Audited Financial Statements For the Year Ended September

THE GREAT LAND TRUST, INC.

Audited Financial Statements

For the Year Ended September 30, 2019

520 SW Yamhill Street Suite 500 Portland, Oregon 97204P: 503 227 0581 F: 503 274 [email protected] mcdonaldjacobs.com

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INDEPENDENT AUDITOR'S REPORT

To the Board of Directors The Great Land Trust, Inc. Report on the Financial Statements We have audited the accompanying financial statements of The Great Land Trust, Inc. (the Trust, a nonprofit corporation), which comprise the statement of financial position as of September 30, 2019, and the related statements of activities, functional expenses, and cash flows for the year then ended, and the related notes to the financial statements. Management’s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor’s Responsibility Our responsibility is to express an opinion on these 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 from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the organization’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Trust’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

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We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of The Great Land Trust, Inc. as of September 30, 2019, and changes in its net assets and its cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America. Report on Summarized Comparative Information We have previously audited The Great Land Trust, Inc.’s 2018 financial statements, and we expressed an unmodified audit opinion on those audited financial statements in our report January 16, 2019. In our opinion, the summarized comparative information presented herein as of and for the year ended September 30, 2018 is consistent, in all material respects, with the audited financial statements from which it has been derived.

Portland, Oregon December 17, 2019

STATEMENT OF FINANCIAL POSITIONSeptember 30, 2019

(With comparative totals for 2018)

2019 2018

ASSETS

Current assets:Cash and cash equivalents 425,677$ 326,535$ Designated cash 11,277 315,520 Restricted cash 1,289,132 1,572,904

Total cash and cash equivalents 1,726,086 2,214,959 Accounts and contributions receivable 333,613 359,718 Other assets 7,602 9,460

Total current assets 2,067,301 2,584,137

Noncurrent assets:Investments 9,501,471 8,316,214 Conservation property 113,398 113,398 Property and equipment, net 12,073 13,051

Total noncurrent assets 9,626,942 8,442,663

TOTAL ASSETS 11,694,243$ 11,026,800$

LIABILITIES AND NET ASSETS

Current liabilities:Accounts payable 74,795$ 73,132$ Deferred revenue 5,242,737 5,029,834

Total current liabilities 5,317,532 5,102,966

Net assets:Without donor restrictions:

Undesignated 621,911 584,955 Board designated 322,581 315,520Net property and equipment 12,073 13,051

Total without donor restrictions 956,565 913,526 With donor restrictions 5,420,146 5,010,308

Total net assets 6,376,711 5,923,834

TOTAL LIABILITIES AND NET ASSETS 11,694,243$ 11,026,800$


See notes to financial statements.- 3 -

STATEMENT OF ACTIVITIESFor the year ended September 30, 2019


2019

Without Donor With Donor 2018

Restrictions Restrictions Total Total

Support and revenue:Contributions 223,304$ 15,182$ 238,486$ 129,130$ Government grants 434,511 - 434,511 403,466 Land conservation fees 155,251 - 155,251 457,364 Donated materials and services 8,420 - 8,420 14,718 Net assets released from restrictions:

Satisfaction of purpose restrictions 108,980 (108,980) - -

Total support and revenue 930,466 (93,798) 836,668 1,004,678

Expenses:Lands management 655,088 - 655,088 679,330 Stewardship 77,979 - 77,979 73,172

Total program expenses 733,067 - 733,067 752,502 Management and general 124,302 - 124,302 138,323 Fundraising 36,370 - 36,370 45,773

Total expenses 893,739 - 893,739 936,598

Change in net assets before

non-operating activities: 36,727 (93,798) (57,071) 68,080

Non-operating activities:

Grants received for acquisition ofconservation property 243,409 39,918 283,327 2,084,874

Conservation property acquisition costs (299,130) - (299,130) (2,292,141) Long-term management income - 175,000 175,000 - Long-term stewardship support - 265,367 265,367 161,020 Investment income, net of fees 4,631 88,594 93,225 121,145 Change in value of investments 3,761 (11,602) (7,841) 135,267 Net assets release from restriction:

Conservation property acquisition

and development costs 53,641 (53,641) - -

Change in net assets 43,039 409,838 452,877 278,245

Net assets:Beginning of year 913,526 5,010,308 5,923,834 5,645,589

End of year 956,565$ 5,420,146$ 6,376,711$ 5,923,834$



STATEMENT OF FUNCTIONAL EXPENSESFor the year ended September 30, 2019

Lands Total ManagementManagement Stewardship Program and General Fundraising Total

Salaries and related costs 488,386$ 42,236$ 530,622$ 61,700$ 12,659$ 604,981$ Land transactions 33,949 19,588 53,537 - - 53,537 Office expense 6,881 638 7,519 716 543 8,778

Outreach and development 8,885 - 8,885 - 16,734 25,619 Occupancy 39,437 5,486 44,923 4,862 993 50,778 Professional services 14,225 2,118 16,343 52,808 124 69,275

Travel and training expense 41,318 6,140 47,458 1,361 427 49,246 Depreciation 5,241 444 5,685 646 132 6,463 Other expenses 9,346 1,329 10,675 2,209 3,758 16,642 In-kind expenses 7,420 - 7,420 - 1,000 8,420

655,088 77,979 733,067 124,302 36,370 893,739 Acquisition and development costs 298,709 421 299,130 - - 299,130

Total expenses 953,797$ 78,400$ 1,032,197$ 124,302$ 36,370$ 1,192,869$



STATEMENT OF FUNCTIONAL EXPENSESFor the year ended September 30, 2018

Lands Total ManagementManagement Stewardship Program and General Fundraising Total

Salaries and related costs 476,214$ 44,476$ 520,690$ 74,950$ 14,187$ 609,827$ Land transactions 44,296 15,375 59,671 577 - 60,248 Office expense 8,159 752 8,911 1,066 523 10,500

Outreach and development 8,662 254 8,916 60 18,807 27,783 Occupancy 47,568 6,359 53,927 7,340 1,392 62,659 Professional services 36,342 2,092 38,434 47,014 125 85,573

Travel and training expense 40,225 2,563 42,788 2,618 947 46,353 Depreciation 4,713 433 5,146 727 138 6,011 Other expenses 4,413 868 5,281 3,971 3,674 12,926 In-kind expenses 8,738 - 8,738 - 5,980 14,718

679,330 73,172 752,502 138,323 45,773 936,598 Acquisition and development costs 2,289,430 2,679 2,292,109 - 32 2,292,141

Total expenses 2,968,760$ 75,851$ 3,044,611$ 138,323$ 45,805$ 3,228,739$



STATEMENT OF CASH FLOWSFor the year ended September 30, 2019


2019 2018

Cash flows from operating activities:Cash received from contributions 238,486$ 129,130$ Cash received from government grants 460,616 248,971 Cash received from land conservation fees 155,251 457,364 Cash received for stewardship and long-term management 440,367 161,020 Cash received for conservation 133,928 2,196,952Cash received from interest and dividends 93,225 121,145 Cash paid to employees and vendors (875,313) (903,433)

Net cash flows from operating activities 646,560 2,411,149

Cash flows from investing activities:Cash paid for conservation property acquisition (312,741) (2,282,178) Purchase of property and equipment (5,957) (5,410) Proceeds from sale of equipment 450 - Proceeds from the sale of investments 331,594 795,622 Purchase of investments (1,524,692) (2,770,477)

Net cash flows from investing activities (1,511,346) (4,262,443)

Cash flows from financing activities:Proceeds restricted to the acquisition of conservation property 375,913 2,018,747

Net cash flows from financing activities 375,913 2,018,747

Net change in cash and cash equivalents (488,873) 167,453

Cash and cash equivalents - beginning of year 2,214,959 2,047,506

Cash and cash equivalents - end of year 1,726,086$ 2,214,959$

Cash and cash equivalents 425,677$ 326,535$ Designated cash 11,277 315,520 Restricted cash 1,289,132 1,572,904

1,726,086$ 2,214,959$



THE GREAT LAND TRUST, INC. NOTES TO FINANCIAL STATEMENTS

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1. THE ORGANIZATION Description of Organization The Great Land Trust, Inc. (the Trust) was founded in Alaska in 1995 for the purpose of conserving land and waterways in Southcentral Alaska. The Trust’s mission is to conserve and steward lands and waters essential to the quality of life and economic health of Alaskans. Since 1995, the Trust has completed 55 projects and conserved over 55,800 acres of land. The Trust’s programs include:

Land Project Development Lands project development activities include all mapping and prioritization work, landowner outreach and communication, project development, site selection, site visits, due diligence activities, report preparation, landowner negotiations, and purchase of conservation easement or fee title properties. Lands project development activities also include properties purchased with funding from developers paid to the Trust via the In-Lieu Fee Agreement with the Army Corps of Engineers.

Land Management and Stewardship Land management and stewardship activities include the annual monitoring of all conservation easements held by the Trust including meeting with landowners. Additionally, activities include the management of all properties currently owned in fee or conservation easement by the Trust.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Net Assets Net assets, revenues, gains, and losses are classified based on the existence or absence of donor or grantor imposed restrictions. Accordingly, net assets and changes therein are classified and reported as follows:

Net Assets Without Donor Restrictions - Net assets available for use in general operations and not subject to donor (or certain grantor) restrictions. Net Assets With Donor Restrictions - Net assets subject to donor- (or certain grantor) imposed restrictions. Some donor-imposed restrictions are temporary in nature, such as those that will be met by the passage of time or other events specified by the donor. Other donor-imposed restrictions are perpetual in nature, where the donor stipulates that resources be maintained in perpetuity. Donor-imposed restrictions are released when a restriction expires, that is, when the stipulated time has elapsed, when the stipulated purpose for which the resource was restricted has been fulfilled, or both.

THE GREAT LAND TRUST, INC. NOTES TO FINANCIAL STATEMENTS, CONTINUED

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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued Cash and Cash Equivalents For purposes of the statement of cash flows, the Trust considers all highly liquid investments available for current use, with maturities of three months or less at the time of purchase, to be cash equivalents. Accounts Receivable Accounts receivable are reported at the amount management expects to collect on balances outstanding at year-end from certain contracts and others. Based on an assessment of the credit history with those having outstanding balances and current relationships with them, management has concluded that realization losses on balances outstanding at year-end will be immaterial. Contributions Receivable Contributions, which include unconditional promises to give (pledges), are recognized as revenues in the period the Trust is notified of the commitment. Conditional promises to give are not recognized until they become unconditional, that is, when the conditions on which they depend are substantially met. Bequests are recorded as revenue at the time the Trust has an established right to the bequest and the proceeds are measurable. Investments Investments are carried at fair value. Donor-restricted investment income is reported as an increase in net assets with donor restrictions and classified according to the nature of the restriction. Property and Equipment Acquisitions of property and equipment in excess of $1,000 are capitalized. Property and equipment purchased are recorded at cost. Donated assets are reflected as contributions at their estimated values on the date received. Depreciation is calculated using the straight-line method over the estimated useful lives of the assets, which range from 5 to 10 years. Conservation Property Conservation property is reported at cost when purchased and at fair market value on the date received when acquired by gift. When conservation property is purchased at a bargain sale, that is, when the purchase price is below the appraised value, an in-kind contribution is recorded for the difference between the purchase price and the appraised value. Conservation property value is held at a constant value and is not adjusted for depreciation or re-assessment. Also see Note 7 regarding conservation easements.


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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued

Deferred Revenue Unearned grant receipts and receipt of in-lieu fees are deferred until expended for the purpose of the program.

Port of Anchorage Mitigation Funds: The Trust holds mitigation funding via an agreement with the Army Corps of Engineers for the expansion of the Port of Anchorage. The wetlands permit which allows the Municipality of Anchorage to expand the Port stipulates that funding be set aside for mitigation which is to be used to offset the loss of wetlands associated with the project. The Trust holds these mitigation funds and pays them to entities according to authorization letters from the Army Corps of Engineers. Unspent funds are included in deferred revenue until earned.

In-Lieu Fees – Wetlands Mitigation: The Trust receives funding from private developers and public agencies through an agreement with the U.S. Army Corps of Engineers (agreement in 1998, amended in 2011). Revenue received relates to an agreement between the Trust and the Corps of Engineers whereby an in-lieu fee may be paid by agreement of the parties who have been involved with the development projects in which the Corps of Engineers deems to have affected a wetlands area. The developers of the project can pay a fee to the fee-based compensatory wetland mitigation program (under Section 404 of the Clean Water Act) which allows the project to meet its regulatory obligation to receive a permit for construction. The Trust records an administrative fee of 10% at the time funds are initially received. Remaining amounts are recorded as deferred revenue until earned, that is, when services are performed and expenses are incurred.

Income Tax Status The Great Land Trust, Inc. is a nonprofit corporation exempt from federal income tax under section 501(c)(3) of the Internal Revenue Code. Based on tax law changes, the Trust may be subject to unrelated business income tax on certain taxable benefits. Any provision for income taxes associated with these changes is estimated to be immaterial. The Trust has no other activities subject to unrelated business income tax. The Trust is not a private foundation. The Trust follows the provisions of FASB ASC Topic 740 Accounting for Uncertainty in Income Taxes. Management has evaluated the Trust's tax positions and concluded that there are no uncertain tax positions that require adjustment to the financial statements to comply with provisions of this Topic. Donated Materials and Services Donations of property, equipment, materials and other assets are recorded as support at their estimated fair value at the date of donation. Such donations are reported as support without donor


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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued

Donated Materials and Services, Continued The Trust recognizes donated services that create or enhance nonfinancial assets or that require specialized skills, are provided by individuals possessing those skills, and would typically need to be purchased if not provided by donation. Functional Expenses The costs of providing various programs and other activities have been summarized on a functional basis in the statement of activities and in the statement of functional expenses. Accordingly, certain costs have been allocated among the programs and supporting services benefited. The expenses that are allocated include salaries and related costs, office expenses, occupancy, professional services, travel and training expenses, and other expenses, which are allocated based on estimated time and effort. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Change in Accounting Principle The Trust has implemented Accounting Standards Update (ASU) 2016-14, Presentation of Financial Statements of Not-for-Profit Entities. The ASU modified net asset classification and enhances disclosures regarding liquidity and availability of resources and functional expense reporting. The ASU has been applied retrospectively to all periods presented. Subsequent Events The Trust has evaluated all subsequent events through December 17, 2019, the date the financial statements were available to be issued. Summarized Financial Information for 2018 The accompanying financial statements include certain prior-year summarized comparative information in total but not by net asset class. Such information does not include sufficient detail to constitute a presentation in conformity with accounting principles generally accepted in the United States of America (GAAP). Accordingly, such information should be read in conjunction with our audited financial statements for the year ended September 30, 2018, from which the summarized information was derived.


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3. AVAILABLE RESOURCES AND LIQUIDITY

The Trust regularly monitors liquidity required to meet its operating needs and other contractual commitments, while also striving to maximize the investment of its available funds. For purposes of analyzing resources available to meet general expenditures over a 12-month period, the Trust considers all expenditures related to its primary operations to be general expenditures. It excludes financial assets with donor or other restrictions limiting their use. Financial assets of the Trust consist of the following at September 30, 2019:

2019 2018

Financial assets:Cash and equivalents 1,726,086$ 2,214,959$

Accounts and contributions receivable 333,613 359,718$ Investments 9,501,471 8,316,214

Total financial assets 11,561,170 10,890,891

Less amounts unavailable for general expenditure

within one year due to:

Net assets with donor restrictions (5,306,747) (4,896,909) Board designated net assets (322,581) (315,520) Restricted to mitigation activities (5,242,445) (5,048,924)

Total financial assets available for general

general expenditure 689,397$ 629,538$

See Note 11 for additional information on board-designated net assets. While the Trust does not intend to use funds from the board designated funds for ongoing operations, board designated funds could be made available, if necessary, with a majority vote of the Board. Also see Note 17 for the Trust’s endowment policies which describe the spending rate for donor-restricted endowments.


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4. ACCOUNTS AND CONTRIBUTIONS RECEIVABLE

Accounts and contribution receivables are unsecured and consist of the following at September 30, 2019 and 2018:

2019 2018

Contributions receivable 82,793$ 52,157$ Accounts receivable 223,663 269,720 Accrued interest on investments 27,157 37,841

Total accounts and contributions receivable 333,613$ 359,718$

Contribution receivables are expected to be collected within a year. 5. INVESTMENTS

Investments at September 30, 2019 and 2018 consist of the following:

2019 2018

Cash and cash equivalents 14$ 15,180$ Certificates of deposit 4,287,038 3,736,764 Corporate bonds 1,212,590 1,310,890 Mutual funds 4,001,829 3,253,380

Total investments 9,501,471 8,316,214

Cash held in investment accounts reported

with cash and equivalents 1,279,437 1,879,004

Total investments and invested cash 10,780,908$ 10,195,218$

Investments are held for the following purposes:

2019 2018

Endowment (Note 17) 1,381,826$ 1,370,914$ Restricted for wetlands mitigation 4,711,672 4,511,158Restricted for port mitigation 530,773 537,766Other restrictions and designations 4,156,637 3,775,380

Total investments and invested cash 10,780,908$ 10,195,218$

At September 30, 2019, the Trust holds certificates of deposit, with interest rates ranging from 1.95% to 3.25%, maturating between December 2019 and January 2022. At September 30, 2018, certificates of deposit have interest rates ranging from 1.5% to 2.8%, maturing between December 2018 and July 2020.


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6. PROPERTY AND EQUIPMENT Property and equipment consist of the following at September 30, 2019 and 2018:

2019 2018

Equipment and furniture 47,442$ 42,834$ Vehicles 23,090 23,090

70,532 65,924 Less accumulated depreciation 58,459 52,873

Property and equipment, net 12,073$ 13,051$

7. CONSERVATION PROPERTY AND EASEMENTS

Conservation Property The Trust holds land with a small building that is to be held in perpetuity as a habitat for Sandhill cranes and other wildlife species (Note 12).

Conservation Easements The Trust has acquired and holds a number of conservation easements, each representing a legal interest in land owned by another person or entity. The easements grant the Trust the right to use, control, and/or protect the land for conservation purposes. Because of the unique nature of these assets, the impracticality of obtaining consistent and reliable estimates of the values ascribed to these interests, and consistent with the practices followed by many environmental land trusts, the accompanying financial statements do not include amounts for these property interests. At September 30, 2019, the Trust holds 39 conservation easements on approximately 10,360 acres of land (37 easements on approximate 10,200 acres at September 30, 2018).

8. DEFERRED REVENUE Deferred revenue consists of the following at September 30, 2019 and 2018:

2019 2018

Wetlands mitigation 4,714,171$ 4,494,301$ Port mitigation 528,566 535,533

Total deferred revenue 5,242,737$ 5,029,834$


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9. CONTINGENCIES Amounts received or receivable from various contracting agencies are subject to audit and potential adjustment by the contracting agencies. Any disallowed claims, including amounts already collected, would become a liability of the Trust if so determined in the future. It is management's belief that no significant amounts will be required to be returned in the future.

10. LEASE COMMITMENTS The Trust leases office space under an operating lease expiring October 31, 2021 with current monthly rent of $2,834, increasing to $2,891 in November 2019. The Trust also leases office equipment under an agreement from August 2019 through August 2024 with monthly payments of $256. Rent expense totaled approximately $34,300 for the year ended September 30, 2019 ($39,800 for 2018). Future minimum lease commitments under the operating lease are as follows:

Year ending September 30, 2020 37,700$ 2021 37,800 2022 6,000 2023 3,100 2024 2,800

87,400$

11. BOARD DESIGNATED NET ASSETS The board has elected to designate funds held in designated cash and investments which will

allow the Trust to have funds available for long-term sustainability and development of the Trust.


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12. NET ASSETS WITH DONOR RESTRICTIONS Net assets with donor restrictions consist of the following September 30, 2019 and 2018:

2019 2018

Net assets with expiring donor restrictions:

Stewardship funds 2,477,728$ 2,242,596$

Earnings on endowment (Note 17) 257,228 246,316

Eklutna long-term management funds 1,011,320 998,802

Campbell Creek long-term management funds 146,749 146,706

Campbell Creek property management funds 44,280 47,083

Nic'anilen Na' long-term management funds 24,943 -

Stern Shelter Cove long-term management funds 149,306 - Special projects 70,595 90,808

Total net assets with expiring donor restrictions 4,182,149 3,772,311

Net assets with perpetual donor restrictions:

Endowment (Note 17) 1,124,598 1,124,598 Conservation property:

Land 28,399 28,399Barn 85,000 85,000

Total net assets with perpetual donor restrictions 1,237,997 1,237,997

Total net assets with donor restrictions 5,420,146$ 5,010,308$


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13. SUPPORT WITHOUT AND WITH DONOR RESTRICTIONS

Support without and with donor restrictions for the year ended September 30, 2019:

Received Released Acquisitions Total

ContributionsIndividual 208,029$ 7,458$ -$ 215,487$ Corporate 6,255 51,105 - 57,360 Foundations 9,020 19,863 - 28,883

Government grants 434,511 - 243,409 677,920 Non-operating grants

and contributions - 84,194 - 84,194

657,815$ 162,620$ 243,409$ 1,063,844$

Beginning EndingBalance Received Released Balance

ContributionsIndividual 767,546$ 235,467$ (7,458)$ 995,555$ Corporate 317,265 200,000 (51,105) 466,160 Foundations 495,310 - (19,863) 475,447

Government grants 72,420 - - 72,420 Non-operating grants

and contributions 2,119,770 136,991 (84,194) 2,172,567

3,772,311$ 572,458$ (162,620)$ 4,182,149$

Support with Donor Restrictions

Support without Donor Restrictions


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13. SUPPORT WITHOUT AND WITH DONOR RESTRICTIONS, Continued Support without and with donor restrictions for the year ended September 30, 2018:

Received Released Acquisitions Total

ContributionsIndividual 107,930$ 24,431$ -$ 132,361$ Corporate 7,603 86,700 - 94,303 Foundations 7,548 200,348 - 207,896

Government grants 403,466 - 1,517,435 1,920,901 Non-operating grants

and contributions - 117,472 460,259 577,731

526,547$ 428,951$ 1,977,694$ 2,933,192$

Beginning EndingBalance Received Released Balance

ContributionsIndividual 613,724$ 178,253$ (24,431)$ 767,546$ Corporate 353,965 50,000 (86,700) 317,265 Foundations 645,658 50,000 (200,348) 495,310

Government grants 72,420 - - 72,420 Non-operating grants

and contributions 1,985,905 251,337 (117,472) 2,119,770

3,671,672$ 529,590$ (428,951)$ 3,772,311$

Support with Donor Restrictions

Support without Donor Restrictions

14. RETIREMENT PLANS

The Trust has a defined contribution SIMPLE IRA plan for eligible employees that provides for employee and employer contributions, subject to IRS limitations. The employer contribution rate for fiscal years September 30, 2019 and 2018 was 3%. Contributions to the Plan for the year ended September 30, 2019 totaled approximately $14,700 ($15,300 in 2018).


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15. CONCENTRATIONS OF CREDIT RISK The Trust maintains its cash balances in several financial institutions. Balances in each institution are insured by the National Credit Union Administration (NCUA) up to $250,000. The balances, at times, may exceed the federally insured limit. Balances in excess of insured limits were approximately $134,900 as September 30, 2019. Uninsured balances at September 30, 2018 are insignificant. Investment securities are exposed to various risks such as interest rate, market, and credit risks. Due to the level of risk associated with certain investment securities, it is at least reasonably possible that changes in the values of investment securities will occur in the near term and that such changes could materially affect the amounts reported in the statement of financial position. The Trust's revenues are concentrated with 41%, of total revenues coming from two governmental agencies for the year ended September 30, 2019 and 43% of total revenues coming from three governmental agencies for the year ended September 30, 2018.

16. FAIR VALUE MEASUREMENTS Assets and liabilities recorded at fair value in the statement of financial position are categorized based upon the level of judgment associated with the inputs used to measure their fair value. Level inputs are defined as follows: Level 1: Unadjusted quoted prices in active markets for identical assets and liabilities. Level 2: Observable inputs other than those included in Level 1, such as quoted market prices for similar assets or liabilities in active markets, or quoted market prices for identical assets or liabilities in inactive markets. Level 3: Unobservable inputs reflecting management’s own assumptions about the inputs used in pricing the asset or liability. Level 3 assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair values requires significant management judgment or estimation.


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16. FAIR VALUE MEASUREMENTS, Continued

Fair values of assets measured on recurring basis at September 30, 2019 and 2018 are as follows:

Fair Value Level 1 Level 2

September 30, 2019

Investments:Corporate bonds 1,212,590$ -$ 1,212,590$

Mutual funds:

Domestic 2,364,781 2,364,781 -

International 1,324,627 1,324,627 -

Real estate 312,421 312,421 -

5,214,419 4,001,829$ 1,212,590$

Cash held in investment accounts 1,279,451

Certificates of deposit 4,287,038

Total investments and invested cash 10,780,908$

September 30, 2018

Investments:Corporate bonds 1,310,890$ -$ 1,310,890 Mutual funds:

Domestic 1,822,396 1,822,396 - International 1,194,076 1,194,076 - Real estate 236,908 236,908 -

4,564,270 3,253,380$ 1,310,890$

Cash held in investment accounts 1,894,184 Certificates of deposit 3,736,764

Total investments and invested cash 10,195,218$

Fair values for investments are determined by reference to quoted market prices and other relevant information generated by market transactions. Fair value for investments in corporate bonds are provided by custodians and are based on pricing models that incorporate available trade, bid and other market information.

17. ENDOWMENT The Trust’s endowment consists of a donor-restricted fund established for a specific property. As required by U.S. generally accepted accounting principles (GAAP), net assets associated with endowment funds, including funds designated by the Board of Directors to function as endowments, are classified and reported based on the existence or absence of donor-imposed restrictions and/or board designations.


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17. ENDOWMENT, Continued Interpretation of Relevant Law The Board of Directors of the Trust have interpreted Alaska's enacted Uniform Prudent Management of Institutional Funds Act (the Act or UPMIFA) 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 Trust classifies as net assets with perpetual restrictions. (a) the original value of gifts donated to the perpetual endowment, (b) the original value of subsequent gifts to the perpetual endowment, and (c) accumulations to the perpetual 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 as net assets with perpetual restrictions is classified as net assets with expiring restrictions until those amounts are appropriated for expenditure by the Trust in a manner consistent with the standard of prudence prescribed by the Act. In accordance with UPMIFA, the Trust considers the following factors in making a determination to appropriate or accumulate donor-restricted endowment funds:

(1) The duration and preservation of the fund, (2) The purposes of the Trust and the donor-restricted endowment fund, (3) General economic conditions, (4) The possible effect of inflation and deflation, (5) The expected total return from income and the appreciation of investments, (6) Other resources of the Trust, and (7) The investment policies of the Trust.

Endowment net asset composition as of September 30, 2019 and 2018 and changes in endowment net assets for the years then ended are as follows:

Expiring Perpetual Total

Endowment net assets - September 30, 2017 182,086$ 1,124,598$ 1,306,684$ Investment return 75,355 - 75,355 Appropriation of endowment

assets for expenditure (11,125) - (11,125)

Endowment net assets - September 30, 2018 246,316 1,124,598 1,370,914 Investment return, net 21,199 - 21,199 Appropriation of endowment

assets for expenditure (10,287) - (10,287)

Endowment net assets - September 30, 2019 257,228$ 1,124,598$ 1,381,826$

With Donor Restrictions


September 30, 2019

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17. ENDOWMENT, Continued Return Objectives and Risk Parameters The Trust 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 seeking to maintain the purchasing power of the endowment assets. Endowment assets include those assets of donor-restricted funds that the Trust must hold in perpetuity or for a donor-specified period. Under this policy, as approved by the Board of Directors, the endowment assets are invested in a manner that is intended to produce results that exceed the price and yield results of the S&P 500 index while assuming a moderate level of investment risk. Actual returns in any given year will vary from the benchmark. Strategies Employed for Achieving Objectives To satisfy its long-term rate-of-return objectives, the Trust 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 Trust 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 Policy Distributions are made at such time that the board approves distributions of earnings on the endowment restricted in perpetuity. In establishing this policy, the Trust considered the long-term expected return on its endowment that is consistent with the Trust’s objective to maintain the 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.

Documents

Audited Financial Statements For the Year Ended September