, the fair value of the Boys Town’s interests in the funds. Although a secondary market exists for these investments, it is not active and individual transactions are typically not observable. When transactions do occur in this limited secondary market, they may occur at discounts to the reported net asset value. It is, therefore, reasonably possible that if Boys Town were to sell these investments in the secondary market, a buyer may require a discount to the reported net asset value, and the discount could be significant.

(5) Pledges Receivable

Unconditional promises to give are recorded at net realizable value. Conditional promises to give are not included as support until the conditions are substantially met. The discounts on those amounts are computed using a risk-free interest rate applicable to the years in which promises are received. Amortization of the discounts is included in contribution revenue.

Receivable balances as of December 31, 2011 are as follows:

Capital $ 7,063 Program 34 Restricted to future periods 192

Unconditional promises to give before unamortized discount 7,289

Less unamortized discount (225) Net unconditional promise to give $ 7,064

Amount due in:Less than one year $ 1,963 One to five years 4,827 Over five years 499

Total $ 7,289

Discount rates ranged from 0.39% to 4.43%.

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19 (Continued)

(6) Net Patient Service Revenue

BTNRH has agreements with third-party payors that provide for payments to BTNRH at amounts different from its established rates. A summary of the payment arrangements with major third-party payors is as follows:

Medicaid – Inpatient services rendered to Medicaid program beneficiaries are paid at prospectively determined rates per discharge. Certain outpatient services are reimbursed based on a percentage rate representing the average discounted ratio of cost to charges. Clinic services are paid based on fee schedule amounts.

Revenue from the Medicaid program accounted for approximately 22% of BTNRH net patient service revenue for the year ended December 31, 2011. Laws and regulations governing the Medicaid program are extremely complex and subject to interpretation. As a result, there is at least a reasonable possibility that recorded estimates will change by a material amount in the near term.

BTNRH has also entered into payment agreements with certain commercial insurance carriers and health maintenance organizations. The basis for payment under these agreements includes discounts from established charges, prospectively determined per diem rates, fee schedules, and prospectively determined rates per discharge.

Net patient service revenue, included in program service revenues in the accompanying consolidated statement of activities, consists of the following:

Gross patient charges:Inpatient charges $ 66,718 Outpatient charges 44,475 Behavioral health/residential charges 20,014

Total gross patient charges 131,207

Less:Deductions from gross patient charges –

contractual adjustments – Medicare,Medicaid, and other 55,696

Net patient service revenue $ 75,511

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20 (Continued)

(7) Land, Buildings, and Equipment, Net

Land, buildings, and equipment, net as of December 31, 2011 are as follows:

Land $ 9,474 Buildings 184,966 Equipment 76,664 Equipment under capital lease 958 Construction in process 4,633

276,695

Less accumulated depreciation 156,747 $ 119,948

(8) Notes and Bonds Payable

Total notes and bonds payable as of December 31, 2011, excluding the capital lease obligations, are summarized below:

(a) Term bond, Series 2005, due through September 1, 2030 $ 9,220 (b) Term bond, Series 2003, due June 27, 2013 8,200 (c) Term bond, Series 2008, due through September 15, 2028 6,740 (d) Term bond, Series 2008, due through September 15, 2028 23,670 (e) Term bond, Series 2010, due July 2030 10,335 (f) Kubota Credit Corp, due September 2014 46 (g) Wooldridge Property Partnership 19 (h) Term Loan, unsecured due October 2015 1,918 (i) Term Loan, unsecured due August 2012 763 (j) Seminole County, secured by building, forgivable June 21, 2020 900

Total debt 61,811

Unamortized discounts (1,057) Total debt, net of discounts $ 60,754

(a) On September 1, 2005, revenue bonds of Hospital Authority No. 2 of Douglas County (Boys Town

Project) were issued at a discount of $100 for net proceeds of $10,899. Unamortized discount at December 31, 2011 is $72. Interest is payable semiannually at rates that vary between 2.85% and 4.15%. Bonds are callable starting September 1, 2015.

(b) On June 27, 2003, a term bond of Nebraska Elementary and Secondary School Finance Authority Educational Facility (Father Flanagan’s Boys’ Home Project) was issued. Interest is payable semiannually at 3.91% per annum.

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21 (Continued)

(c) On September 15, 2008, a term bond of Hospital Authority No. 2 of Douglas County, Nebraska Healthcare Revenue Bonds (Boys Town Project) was issued at a discount of $187 for net proceeds of $6,553. Unamortized discount at December 31, 2011 is $168. Interest is payable semiannually at 4.75% per annum. Bonds are callable starting September 1, 2018.

(d) On September 15, 2008, a term bond of Nebraska Elementary and Secondary School Finance Authority Educational Facility Revenue Bonds (Boys Town Project) was issued at a discount of $657 for net proceeds of $23,013. Unamortized discount at December 31, 2011 is $589. Interest is payable semiannually at 4.75% per annum. Bonds are callable starting September 1, 2018.

(e) On November 11, 2010, a term bond of Nebraska Elementary and Secondary School Finance Authority Educational Facility Revenue Bonds (Boys Town Project) was issued at a discount of $237 for net proceeds of $10,099. Unamortized discount at December 31, 2011 is $228. Interest is payable semiannually at 3.75% and 4.00% per annum.

(f) Payable in annual installments at a rate of 0%.

(g) Payable in monthly installments at a rate of 6% per annum.

(h) Payable in monthly installments at a rate of 3.97% per annum.

(i) Payable in monthly installments at a rate of 4.85% per annum.

(j) Interest is paid at 0% per annum. Imputed interest was calculated at 6.7%.

Boys Town had an irrevocable letter of credit of $3,085,000 as of December 31, 2011 in favor of its workers’ compensation insurance carrier. No funds have been drawn as of December 31, 2011.

FFFNC had an available line of credit of $15,000,000 as of December 31, 2011 of which no amount was drawn down.

The following table presents aggregate debt maturities as of December 31, 2011:

2012 $ 442 2013 8,662 2014 482 2015 2,097 2016 416 Thereafter 49,712

Total debt $ 61,811

(9) Pension Plans and Other Postretirement Benefit Plans

Boys Town sponsors a 401(k) plan and defined benefit pension plans that together cover substantially all of its employees.

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22 (Continued)

All participants of Boys Town’s 401(k) plan receive a match of 100% up to 6% of the participant’s contributed salary on a monthly basis. Total employer expense to the 401(k) plan was $3,862 for the year ended December 31, 2011.

Boys Town sponsors two defined benefit pension plans consisting of one for employees who retired prior to January 1, 1998 and the other for active employees as of January 1, 1998. The plan assets for the pension plans are held in a master trust.

The benefits are based on the employees’ years of service and highest sixty-month average compensation. Boys Town’s policy is to fund, at a minimum, the net periodic pension cost. Boys Town also provides certain health care benefits for substantially all of its retired employees. The health care plan is contributory with participants’ contributions adjusted periodically. Boys Town’s postretirement health care plan is not currently funded.

The following summarizes the projected benefit obligation, the fair value of plan assets, and the funded status at the measurement date of December 31, 2011:

Pension Health carebenefits benefits

Change in benefit obligation:Benefit obligation at beginning of year $ 58,465 36,995 Service cost 938 777 Interest cost 2,995 1,826 Plan participants’ contributions — 564 Actuarial loss 5,594 1,690 Benefits and expenses paid (3,846) (1,672) Federal subsidy and reinsurance receipts — 141

Benefit obligation at end of year 64,146 40,321

Change in plan assets:Fair value of plan assets at beginning of year 86,108 — Actual return on plan assets 481 — Employer contribution 3,000 1,108 Plan participants’ contributions — 564 Benefits and expenses paid (3,846) (1,672) Transfers out (350) —

Fair value of plan assets at end of year 85,393 — Funded status at end of year $ 21,247 (40,321)

The accumulated benefit obligation for all defined benefit pension plans was $58,600 at December 31, 2011. The accumulated post retirement obligation was $40,321 at December 31, 2011.

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23 (Continued)

The projected benefit obligation, accumulated benefit obligation, and fair value of plan assets for the pension plan for active employees which has an accumulated benefit obligations in excess of plan assets at December 31, 2011 was $58,838, $53,352, and $38,976, respectively.

The following is a summary of amounts recognized in the consolidated statement of financial position as of December 31, 2011:


Pension asset $ 41,109 — Pension and postretirement benefits liability (19,862) (40,321)

Net amount recognized $ 21,247 (40,321)

Amounts recognized in the consolidated statement of activities for 2011 consist of the following:


Pension benefit $ 2,351 — Postretirement benefit obligation cost — 2,025 Federal subsidy — 140 Pension-related charges other than net periodic pension (cost)

benefit (11,748) (2,407) $ (9,397) (242)

Amounts recognized in accumulated unrestricted net assets outside of net periodic pension cost consist of the following:


Net loss $ 23,903 6,311 Prior service cost (credit) 410 (4,951)

Net amount recognized $ 24,313 1,360

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24 (Continued)

The following is a summary of the components of net periodic benefit cost for the year ended December 31, 2011:


Service cost $ 938 777 Interest cost 2,995 1,826 Expected return on plan assets (6,617) — Amortization of prior service cost 88 (718) Amortization of net loss 245 —

Net periodic (benefit) cost $ (2,351) 1,885

The estimated net (gain) loss and prior service cost (credit) that will be amortized from unrestricted net assets into net periodic benefit cost in 2012 are as follows:


Net loss $ 1,831 211 Prior service cost (credit) 88 (718)

Net amount $ 1,919 (507)

Weighted average assumptions used to determine benefit obligations at December 31, 2011 are as follows:


Discount rate 4.50% 4.50%Rate of compensation increase (employee plan only) 4.00 —

Weighted average assumptions used to determine net periodic cost for the year ended December 31, 2011 are as follows:


Discount rate 5.25% 5.25%Expected long-term return on plan assets 7.50 —Rate of compensation increase (employee plan only) 4.00 —

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25 (Continued)

Assumed health care cost trend rate at December 31, 2011 is as follows:

Health care cost trend rate assumed for next year 8.0%Rate to which the cost trend rate is assumed to decline (the ultimate trend rate) 5.0Year that the rate reaches the ultimate trend rate 2015

The expected long-term return on plan assets is based on the asset allocation mix and historical returns, taking into account current and expected market conditions. The actual return (loss) on pension plan assets was approximately (1.0%) in 2011. Boys Town’s historical annualized five-year rate of return on plan assets is approximately 2.2%.

Boys Town’s pension plan weighted average asset allocation at December 31, 2011 and target allocation for 2011 are as follows:

Target Plan assets atallocation December 31,

2011 2011

Equity securities 54% 48%Debt securities 15 21 Alternative investments 31 31

Total 100% 100%

The investment strategy for pension plan assets is to maintain a broadly diversified portfolio designed to achieve a target of an average long-term rate of return of 7.5%. Management believes that Boys Town can achieve a long-term average rate of return of 7.5% but cannot be certain that the portfolio will perform to expectations. Assets are strategically allocated between several equity asset classes and debt securities in order to achieve a diversification level that mitigates wide swings in investment returns. Asset allocation target ranges are reviewed annually. Actual asset allocations are monitored and rebalancing actions are executed quarterly, if needed.

Investments in securities traded on a national securities exchange were valued at the latest quoted market prices. The estimated value of certain nonmarketable securities such as partnerships and closely held stock or funds was provided by the respective companies and independent appraisals. For these investments, Boys Town used the net asset value reported by the underlying fund or partnership as a practical expedient to fair value. Due to the nature of these investments, changes in market conditions and the economic environment may significantly impact the net asset value of the investments and, consequently, the fair value of the Boys Town’s interests. Although a secondary market exists for these investments, it is not active and individual transactions are typically not observable. When transactions do occur in this limited secondary market, they may occur at discounts to the reported net asset value. It is, therefore, reasonably possible that if Boys Town were to sell these investments in the secondary market, a buyer may require a discount to the reported net asset value, and the discount could be significant.

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26 (Continued)

The asset allocations of Boys Town’s pension investments as of the December 31, 2011 measurement date were as follows:

Fair value measurements at December 31, 2011Pension benefits – plan assets

Quotedprices in

activemarkets for Significant Significant

identical observable unobservableassets inputs inputs

Total Level 1 Level 2 Level 3

Short-term securities $ 3,194 3,194 — — Long-term investments:

Equities:Domestic 5,149 5,149 — —

Mutual funds:Equity — — — — Fixed income 14,410 14,410 — — International 6,947 6,947 — — Emerging markets 3,038 3,038 — —

Alternative investments:Domestic equity funds 18,537 — 2,798 15,739 Absolute return funds 15,435 — — 15,435 International equity 6,935 — 6,935 — Private equity funds 7,032 — — 7,032 Real assets 4,716 — — 4,716

Total long-terminvestments 82,199 29,544 9,733 42,922

Total $ 85,393 32,738 9,733 42,922

Certain investments classified in Levels 2 and 3 consist of shares or units in investment funds as opposed to direct interests in the funds’ underlying holdings, which may be marketable. Because the net asset value reported by each fund is used as a practical expedient to estimate the fair value of Boys Town’s interest therein, its classification in Level 2 or 3 is based on Boys Town’s ability to redeem its interest at or near the date of the consolidated statement of financial position. If the interest can be redeemed in the near term, the investment is classified in Level 2. The classification of investments in the fair value hierarchy is not necessarily an indication of the risks, liquidity, or degree of difficulty in estimating the fair value of each investment’s underlying assets and liabilities.

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27 (Continued)

During 2011, there were no transfers between investment Levels 1 and 2. The following table presents the activity for Boys Town’s pension assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the year ended December 31, 2011:

Balance at December 31, 2010 $ 37,070 Total realized gain 673 Change in unrealized gain 690 Purchases 8,584 Sales — Settlements (3,973) Transfers into and/or out of Level 3 (122)

Balance at December 31, 2011 $ 42,922

The estimated value of certain alternative investments and nonmarketable securities, such as partnerships, and closely held stock was provided by the respective companies and independent appraisals. For these alternative investments, Boys Town used the net asset value (or its equivalent) reported by the underlying fund as a practical expedient to fair value. Below is a summary of investments accounted for at net asset value:

* Redemptionfrequency Redemption

Unfunded (if currently noticeFair value commitments eligible) period

Domestic equity funds (a) $ 18,537 — m/q/sa/a 15-90 daysAbsolute return funds (b) 15,435 — m/q/sa/a 7-180 daysInternational equity (c) 6,935 — monthly 10-30 daysPrivate equity funds (d) 7,032 743 N/A N/AReal assets (e) 4,716 1,040 N/A N/A

$ 52,655 1,783

* m – monthly, q – quarterly, sa – semiannual, a – annual

(a) This class includes investments in funds that primarily invest in U.S. common stocks. Of this class, $13 million employ a long-short strategy. Of this balance, $2 million is restricted for the next 13 months at which time it will be available annually subject to a 45-day redemption notice.

(b) The class includes investments in funds that invest in a mix of securities including equities and fixed income. The funds are primarily multi-strategy in their approach and may include such tactics as risk arbitrage, distressed credit, and other long-short strategies.

(c) This class includes investments in funds that primarily invest in international common stocks.

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28 (Continued)

(d) This class includes investments in private equity funds that invest primarily in private companies at various stages of development and maturity. These include funds pursuing a leveraged buyout, growth equity, or venture capital strategy through investments across the capital structure. The fair values of the investment in this class have been estimated using the net asset value of Boys Towns’ ownership interest in partners’ capital. These investments can never be redeemed with the fund. Distributions from each fund will be received as the underlying investments of the funds are liquidated. It is estimated that the underlying assets of the fund will be liquidated over the next 4 to 6 years.

(e) This class includes real estate funds that employ a value-add strategy across multiple property types including multifamily, office, industrial, and retail. It also includes energy funds that invest primarily in interests of oil and gas properties. The fair values of the investments in the real estate funds have been estimated using the net asset value of the Boys Town’s ownership interest in partners’ capital. These investments can never be redeemed with the fund. Distributions from real estate funds will be received as the underlying investments of the funds are liquidated, and distributions from energy funds will be received from the production and marketing of oil and gas and upon final sale of the underlying interests in the properties. It is estimated that the underlying assets of the fund will be liquidated over the next 4 to 7 years.

In 2012, Boys Town expects to contribute $3,204 to the pension plan and $1,626 to its health care benefit plan and receive $250 in federal subsidy payments.

The following benefit payments and federal subsidy receipts, which reflect expected future service, as appropriate, are expected to be paid for the years 2012 through 2021:

Expectedfederal

Pension Health care subsidybenefits benefits receipts

2012 $ 3,204 1,626 250 2013 3,350 1,864 287 2014 3,471 2,045 327 2015 3,788 2,164 371 2016 3,854 2,288 413 Years 2017 – 2021 22,020 12,753 1,236

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29 (Continued)

(10) Temporarily Restricted Net Assets

Temporarily restricted net assets consist of gifts contributed for a specified period or until the occurrence of some future event.

Temporarily restricted net assets are available for the following purposes at December 31, 2011:

General education and scholarships $ 14,988 Specific program activities 693 Beneficial interest in assets held in trust –

general operations 14,055 Future periods 3,604 Capital 9,922

$ 43,262

Net assets were released from donor restrictions by incurring expenses satisfying the restricted purposes or by occurrence of other events specified by the donors for the year ended December 31, 2011:

Capital $ 65 Specific program activities 350 Priests education 618 General education 137 General operations 19

$ 1,189

(11) Permanently Restricted Net Assets

Permanently restricted net assets consist of long-term investments and beneficial interest in assets held by others that are restricted by the donors. The restrictions require that the resources be maintained permanently but permit use of the income derived from the assets.

Permanently restricted net assets consist of the following at December 31, 2011, the income from which is expendable to support:

General operations $ 60,001 General education and scholarships 4,044 Direct care of children 733

$ 64,778

(12) Endowment

The Nebraska Uniform Prudent Management of Institutional Funds Act (NUPMIFA) was enacted April 4, 2007. NUPMIFA sets out guidelines to be considered when managing and investing donor-restricted

BOYS TOWN


December 31, 2011


30 (Continued)

endowment funds. Boys Town applies ASC Topic 958 (FASB Staff Position FAS 117-1, Endowments of Not-for-Profit Organizations: Net Asset Classification of Funds Subject to an Enacted Version of the Uniform Prudent Management of Institutional Funds Act, and Enhanced Disclosures for All Endowment Funds).

Boys Town holds endowment funds for support of its programs and operations. As required by generally accepted accounting principles, net assets and the changes therein associated with endowment funds, including funds designated by the Board of Trustees to function as endowments, and beneficial interest in trust assets are classified and reported based on the existence or absence of donor-imposed restrictions. The funds classified as beneficial interest in trust funds are not under the control of Boys Town, and as such, Boys Town does not appropriate these funds or control their investment policies.

The Board of Trustees of Boys Town has interpreted NUPMIFA as requiring the preservation of the whole dollar value of the original gift as of the gift date of donor-restricted endowment funds absent explicit donor stipulations to the contrary. As a result of this interpretation, Boys Town classifies as permanently restricted net assets the original value of gifts donated to the permanent endowment and the original value of subsequent gifts to the permanent endowment. Interest, dividends, and net appreciation of the donor-restricted endowment funds are classified according to donor stipulations, if any. Absent any donor-imposed restrictions, interest, dividends, and net appreciation of donor-restricted endowment funds are classified as temporarily restricted net assets until those amounts are appropriated for expenditure by Boys Town in a manner consistent with the standard of prudence prescribed by NUPMIFA. In accordance with NUPMIFA, Boys Town considers the following factors in making a determination to appropriate or accumulate donor-restricted endowment funds:

(1) the duration and preservation of the endowment fund

(2) the purposes of Boys Town and the donor-restricted endowment fund

(3) general economic conditions

(4) the possible effect of inflation or deflation

(5) the expected total return from income and the appreciation of investments

(6) other resources of Boys Town

(7) the investment policy of Boys Town

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31 (Continued)

Endowment Net Asset Composition by Type of Fund

December 31, 2011

Temporarily PermanentlyUnrestricted restricted restricted Total

Donor-restricted endowmentfunds $ — 5,161 7,881 13,042

Board-designated endowmentfunds 780,369 — — 780,369

Total funds $ 780,369 5,161 7,881 793,411

Changes in Endowment Net Assets


Temporarily PermanentlyUnrestricted restricted restricted Total

Endowment net assets,beginning of year $ 829,012 5,463 7,166 841,641

Investment return:Investment income 11,223 104 — 11,327 Net appreciation/depreciation

(realized and unrealized) (16,739) 369 — (16,370)

Total investmentreturn (5,516) 473 — (5,043)

Other revenues 81 — — 81 Appropriation of endowment

assets for expenditure (43,208) (775) (24) (44,007) New designations — — 739 739

Endowment net assets,end of year $ 780,369 5,161 7,881 793,411

(a) Return Objectives and Risk Parameters

Boys Town has adopted investment and spending policies for endowment assets that attempt to provide a predictable stream of funding to programs supported by its endowment while complying with all donor-imposed restrictions. Under this policy, as approved by the Board of Trustees, the endowment assets are invested in a manner that is intended to produce results that exceed inflation plus the long-term spending rate.

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32 (Continued)

(b) Strategies Employed for Achieving Objectives

To satisfy its long-term rate-of-return objectives, Boys Town relies on a total return strategy in which investment returns are achieved through both capital appreciation (realized and unrealized) and current yield (interest and dividends). Boys Town targets a diversified asset allocation that places a greater emphasis on equity-based investments to achieve its long-term return objectives within prudent risk constraints.

(c) Appropriation Policy and How the Investment Objectives Relate to Appropriation Policy

Boys Town preserves the whole dollar value of the original gift as of the gift date of donor-restricted endowments, absent explicit donor stipulations to the contrary. Interest, dividend, and net appreciation of the donor-restricted endowments funds are deemed appropriated for expenditure when earned or when donor-imposed restriction is met.

For board-designated endowment funds, Boys Town appropriates distributions in its annual budget while considering the operations of Boys Town as well as expected investment returns and new endowment contributions. Historically, annual appropriations have generally been between 5% and 7% of the board-designated endowment fund’s average fair value over the prior four quarters ending June 30. In 2011, the board adopted a new spending rule that is based on 80% of prior year’s spending, adjusted for inflation, plus 20% of 5% of the average market value for the four quarters ended June 30 of the previous fiscal year. Thus, Boys Town expects to achieve inflation-adjusted growth of its endowment assets from the total return on investments as well as from the receipt of new gifts.

(d) Appropriation of Board-Designated Endowment Assets for 2011

For 2012, Boys Town has budgeted to appropriate $42,714 of its board-designated endowment assets to be distributed for spending. Consistent with Boys Town’s spending rule described above.

(13) Beneficial Interest in Assets Held by Others

Boys Town holds a beneficial interest in assets held in perpetuity and remainder trusts, which are controlled by independent trustees. In 2011, the following support was recognized in the accompanying consolidated statement of activities:

Temporarily PermanentlyUnrestricted restricted restricted

net assets net assets net assets

Contributions $ — 1,612 — Loss in value of beneficial interests — (3,458) (1,974) Investment income 2,379 — —

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33 (Continued)

(14) Split-Interest Agreements

Boys Town is the beneficiary of split-interest agreements in the form of charitable gift annuities, charitable remainder trusts, and pooled income funds. Assets of split-interest agreements of $27,851 are included in investments, and $139 is included in beneficial interest in trust assets on the consolidated statement of financial position at December 31, 2011. The value of split-interest agreements is measured as the Boys Town’s fair value share of the assets. Liabilities associated with these agreements are $8,381 and have been included in accrued liabilities on the consolidated statement of financial position.

(15) Joint Cost Allocation

In 2011, Boys Town incurred joint costs of $16,652 for informational materials and activities that included fund-raising appeals. Of these costs, $15,228 was allocated to fund-raising expense, $1,209 was allocated to program services, and $215 was allocated to management and general expense.

(16) Leases

Boys Town leases building space under long-term operating leases. In addition, Boys Town leases office equipment under capital leases. Future minimum lease payments for operating and capital leases with initial or remaining noncancelable lease terms in excess of one year as of December 31, 2011 were as follows:

Operating Capitalleases leases

2012 $ 1,356 48 2013 1,189 19 2014 993 4 2015 770 3 2016 698 1 Thereafter 574 —

Total minimum lease payments $ 5,580 75

Less amount representing interest (8)

Present value of minimum lease payments,included in accrued liabilities $ 67

The operating leases expire through 2020; however, many of the leases contain renewal options. Escalating rent payments are recognized on a straight-line basis over the lease term. Deferred liabilities recorded for lessor incentives related to leasehold improvements are recognized over the lease term as a reduction of rent expense. Rent expense for operating leases was $2,807 in 2011.

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34

Portions of clinic space are sublet under leases expiring during 2017. Sublet rental income was approximately $66 in 2011. Minimum future rentals on noncancelable leases as of December 31, 2011 are as follows:

Subleases

Year:2012 $ 45 2013 46 2014 47 2015 48 2016 49 Thereafter 29

$ 264

(17) Commitments and Contingencies

Boys Town is a defendant in a number of lawsuits incidental to its operations. In the opinion of management, the outcome of such lawsuits will not have a materially adverse effect on Boys Town’s consolidated financial position or its activities.

(18) Subsequent Events

Boys Town has evaluated subsequent events from the consolidated statement of financial position date through June 6, 2012, the date at which the consolidated financial statements were available to be issued, and determined there are no other items to disclose.

consolidated financial statements december 31, 2011 … · · 2012-06-28consolidated financial...

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