freestore foodbank, inc. and corwine foundation, inc

Freestore Foodbank, Inc. and Corwine Foundation, Inc.

Combined Financial Statements

Years Ended June 30, 2010 and 2009

(with Independent Auditors’ Report)

TABLE OF CONTENTS

Independent Auditors' Report .................................................................................................................. 1

Combined Financial Statements:

Combined Statements of Financial Position....................................................................................... 2

Combined Statements of Activities ................................................................................................. 3-4

Combined Statements of Functional Expenses............................................................................... 5-6

Combined Statements of Cash Flows................................................................................................ 7

Notes to Combined Financial Statements ........................................................................................... 8-16

105 east fourth street, ste. 1500cincinnati, oh 45202

www.cshco.comp. 513.241.3111f. 513.241.1212

cincinnati | columbus | dayton | middletown | springfield

INDEPENDENT AUDITORS’ REPORT

The Board of TrusteesFreestore Foodbank, Inc. and Corwine Foundation, Inc.:

We have audited the accompanying combined statements of financial position of Freestore Foodbank, Inc. and Corwine Foundation, Inc. (a not-for-profit organization) as of June 30, 2010 and 2009, and the related combined statements of activities, functional expenses and cash flows for the years then ended. These financial statements are the responsibility of Freestore Foodbank, Inc. and Corwine Foundation, Inc.’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States of America and 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 audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and the significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the combined financial statements referred to above present fairly, in all material respects, the financial position of Freestore Foodbank, Inc. and Corwine Foundation, Inc. as of June 30, 2010 and 2009, and the changes in its net assets and its cash flows for the years 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 November 4, 2010 on our consideration of Freestore Foodbank, Inc. and Corwine Foundation, Inc.’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and 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.

Cincinnati, OhioNovember 4, 2010

www.cshco.com

Assets 2010 2009Current assets:

Cash and cash equivalents $ 142,801 4,186,137 Restricted cash 40,390 106,348 Accounts receivable 353,223 588,392 Pledges receivable 1,152,602 1,857,711 Grants receivable 522,837 303,968 Inventory 1,361,021 2,101,288 Prepaid expenses 60,011 75,858

Total current assets 3,632,885 9,219,702

Property and equipment:Land 1,350,230 411,418 Buildings and improvements 8,806,290 3,970,797 Furniture, fixtures and equipment 1,983,008 1,658,951 Vehicles 565,785 565,785 Construction in process 4,301,003 4,587,393

17,006,316 11,194,344 Less accumulated depreciation 5,321,023 5,004,711

Total property and equipment 11,685,293 6,189,633

Other assets:Interest in Freestore Foodbank Foundation 4,427,629 4,118,690 Beneficial interest in charitable trust 230,434 212,641 Cash surrender value of life insurance policy 11,334 13,003 Other assets 17,205 16,500

Total other assets 4,686,602 4,360,834

Total assets $ 20,004,780 19,770,169

Liabilities and net assets:Current liabilities:

Current portion of long-term debt $ 30,862 30,091 Accounts payable 787,021 825,333 Amounts held for others 40,390 106,348 Accrued expenses 669,771 641,306

Total current liabilities 1,528,044 1,603,078

Other liabilities:Non-current portion of long-term debt 277,772 308,699

Total liabilities 1,805,816 1,911,777

Net assets:Unrestricted 15,581,901 11,456,299 Temporarily restricted 2,386,629 6,189,452 Permanently restricted 230,434 212,641

Total net assets 18,198,964 17,858,392

Total liabilities and net assets $ 20,004,780 19,770,169

June 30, 2010 and 2009Combined Statements of Financial Position


2See accompanying notes to the combined financial statements.

Temporarily PermanentlyUnrestricted Restricted Restricted Total

Public support:Contributions and grants $ 5,165,683 537,763 - 5,703,446 United Way/Community Chest 205,998 206,002 - 412,000 Government awards 523,425 - - 523,425 Change in interest in Foundation and irrevocable trusts 329,168 - 17,793 346,961

6,224,274 743,765 17,793 6,985,832

Revenues:Program service fees:

Government agencies 1,538,255 - - 1,538,255 Private organizations 31,855 - - 31,855 FoodBank - member agency fees 1,429,662 - - 1,429,662 Client services - individuals 152,795 - - 152,795 Cooks catering 114,108 - - 114,108

Special events 950,922 - - 950,922 Less special event direct expenses (170,841) - - (170,841) In-kind services

Advertising services 35,000 - - 35,000 FoodBank and Food Room donations - food and products 28,473,753 - - 28,473,753

Other 61,025 - - 61,025 Net assets released from restriction:

Satisfaction of program and purpose restrictions 4,367,784 (4,367,784) - - Satisfaction of time restrictions 178,804 (178,804) - -

37,163,122 (4,546,588) - 32,616,534

Total public support and revenues 43,387,396 (3,802,823) 17,793 39,602,366

Expenses:Client services 3,122,647 - - 3,122,647 FoodBank 33,557,932 - - 33,557,932 Management and general 1,762,160 - - 1,762,160 Fundraising 819,055 - - 819,055

39,261,794 - - 39,261,794

Change in net assets 4,125,602 (3,802,823) 17,793 340,572

Net assets at beginning of year 11,456,299 6,189,452 212,641 17,858,392

Net assets at end of year $ 15,581,901 2,386,629 230,434 18,198,964

Freestore Foodbank, Inc. and Corwine Foundation, Inc.Combined Statement of Activities

Year Ended June 30, 2010


Temporarily PermanentlyUnrestricted Restricted Restricted Total

Public support:Contributions and grants $ 4,584,256 472,333 - 5,056,589 United Way/Community Chest 191,306 178,804 - 370,110 Government awards 624,916 - - 624,916 Change in interest in Foundation and irrevocable trusts (19,974) - (73,919) (93,893)

5,380,504 651,137 (73,919) 5,957,722

Revenues:Program service fees:

Government agencies 2,251,835 - - 2,251,835 Private organizations 46,810 - - 46,810 FoodBank - member agencies 1,463,657 - - 1,463,657 Client services - individuals 147,139 - - 147,139 Cooks catering 123,921 - - 123,921

Special events 723,795 - - 723,795 Less special event direct expenses (203,747) - - (203,747) In-kind services

Advertising services 32,500 - - 32,500 FoodBank and Food Room donations - food and products 24,778,646 - - 24,778,646

Other 67,000 - - 67,000 Net assets released from restriction:

Satisfaction of program and purpose restrictions 1,585,673 (1,585,673) - - Satisfaction of time restrictions 181,500 (181,500) - -

31,198,729 (1,767,173) - 29,431,556

Total public support and revenues 36,579,233 (1,116,036) (73,919) 35,389,278

Expenses:Client services 3,522,593 - - 3,522,593 FoodBank 29,282,621 - - 29,282,621 Management and general 1,557,352 - - 1,557,352 Fundraising 689,815 - - 689,815

35,052,381 - - 35,052,381

Change in net assets 1,526,852 (1,116,036) (73,919) 336,897

Net assets at beginning of year 9,929,447 7,305,488 286,560 17,521,495

Net assets at end of year $ 11,456,299 6,189,452 212,641 17,858,392


Year Ended June 30, 2009Combined Statement of Activities


ManagementClient Services FoodBank and General Fundraising Total

Salaries $ 1,567,022 1,537,865 954,511 213,837 4,273,235 Employee benefits 211,279 203,263 192,411 33,110 640,063 Payroll taxes 144,455 133,285 143,520 25,332 446,592

1,922,756 1,874,413 1,290,442 272,279 5,359,890

In-kind food and products distributed - 29,223,582 - - 29,223,582 Specific assistance to individuals 682,273 743,906 4,110 - 1,430,289 Building rental and maintenance 72,174 73,073 29,646 7,273 182,166 Equipment rental and maintenance 66,729 250,898 51,454 82,589 451,670 Utilities 63,503 131,427 14,837 2,636 212,403 In-kind advertising - - - 35,000 35,000 Printing and supplies 65,870 96,558 36,891 98,320 297,639 Dues and fees 2,069 6,600 11,659 4,701 25,029 Travel, conferences and conventions 18,273 25,755 23,278 5,529 72,835 Staff training 2,593 12,265 3,593 - 18,451 Professional fees 24,228 19,204 81,043 7,436 131,911 Contracted services 133,420 81,626 86,549 172,294 473,889 Shipping and postage 13,377 82,267 14,608 127,847 238,099 Interest 4,928 2,591 4,619 2,299 14,437 Miscellaneous 329 10,574 2,142 - 13,045 Insurance 16,704 53,821 18,560 852 89,937 Product purchases - 675,210 - - 675,210

Total expenses before depreciation 3,089,226 33,363,770 1,673,431 819,055 38,945,482

Depreciation 33,421 194,162 88,729 - 316,312

Total expenses $ 3,122,647 33,557,932 1,762,160 819,055 39,261,794

See accompanying notes to the combined financial statements.5

Freestore Foodbank, Inc. and Corwine Foundation, Inc.Combined Statement of Functional Expenses


Program Services Supporting Services

ManagementClient Services FoodBank and General Fundraising Total

Salaries $ 1,868,545 1,344,715 750,068 218,018 4,181,346 Employee benefits 218,609 188,154 171,930 24,310 603,003 Payroll taxes 154,948 114,394 116,654 23,533 409,529

2,242,102 1,647,263 1,038,652 265,861 5,193,878

In-kind food and products distributed - 25,162,572 - - 25,162,572 Specific assistance to individuals 655,557 314,647 4,390 - 974,594 Building rental and maintenance 81,724 77,648 13,950 5,450 178,772 Equipment rental and maintenance 92,744 225,758 70,120 44,337 432,959 Utilities 70,448 112,284 5,006 834 188,572 In-kind advertising - - - 32,500 32,500 Printing and supplies 58,901 86,243 28,721 85,492 259,357 Dues and fees 1,017 7,554 9,496 12,129 30,196 Travel, conferences and conventions 23,021 21,125 16,722 1,778 62,646 Staff training 910 4,334 9,534 - 14,778 Professional fees 20,130 12,924 108,071 2,336 143,461 Contracted services 188,442 66,908 136,180 135,363 526,893 Shipping and postage 9,960 81,974 18,640 98,975 209,549 Interest 5,541 3,456 3,932 2,462 15,391 Miscellaneous 14,640 15,469 50,210 - 80,319 Insurance 16,987 38,812 23,187 2,233 81,219 Product purchases - 1,249,754 - - 1,249,754

Total expenses before depreciation 3,482,124 29,128,725 1,536,811 689,750 34,837,410

Depreciation 40,469 153,896 20,541 65 214,971

Total expenses $ 3,522,593 29,282,621 1,557,352 689,815 35,052,381

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Freestore Foodbank, Inc. and Corwine Foundation, Inc.Combined Statement of Functional Expenses

Program Services Supporting Services


See accompanying notes to the combined financial statements.

2010 2009Cash flows from operating activities:

Change in net assets $ 340,572 336,897

Adjustments to reconcile change in net assets to net cash provided by operating activities:Depreciation 316,312 214,971 Contributed property and equipment - (122,333) Effects of change in operating assets and liabilities:

Accounts receivable 235,169 268,365 Pledges receivable 705,109 1,228,886 Grants receivable (218,869) (31,252) Inventory 740,267 319,757 Prepaid expenses 15,847 (3,071) Interest in The Freestore Foodbank Foundation (329,168) 19,974 Beneficial interest in charitable trusts (17,793) 73,919 Other assets (705) (16,500) Accounts payable 377,552 (113,057) Accrued expenses 28,465 364,896

Net cash provided by operating activities 2,192,758 2,541,452

Cash flows from investing activities:Capital expenditures (6,227,836) (1,273,180)Change in cash surrender value of life insurance policy 1,669 1,153

Net cash used by investing activities (6,226,167) (1,272,027)

Cash flows from financing activities:Cash from (to) Freestore Foodbank Foundation 20,229 (20,229) Payments on long-term debt (30,156) (28,265)

Net cash used by financing activities (9,927) (48,494)

Net change in cash and cash equivalents (4,043,336) 1,220,931

Cash and cash equivalents - beginning of the year 4,186,137 2,965,206

Cash and cash equivalents - end of the year $ 142,801 4,186,137

Supplemental Disclosures:

Interest paid $ 14,437 15,391 Donation of vehicles $ - 122,333 Construction in progress included in accounts payable $ - 415,864

Years Ended June 30, 2010 and 2009Combined Statements of Cash Flows



Freestore Foodbank, Inc.and Corwine Foundation, Inc.

Notes to the Combined Financial StatementsJune 30, 2010 and 2009

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1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Freestore Foodbank, Inc. exists to help people throughout the tri-state area who are facing crisis because they are unable to meet their basic survival needs. The primary mission of the Freestore Foodbank, Inc. is to provide food and services; create stability and further self-reliance for people in crisis.

Freestore Foodbank, Inc. has a support organization, The Freestore Foodbank Foundation, which grants funds to Freestore Foodbank, Inc. for operations and raises money on its behalf.

Corwine Foundation, Inc. is a not-for-profit corporation comprised of Freestore Foodbank, Inc. trustees for the purpose of holding property for Freestore Foodbank, Inc.

A summary of significant accounting policies applied in the preparation of the accompanying financial statements follows.

Principles of combinationThese financial statements are the result of the combination of the operations of the Freestore Foodbank, Inc. and Corwine Foundation, Inc. (the “Agency”). All intercompany transactions are eliminated upon combination.

Temporarily restricted net assetsThe Agency reports gifts of cash and other assets as restricted support if they are received with donor stipulations that limit the use of the donated assets. When a donor restriction expires, that is, when a stipulated time restriction ends or purpose restriction is accomplished, temporarily restricted net assets are reclassified to unrestricted net assets and reported in the statement of activities as net assets released from restrictions. Contributions whose restrictions are met in the same period as received are reported as unrestricted support.

The Agency reports gifts of land, buildings and equipment 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, the Agency reports expirations of donor restrictions when the donated or acquired long-lived assets are placed in service.

Permanently restricted net assetsNet assets that are subject to donor-imposed stipulations that require the assets be maintained permanently by the Agency are recorded as permanently restricted net assets. Generally, the donors of these assets permit the Agency to use all or part of the income earned on related investments for general or specific purposes.

Food contributions and other in-kind donations/InventoryReceipt and subsequent distribution of in-kind food contributions are noted in the statement of activities at $2.48 and $2.38 per pound in 2010 and 2009. Inventory on hand at year-end is also valued at the same amounts per pound. The price per pound is based on price indexes from a Feeding America survey which is then adjusted for gross profit based on a local grocery survey.



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The following table summarizes FoodBank and Food Room activity, in pounds, as of and for the year ended June 30, 2010:

FoodBank Food Room Total Pounds

Beginning balance 896,950 62,663 959,613Donated product 11,388,706 92,646 11,481,352Purchased product 1,703,502 - 1,703,502Transfers (1,911,398) 1,911,398 -Donated product distributed (8,826,737) (2,024,585) (10,851,322)Purchased product

distributed (1,690,785) - (1,690,785)Physical inventory variance & scrap (858,854) (15,092) (873,946)Ending balance 701,384 27,030 728,414

The following table summarizes FoodBank and Food Room activity as of and for the year ended June 30, 2009:

FoodBank Food Room Total Pounds

Beginning balance 808,483 67,535 876,018Donated product 9,711,690 113,445 9,825,135Purchased product 1,540,552 - 1,540,552Transfers (2,103,786) 2,103,786 -Donated product distributed (6,910,535) (1,936,680) (8,847,215)Purchased product

distributed (1,145,753) (194,489) (1,340,242)Physical inventory variance & scrap (1,003,701) (90,934) (1,094,635)Ending balance 896,950 62,663 959,613

Products distributed by the Agency which have both been donated by others and purchased from outside vendors are carried at fair value. Purchased and donated inventory amounts to $1,361,021 and $2,101,288 at June 30, 2010 and 2009, respectively.

Food contributions increased 1,656,217 pounds in 2010 to 11,481,352 pounds versus 9,825,135 in 2009. This increase in product increased in-kind revenues by $3,695,107.

Donated materials and servicesDonated vehicles, equipment, investments and services are recorded as public support contributions in the accompanying statements at their estimated fair value at the date of receipt.



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Donated services are recorded as public support only if they create or enhance non-financial assets or require specialized services. Donated services for the years ended June 30, 2010 and 2009 were estimated at $35,000 and $32,500, respectively, all of which were advertising services. The Agencyreceived volunteer services of approximately 48,000 hours for the years ended June 30, 2010 and 2009, which are not recorded in these financial statements as public support in accordance with generally accepted accounting principles. The Agency also received a donation of two vehicles with an appraised value of $122,333 during the year ended June 30, 2009.

DepreciationProperty and equipment is recorded at cost. Depreciation is provided by the straight-line method over the estimated useful lives of the depreciable assets. The estimated useful lives are:

Buildings 20 - 40 yearsBuilding improvements 10 – 20 yearsFurniture, fixtures and equipment 5 - 8 yearsVehicles 3 - 6 years

Construction in process consists of costs relating to building and renovation costs incurred by the Agency. Depreciation will begin on these costs when the related assets are placed in service based on the depreciable lives noted above.

Use of estimates in financial statementsIn preparing financial statements in conformity with generally accepted accounting principles, management makes estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements, as well as thereported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Cash and cash equivalentsFor purposes of the statement of cash flows, the Agency considers all highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents. The Agency maintains its cash in deposit accounts, which, at times, may exceed federally insured limits. The Agency has not experienced any losses in such accounts and believes it is not exposed to any significant credit risk on cash.

The Agency also maintains funds for the use of others which is shown as restricted cash on the financial statements. Amounts held as restricted cash were $40,390 and $106,348 at June 30, 2010 and 2009, respectively, which includes amounts for the Direct Rent program.

Pledges receivableAs of June 30, 2010 and 2009, contributors to the Agency have promised to give $1,152,602 and $1,857,711 for its capital campaign and special events, including the Rubber Duck Regatta, the Hunger Walk and the Taste of the NFL. Multiple year pledges are discounted to net present value using the risk free rate of return in the year pledged.



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Management expects to collect all pledges. Pledges are reviewed quarterly and compared to scheduled payments for collectability. Pledges receivable at June 30, 2010 and 2009 are as follows:

2010 2009

Due within one year $ 1,133,902 1,801,534Due two - five years 18,700 57,285

1,152,602 1,858,819Unamortized discount at 1.65% - 1,108Pledges, net $ 1,152,602 1,857,711

The pledges at June 30, 2010 have not been discounted as almost all pledges are due within one yearand, thus, the discount is insignificant.

Functional expense allocationThe costs of providing various programs and other activities have been summarized on a functional basis in the statement of activities, accordingly, certain costs have been allocated among benefited programs and supporting services. All fundraising costs are charged to fundraising; there are no joint costs.

Accounts and grants receivableThe majority of the Agency’s accounts and grants receivable are due from other not-for-profit or governmental agencies. It is the opinion of management that the receivables are all collectible. Therefore, an allowance for doubtful accounts has not been provided for in these financial statements.

Subsequent eventsThe Agency evaluates events and transactions occurring subsequent to the date of the financial statements for matters requiring recognition or disclosure in the financial statements. The accompanying financial statements consider events through November 4, 2010, the date on which the financial statements were available to be issued.

ReclassificationsCertain items in the prior year financial statements have been reclassified to conform to current year presentation.

2. TEMPORARILY RESTRICTED NET ASSETS:

Temporarily restricted net assets are available for the following purposes at June 30:

2010 2009

Program activities $ 911,359 653,252Time restrictions 206,002 178,804Building and equipment 1,269,268 5,357,396

$ 2,386,629 6,189,452



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3. PERMANENTLY RESTRICTED NET ASSETS:

Permanently restricted net assets as of June 30, 2010 and 2009, consists of interest in charitable trusts of$230,434 and $212,641, respectively.

4. LINE OF CREDIT:

The Agency has a $1,000,000 line of credit with a financial institution with interest at prime less 0.50% (2.75% at June 30, 2010). The Agency had not drawn on this line of credit at June 30, 2010 and 2009. The line of credit is secured by a mortgage on 1250 Tennessee Avenue. Subsequent to year end the $1,000,000 line of credit was renewed with interest at LIBOR plus 2.75%. The renewed line of credit is secured by all assets of the Agency.

5. LONG-TERM DEBT:

The Agency has a note payable to a bank. The note requires monthly payments of $3,172, including interest at the prime rate less 0.75% (2.50% at June 30, 2010), through July 2019, secured by a mortgage on 1250 Tennessee Avenue. Long-term debt at June 30, 2010 and 2009 is $308,634 and $338,790, respectively. The long-term debt matures as follows at June 30:

2011 $ 30,8622012 31,9502013 32,7492014 33,5682015 34,407Thereafter 145,098

$ 308,634

Subsequent to year end the Agency entered into a term note for $1,000,000. The note bears interest at LIBOR plus 2.75% and matures September 2012.

6. INCOME TAXES:

Freestore Foodbank, Inc. and Corwine Foundation, Inc., have been classified as exempt organizationsunder Internal Revenue Code Sections 501(c)(3) and 501(c)(2), respectively. Freestore Foodbank, Inc. has been classified as a public charity qualified for charitable contributions under Internal Revenue Code Section 170. In addition, Freestore Foodbank, Inc. and Corwine Foundation, Inc. are not classified as private foundations as defined in Section 509(a)(1) of the Internal Revenue Code. The Freestore Foodbank, Inc. and Corwine Foundation, Inc. are not engaged in any activities subject to unrelated business income regulations.

The Financial Accounting Standards Board (“FASB”) has issued guidance which clarifies generally accepted accounting principles for recognition, measurement, presentation and disclosure relating to uncertain tax positions. The guidance was adopted by the Agency on July 1, 2009. This guidance clarifies the accounting and recognition for income tax positions taken or expected to be taken in the Agency’s income tax returns. The Agency’s income tax filings are subject to audit by various taxing authorities. The fiscal years of filings open to these authorities and available for audit are 2007, 2008 and



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2009. The Agency’s policy with regards to interest and penalties is to recognize interest through interest expense and penalties through other expense. In evaluating the Agency’s tax provision and tax exempt status, interpretations and tax planning strategies were considered. The Agency believes their estimates are appropriate based on the current facts and circumstances.

7. COMMITMENTS:

The Agency leases equipment under operating leases expiring through the year 2013. Future minimum lease payments required under terms of the above operating leases are as follows:

2011 $ 14,6642012 14,6642013 8,546

$ 37,874

Total rent expense during the years ended June 30, 2010 and 2009 was $19,216 and $21,216,respectively.

8. FUNDRAISING:

The Agency received total revenues and donations of $7,212,793 and $6,437,800 from its fundraising activities and incurred related expenses of $989,896 and $893,627 for the years ended June 30, 2010and 2009, respectively. In addition, the Agency received in-kind food donations of $28,473,753 and $24,778,646 in the years ended June 30, 2010 and 2009, respectively. The total fund raising costs expended in the year were 3% in 2010 and 2009 of the total contributions, including in-kind food donations generated by the Agency.

Supporting services, which include management and general and fundraising expenses, of $2,581,215and $2,247,167 approximate 6% of total revenues for the years ended June 30, 2010 and 2009. These expenses included costs of the capital campaign of $23,860 in 2010 and $9,033 in 2009 with revenues of $439,740 in 2010 and $404,625 in 2009.

9. EMPLOYEE BENEFITS:

The Agency offers retirement benefits for all of its eligible full time employees. The defined contribution plan meets the requirements of Internal Revenue Code Section 403(b) and is funded by contributions from the Agency and employees. Contributions are paid as accrued. Employees vest over five years in employer contributions. Agency contributions were $67,190 and $66,212 for the years ended June 30, 2010 and 2009, respectively.

10. BENEFICIAL INTEREST IN CHARITABLE TRUST:

A donor established a perpetual trust with a bank naming the Agency as one of the beneficiaries. Under terms of the split-interest agreement, the Agency is to receive the interest income earned annually for its use into perpetuity. The fair value of the Agency’s interest in this perpetual trust was recorded as a permanently restricted contribution and as beneficial interest in a charitable trust. Income received from the trust in 2010 and 2009 was $10,606 and $13,813, respectively.



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11. THE FREESTORE FOODBANK FOUNDATION:

The Freestore Foodbank Foundation has been established solely for the benefit of this Agency and the Foundation has no variance power over the funds. Variance power is the unilateral power to redirect the use of the transferred assets to another beneficiary. Amounts held by The Freestore FoodbankFoundation will be distributed upon the approval of their Board of Trustees. The Agency’s interest in the assets of the Foundation is $4,427,629 and $4,118,690 at June 30, 2010 and 2009, respectively.

12. FAIR VALUE:

Generally accepted accounting principles define fair value, establish a framework for measuring fair value, and establish a fair value hierarchy that prioritizes the inputs to valuation techniques. Fair value is 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. A fair value measurement assumes that the transaction to sell the asset or transfer the liability occurs in the principal market for the asset or liability or, in the absence of a principal market, the most advantageous market. Valuation techniques that are consistent with the market, income or cost approach are used to measure fair value. The fair value hierarchy prioritizes the inputs to valuation techniques used to measure fair value into three broad levels:

Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilitiesthe Company has the ability to access.

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 are unobservable inputs for the asset or liability and rely on management’s ownassumptions about the assumptions that market participants would use in pricing the asset or liability.

The beneficial interest in charitable trust and interest in the Foundation are valued on Level 2 inputs using prices obtained from our custodians, which used third party data service providers.

The following tables present the Agency’s fair value hierarchy for assets measured at fair value on a recurring basis as of June 30, 2010 and 2009.

Fair Value Measurements at Reporting Date Using

Fair Value Level 1 Level 2 Level 3June 30, 2010Interest in The Freestore

Foodbank Foundation $ 4,427,629 - 4,427,629 -Beneficial interest in

charitable trust 230,434 - 230,434 -



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Fair Value Measurements at Reporting Date Using

Fair Value Level 1 Level 2 Level 3June 30, 2009Interest in The Freestore

Foodbank Foundation $ 4,118,690 - 4,118,690 -Beneficial interest in

charitable trust 212,641 - 212,641 -

13. ENDOWMENT FUNDS:

The Agency implemented guidance requiring that the net assets associated with endowment funds, including funds designated by the Board of Trustees to function as endowments, to be classified and reported based on the existence or absence of donor-imposed restrictions. The Agency’s endowment consists of a board designated fund which is held within the Freestore Foodbank Foundation.

The Agency has interpreted the State Prudent Management of Institutional Funds Act (SPMIFA) as requiring the preservation of the fair value of the original gift as of the gift date of the donor-restricted endowment funds absent explicit donor stipulations to the contrary. As a result of this Interpretation, the Agency classifies as permanently restricted net assets (a) the original value of gifts donated to the permanent endowment, (b) the original value of subsequent gifts to the permanent endowment, and (c) accumulations to the permanent endowment made in accordance with the direction of the applicable donor gift instrument at the time the accumulation is added to the fund. The remaining portion of the donor-restricted endowment fund that is not classified in permanently restricted net assets is classified as temporarily restricted net assets until those amounts are appropriated for expenditure by the Agency in a manner consistent with the standard of prudence prescribed by SPMIFA. In accordance with SPMIFA, the Agency considers the following factors in making a determination to appropriate or accumulate donor-restricted endowment funds: the duration and preservation of the fund; the purposes of the Agency and the donor-restricted endowment fund; general economic conditions; the possible effect of inflation and deflation; the expected total return from income and the appreciation of investments; other resources of the Agency; and the investment policies of the Agency.

The endowment consists of investments held within the Freestore Foodbank Foundation and the net assets composition is as follows at June 30:

2010 2009

Board-designated endowment, unrestricted $ 3,926,129 3,617,744



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Changes in board-designated endowment net assets are as follows for the year ended June 30, 2010:

2010 2009Endowment net assets at beginning of year, unrestricted $ 3,617,744 3,639,592Interest and dividends 107,751 -Realized and unrealized gain 250,690 49,595Advisor fees (22,527) -Spending appropriation (27,529) (71,443)Endowment net assets at end of year, unrestricted $ 3,926,129 3,617,744

Return objectives and risk parametersThe Agency has adopted investment and spending policies for endowment assets that attempt to provide for long-term growth in excess of inflation, annual distributions and expenses. The return objective shall be accomplished utilizing a strategy of equities, fixed income and cash equivalents. The performance objectives will be measured against appropriate industry benchmarks such as the S&P 500 Index, Russell 3000 Stock Index, and other indexes.

Strategies employed for achieving objectivesTo satisfy its long-term rate-of-return objectives, the Agency 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). The Agency 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.

Spending policy and how the investment objectives relate to spending policyThe Agency has a policy of appropriating for distribution each year five percent of its previous twelve quarter moving average endowment fund balance as needed. In establishing this policy, the Agency considered the long-term expected return on its endowment. Accordingly, this spending policy should, over time, protect the inflation-adjusted value of the endowment and, consequently, allow inflation-adjusted spending to occur in the distant future. This is consistent with the Agency’s objective to maintain purchasing power of the endowment assets held in perpetuity or for a specified term as well as to provide additional real growth through new gifts and investment return.

14. REPRESENTATIVE PAYEE PROGRAM:

The Agency is appointed by the Social Security Administration to act as a representative payee. The Agency receives Social Security and/or SSI benefits for customers who cannot manage or cannot direct someone else to manage their money. The main responsibilities of a payee are to use the benefits to pay for the current and foreseeable needs of the beneficiary and properly save any benefits not needed to meet current needs. The Agency managed monthly receipts averaging $469,419 and $460,942 for the years ending June 30, 2010 and 2009 respectively.

freestore foodbank, inc. and corwine foundation, inc

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