San Francisco Food Bank dba SF-Marin Food Bank · SAN FRANCISCO FOOD BANK dba SF-Marin Food Bank Notes to Financial Statements June 30, 2015 _____ 1. Nature of Operations The San

San Francisco Food Bank dba SF-Marin Food Bank Financial Statements For the Year Ended June 30, 2015 (With Comparative Totals for the Year Ended June 30, 2014)

TABLE OF CONTENTS

Page No.

Independent Auditor's Report 1 - 2

Financial Statements

Statement of Financial Position 3

Statement of Activities 4

Statement of Functional Expenses 5

Statement of Cash Flows 6

Notes to Financial Statements 7 - 20

INDEPENDENT AUDITOR'S REPORT

To the Board of DirectorsSan Francisco Food Bankdba SF-Marin Food BankSan Francisco, California

Report on the Financial Statements

We have audited the accompanying financial statements of San Francisco Food Bank ("Food Bank") (aCalifornia nonprofit public benefit corporation), which comprise the statement of financial position as of June 30,2015, and the related statements of activities, functional expenses, and cash flows for the year then ended, andthe 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 accordancewith 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 financialstatements 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 ouraudit in accordance with auditing standards generally accepted in the United States of America. Those standardsrequire that we plan and perform the audit to obtain reasonable assurance about whether the financial statementsare free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in thefinancial statements. The procedures selected depend on the auditor's judgment, including the assessment of therisks of material misstatement of the financial statements, whether due to fraud or error. In making those riskassessments, the auditor considers internal control relevant to the Food Bank's preparation and fair presentationof the financial statements in order to design audit procedures that are appropriate in the circumstances, but notfor the purpose of expressing an opinion on the effectiveness of the Food Bank's internal control. Accordingly,we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies usedand the reasonableness of significant accounting estimates made by management, as well as evaluating theoverall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our auditopinion.

Opinion

In our opinion, the financial statements referred to above present fairly, in all material respects, thefinancial position of San Francisco Food Bank as of June 30, 2015, and the changes in its net assets andits cash flows for the year then ended in accordance with accounting principles generally accepted in theUnited States of America.

Report on Summarized Comparative Information

San Francisco Food Bank's financial statements as of and for the year ended June 30, 2014 were auditedby Berger Lewis Accountancy Corporation, whose practice became part of ArmaninoLLP as of January 1,2015, and whose report dated October 9, 2014, expressed an unmodified audit opinion on those financialstatements. In our opinion, the summarized comparative information presented herein as of and for theyear ended June 30, 2014, is consistent, in all material respects, with the audited financial statements fromwhich it has been derived.

ArmaninoLLP

San Jose, CaliforniaOctober 21, 2015

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FINANCIAL STATEMENTS

SAN FRANCISCO FOOD BANKdba SF-Marin Food Bank

Statement of Financial PositionJune 30, 2015

(With Comparative Totals as of June 30, 2014)_________________________

ASSETS2015 2014

Current assetsCash and cash equivalents $ 5,452,899 $ 4,696,563Investments in marketable securities 641,906 612,782Accounts receivable from affiliated agencies, net 60,201 71,777Government grants receivable 1,289,183 677,396Pledges receivable 899,500 349,724Inventory 3,767,365 3,665,500Prepaid expenses and other assets 218,356 204,870

Total current assets 12,329,410 10,278,612

Property and equipment, net 7,715,775 7,735,128

Other assetsInvestments in marketable securities 5,000,000 5,000,000

Total assets $ 25,045,185 $ 23,013,740

LIABILITIES AND NET ASSETSCurrent liabilities

Accounts payable $ 717,519 $ 723,184Accrued expenses 1,289,174 914,548Deferred revenue 402,562 394,800

Total current liabilities 2,409,255 2,032,532

Net assetsUnrestricted net assets

Undesignated 3,340,326 3,260,780Inventory 3,767,365 3,665,500Property and equipment 7,715,775 7,735,128Board designated - operating reserve 1,000,000 1,000,000Board designated - facilities reserve 5,000,000 5,000,000

Total unrestricted net assets 20,823,466 20,661,408

Temporarily restricted net assets 1,812,464 319,800

Total net assets 22,635,930 20,981,208

Total liabilities and net assets $ 25,045,185 $ 23,013,740

The accompanying notes are an integral part of these financial statements.

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SAN FRANCISCO FOOD BANKdba SF-Marin Food BankStatement of Activities

Year Ended June 30, 2015(With Comparative Totals for the Year Ended June 30, 2014)

_______________________

2015 2014Temporarily

Unrestricted Restricted Total TotalSupport and revenueSupport

Contributions in-kind $ 61,053,919 $ - $ 61,053,919 $ 61,369,920Contributions 14,094,979 3,007,719 17,102,698 14,641,774Special events (includes in-kind income of

$14,700 and $15,400) 788,913 - 788,913 424,307Less: special event costs (31,253) - (31,253) (27,295)Total support 75,906,558 3,007,719 78,914,277 76,408,706

RevenueGovernmental support - in-kind food 11,969,112 - 11,969,112 11,393,077Governmental support - cash 3,028,540 - 3,028,540 2,425,032Shared maintenance fees 254,120 - 254,120 335,678Net investment income 118,636 - 118,636 509,640Other income, net 18,133 - 18,133 23,773

Total revenue 15,388,541 - 15,388,541 14,687,200Total support and revenue 91,295,099 3,007,719 94,302,818 91,095,906

Net assets released from restrictions 1,515,055 (1,515,055) - -Total support, revenue and net assets

released from restrictions 92,810,154 1,492,664 94,302,818 91,095,906

ExpensesProgram services

Healthy children pantries 9,685,950 - 9,685,950 10,232,670Brown bag pantries serving seniors 8,477,520 - 8,477,520 8,205,683Neighborhood pantries 50,332,207 - 50,332,207 47,121,298Supplemental food program for seniors 8,224,375 - 8,224,375 9,281,408Agency distribution 10,827,042 - 10,827,042 12,177,827Advocacy and education 1,546,038 - 1,546,038 1,214,211

Total program services 89,093,132 - 89,093,132 88,233,097

Supporting servicesManagement and general 940,177 - 940,177 1,043,270Fundraising and development 2,614,787 - 2,614,787 2,065,518

Total supporting services 3,554,964 - 3,554,964 3,108,788Total expenses 92,648,096 - 92,648,096 91,341,885

Change in net assets (Note 3) 162,058 1,492,664 1,654,722 (245,979)

Net assets, beginning of year 20,661,408 319,800 20,981,208 21,227,187

Net assets, end of year $ 20,823,466 $ 1,812,464 $ 22,635,930 $ 20,981,208


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Statement of Functional ExpensesYear Ended June 30, 2015

(With Comparative Totals for the Year Ended June 30, 2014)_________________________

Program Services Supporting Services Total Expenses

HealthyChildrenPantries

Brown BagPantriesServingSeniors

NeighborhoodPantries

SupplementalFood

Program forSeniors

AgencyDistribution

Advocacyand

Education

TotalProgramServices

Managementand General

Fundraisingand

Development

TotalSupporting

Services 2015 2014

Donated food $ 7,933,544 $ 6,815,134 $ 41,778,689 $7,093,103 $ 9,061,703 $ - $ 72,682,173 $ - $ - $ - $ 72,682,176 $ 73,230,338Salaries 518,190 535,951 2,804,450 570,271 632,917 949,150 6,010,929 531,298 1,122,825 1,654,123 7,665,051 7,010,744Food procurement 668,502 584,634 2,888,324 9,772 513,301 - 4,664,533 - - - 4,664,532 4,161,224Employee benefits 106,536 109,875 576,485 117,037 130,263 188,414 1,228,610 108,439 229,809 338,248 1,566,858 1,611,785Freight and storage 137,065 116,094 677,028 74,838 125,042 - 1,130,067 - - - 1,130,067 1,046,960Outside services 9,486 24,684 51,120 12,011 11,336 17,073 125,710 134,547 668,370 802,917 928,627 615,085Depreciation andamortization 40,612 48,307 225,241 45,891 48,151 72,919 481,121 39,684 86,132 125,816 606,936 549,666

Payroll taxes 39,920 41,813 217,311 44,000 49,034 71,216 463,294 40,942 86,779 127,721 591,015 600,946Vehicle expenses 49,248 39,143 226,295 28,950 49,636 19,382 412,654 2,749 5,623 8,372 421,026 496,830Occupancy 50,049 39,230 212,988 18,908 43,444 26,461 391,080 9,000 19,591 28,591 419,670 371,357Warehouse supplies 33,635 27,512 161,780 122,534 37,153 - 382,614 - - - 382,614 377,515Utilities 25,795 23,144 130,658 22,178 28,501 28,707 258,983 11,269 27,617 38,886 297,868 270,898Donor relations 7,033 6,727 37,897 2,167 8,835 3,594 66,253 2,133 221,830 223,963 290,217 251,260Equipment expenses 24,181 22,075 118,791 18,631 26,123 16,533 226,334 6,703 15,428 22,131 248,465 185,447Public affairs 7,882 8,061 42,394 8,622 9,606 82,303 158,868 7,980 16,816 24,796 183,664 162,411Donated services 4,832 6,117 27,898 5,586 6,044 9,021 59,498 26,526 64,915 91,441 150,940 73,834Office/computer supplies 5,966 6,593 32,347 7,258 7,095 13,512 72,771 5,760 12,494 18,254 91,026 46,114Miscellaneous 6,909 6,438 35,744 5,175 19,351 7,123 80,740 2,355 6,865 9,220 89,959 82,492Insurance 8,151 7,412 42,354 8,171 9,597 4,884 80,569 2,352 5,726 8,078 88,647 85,658Printed materials andpostage 4,773 4,772 24,805 5,303 5,551 23,096 68,300 4,949 11,886 16,835 85,135 73,064

Conferences and training 3,562 3,734 19,197 3,908 4,264 12,650 47,315 3,491 12,081 15,572 62,887 37,392Volunteer program 79 70 411 61 95 - 716 - - - 716 865

Total expenses $ 9,685,950 $ 8,477,520 $ 50,332,207 $8,224,375 $ 10,827,042 $1,546,038 $ 89,093,132 $ 940,177 $ 2,614,787 $ 3,554,964 $ 92,648,096 $ 91,341,885

Percentage of total %10.5 %9.2 %54.3 %8.9 %11.7 %1.7 %96.3 %1.0 %2.7 %3.7 %100.0


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SAN FRANCISCO FOOD BANKdba SF-Marin Food BankStatement of Cash Flows

Year Ended June 30, 2015(With Comparative Totals for the Year Ended June 30, 2014)

_________________________

2015 2014Cash flows from operating activities

Change in net assets $ 1,654,722 $ (245,979)Adjustments to reconcile change in net assets to net cash provided by

operating activitiesDepreciation and amortization 606,936 549,666Loss on sale/disposal of property and equipment - 13,966Donated property and equipment (40,150) (189,747)In-kind contributions of food (including USDA) (72,828,416) (72,491,822)Distribution of food received in-kind 72,682,176 73,230,338Net realized and unrealized (gains) losses on investments 60,661 (357,205)

Change in operating assets and liabilitiesAccounts receivable from affiliated agencies, net 11,576 8,874Government grants receivable (611,787) (38,193)Pledges receivable (549,776) (173,766)Inventory purchased 44,376 (22,588)Prepaid expenses and other assets (13,488) (64,799)Accounts payable (174,556) 391,510Accrued expenses 374,626 (154,959)Deferred revenue 7,762 394,800

Net cash provided by operating activities 1,224,662 850,096

Cash flows from investing activitiesPurchase of property and equipment (380,020) (424,999)Purchase of investments (1,757,778) (2,540,533)Proceeds from sale of investments 1,669,472 5,840,429

Net cash provided by (used in) investing activities (468,326) 2,874,897

Net increase in cash and cash equivalents 756,336 3,724,993

Cash and cash equivalents, beginning of year 4,696,563 971,570

Cash and cash equivalents, end of year $ 5,452,899 $ 4,696,563


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Notes to Financial StatementsJune 30, 2015

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1. Nature of Operations

The San Francisco Food Bank (dba “SF-Marin Food Bank”, referred to hereafter as “Food Bank”)is the largest distributor of food to low-income families and individuals in San Francisco andMarin Counties, providing non-perishable groceries, fresh produce, bread, meat and dairy to over450 community partners, from senior centers and after-school programs to soup kitchens and foodpantries. The Food Bank solicits donations from a wide variety of sources, including producegrowers, supermarket chains, wholesalers, the United States Department of Agriculture, largemanufacturers, and locally sponsored food drives; then distributes these food commodities toqualifying nonprofit agencies and neighborhood pantries. The Food Bank is meeting more of thecommunity need in its service area than any other food bank in the country according to thenational food bank association Feeding America’s annual Meals Distributed as % of Meal Gap inService Area report.

This year, the Food Bank distributed nearly 47 million pounds of food, equivalent to more than107,000 meals per day. The Food Bank was fortunate to receive significant financial support fromthe community in the 2014-2015 fiscal year, allowing it to address the ongoing need caused by therecession. This funding enabled the Food Bank to bring in large quantities of protein, freshproduce, staples and other nutritious items. The Food Bank expanded service and increased theamount and quality of food distributed through its more than 245 pantries, helping nearly 30,000households each week.

The Food Bank obtains government revenues and support equal to 16% of total revenues andsupport from the following government agencies:

United States Department of Agriculture (USDA) - Emergency Food Assistance Program

The USDA revenue represents federal funds which have been distributed through the CaliforniaDepartment of Social Services. The funds are designated to partially cover the costs ofdistributing USDA commodities to nonprofit agencies serving low-income families and individualsthrough their emergency meal and pantry programs.

United States Department of Agriculture (USDA) - Commodity Supplemental Food Program(CSFP)

CSFP is partially funded by the USDA and state-administered by the California Department ofEducation. CSFP provides a monthly box of nutritious USDA commodity food products toeligible seniors.

United States Department of Agriculture (USDA) - Nutrition Education Program

Nutrition education is funded by the USDA as part of the Supplemental Nutrition AssistanceProgram (SNAP, formerly Food Stamps). Nutrition Education efforts include interactive seminarsas well as cooking demonstrations featuring fresh, seasonal produce distributed by the Food Bank.

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1. Nature of Operations (continued)

United States Department of Agriculture (USDA) - CalFresh Outreach Program

CalFresh (California’s name for SNAP, formerly Food Stamps) outreach is funded by the USDAin an effort to get benefits to those who qualify for this under-utilized federal program. Oneinitiative is CalFresh-In-A-Day, a partnership with the City and County of San Francisco toprovide next-day benefits.

Emergency Food and Shelter Program National Board/Federal Emergency Management Agency(FEMA)

FEMA funds represent federal money that has been distributed to the Food Bank through both theSan Francisco and Marin Emergency Food and Shelter Program Boards. The funds are designatedto distribute foods to nonprofit agencies serving low-income families and individuals through theirmeal and pantry programs.

City and County of San Francisco Human Services Agency (HSA) and Department of PublicHealth (DPH)

HSA and DPH funds are designated to provide weekly groceries to low-income immigrants, seniorcitizens, persons with disabilities, persons with HIV/AIDS, and formerly homeless individuals.HSA funds also provide a nutritionally balanced three-day supply of emergency food to eligiblefamilies and individuals.

2. Program Services

Pantry programs

The Food Bank has established a variety of pantry programs designed to provide a lifeline forpeople who need help. The pantries provide food to low-income seniors, families, children andother individuals, enabling them to plan and prepare meals in their own homes, an essential aspectof promoting good health, normalcy and dignity. Relying largely on the support of grants andcontributions, the Food Bank operates the following types of pantries:

Healthy children pantries

This program combats child hunger by distributing nutritious foods every week in family-friendly environments such as public schools, childcare centers, parenting support centers andother child-focused locations.

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2. Program Services (continued)

Brown bag pantries serving seniors

This program enables the Food Bank to help low-income seniors and adults with disabilitiessecure immediate access to nutritious food. The Food Bank provides weekly groceries tothousands of older adults struggling to maintain their health and independence. In the 2014-2015 fiscal year, the Food Bank expanded its Home Delivered Grocery Program, providingregular groceries to nearly 650 seniors and adults with disabilities in San Francisco and Marin.The Food Bank provides the food, performs some deliveries and collaborates with othercommunity organizations to serve homebound and mobility-impaired individuals who cannotmake the trip to pantry sites or meal programs and don't qualify for home-delivered meals.

Neighborhood pantries

The Food Bank established a network of weekly pantries to serve economically distressedcommunities and reach target populations in need of food assistance. The Immigrant FoodAssistance Pantries initiative focuses on low-income immigrants struggling with language andcultural barriers. The Community Food Partners Pantries distribute food to families living inpublic housing developments. The Supportive Housing Pantries distribute easily preparedfresh and packaged products to formerly homeless individuals living in permanent housing withsupportive services. The Neighborhood Grocery Network Pantries distributes supplementalweekly groceries to working poor families and low-income individuals.

Supplemental food program for seniors

This program provides a monthly box of nutritious USDA food to approximately 11,300 low-income senior citizens.

Agency distribution shopping program

More than 200 of the Food Bank’s member agencies, including community centers, religiousorganizations, soup kitchens, shelters, affordable housing, senior programs, AIDS supportprograms and childcare centers, visit the warehouse on a regular basis to select bread, dry goods,meat and fresh produce for their clients.

Advocacy and education

Food Bank advocacy efforts focus on optimizing under-utilized government food assistanceprograms (e.g., CalFresh, the state’s food stamp program, and San Francisco’s public school mealsprogram), eliminating bureaucracy and red tape that prevents low-income individuals fromreceiving assistance, improving program quality and participation, and offering recommendationsto elected officials and community leaders to reduce barriers to food for low-income residents ofSan Francisco and Marin. Food Bank education programs raise public awareness about theproblem of hunger, help mobilize support for government programs and policies that provideadequate nutrition for low-income people, inform and assist low-income households to apply forCalFresh and promote healthy eating and nutrition basics.

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3. Change in Net Assets

Year ended June 30, 2015

The positive change in net assets for the year ended June 30, 2015 is largely due to temporarilyrestricted funding that will be spent in subsequent years.

Year ended June 30, 2014

The negative change in net assets for the year ended June 30, 2014 is largely due to the Food Bankdistributing more government commodities during the year than it received. The Food Bankreceived a significant amount of nutritious commodities in the final months of the year ended June30, 2013, most of which were distributed in the year ended June 30, 2014. This created asignificant increase in the Food Bank’s inventory valuation (as well as a positive change in netassets) for the year ended June 30, 2013 with a corresponding decrease in the Food Bank’sinventory valuation (and negative change in net assets) for the year ended June 30, 2014. Withoutthis decrease, the Food Bank would have had a positive change in net assets of $484,940.

4. Summary of Significant Accounting Policies

Basis of accounting

The financial statements of San Francisco Food Bank have been prepared on the accrual basis ofaccounting.

Basis of presentation

The Food Bank follows standards of accounting and financial reporting for voluntary health andwelfare organizations. In accordance with accounting principles generally accepted in the UnitedStates of America, the Food Bank reports its financial position and operating activities in threeclasses of net assets: unrestricted net assets, temporarily restricted net assets, and permanentlyrestricted net assets.

Unrestricted net assets include those assets over which the Board of Directors hasdiscretionary control in carrying out the operations of the Food Bank. Under thiscategory, the Food Bank maintains an operating fund, any net assets designated by theBoard for specific purposes and the unrestricted inventory and property and equipmentfunds.

Temporarily restricted net assets include those assets which are subject to donorrestriction and for which the applicable restriction was not met as of the end of thecurrent reporting period.

Permanently restricted net assets include those assets which are subject to a non-expiring donor restriction, such as endowments. There are currently no permanentlyrestricted net assets.

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4. Summary of Significant Accounting Policies (continued)

Comparative financial information

The financial statements include certain prior-year summarized comparative information in totalbut not by net asset class or functional expense categories. Such information does not includesufficient detail to constitute a presentation in conformity with accounting principles generallyaccepted in the United States of America. Accordingly, such information should be read inconjunction with the Food Bank's financial statements for the year ended June 30, 2014, fromwhich the summarized information was derived.

Use of estimates

The preparation of financial statements in conformity with accounting principles generallyaccepted in the United States of America requires management to make estimates and assumptionsthat affect the reported amounts of assets and liabilities at the date of the financial statements andthe reported amounts of support, revenue and expenses during the period. Accordingly, actualresults could differ from those estimates.

Cash and cash equivalents

Cash equivalents include highly liquid investments and investments with a maturity of threemonths or less and exclude donor restricted receipts for long-term purposes. The Food Bankmaintains its cash in bank deposit accounts which, at times, may exceed federally insured limits.The Food Bank has not experienced any losses in such accounts. Management believes it is notexposed to any significant risk on cash accounts.

Accounts, grants and pledges receivable

Receivables represent amounts due from affiliated agencies and are stated at the amount the FoodBank expects to collect for shared maintenance fees and grants from government agencies.Provision for losses on receivables is made when considered necessary to maintain an adequateallowance to cover bad debts. Receivables are charged against the allowance when the Food Bankdetermines that payments will not be received. Any subsequent receipts are credited to theallowance. As of June 30, 2015 and 2014, the Food Bank estimates that no reserve for losses onreceivables is required. Bad debt expense for the years ended June 30, 2015 and 2014 amounted to$11,196 and $907, respectively.

Inventory

Inventory consists of donated non-government food, purchased food and United States Departmentof Agriculture (USDA) food commodities received from the government. Donated non-government food and donated government food for the years ended June 30, 2015 and 2014 wasvalued at $1.70 and $1.72 per pound, respectively. This valuation is based on a cost studyconducted for Feeding America. Purchased food is valued at the latest purchase price.

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Property and equipment

Property and equipment are recorded at cost or estimated fair value for donated items.Depreciation is computed on the straight-line method based on the estimated useful lives of theassets, which range from three to seven years for vehicles, office furniture and equipment, andthirty-nine years for buildings and building improvements. Equipment purchases over $1,000 arecapitalized. Depreciation is recorded as a decrease in unrestricted net assets and the expense ischarged to the activity benefiting from the use of the facilities or equipment. Amounts expendedfor maintenance and repairs are charged to operations as incurred.

The Food Bank regularly evaluates its long-lived assets for indicators of possible impairment.Should an impairment exist, the impairment loss would be measured based on the excess carryingvalue of the asset’s fair market value or discounted estimates of future cash flows. The Food Bankhas not identified any such impairment losses to date.

Investments

Investments in marketable securities with readily determinable fair values and all investments indebt securities are reported at their fair values in the statement of financial position. Unrealizedgains or losses are included in the change in net assets.

Fair value measurement

Fair value is defined as "the price that would be received to sell an asset or paid to transfer aliability in an orderly transaction between market participants at the measurement date."

A hierarchy has been established to prioritize the inputs to valuation techniques used to measurefair value. The hierarchy gives the highest ranking to fair values determined using unadjustedquoted prices in active markets for identical assets (Level 1) and the lowest ranking to fair valuesdetermined using methodologies and models with unobservable inputs (Level 3). Observableinputs are those that market participants would use in pricing the asset based on market dataobtained from sources independent of the Food Bank. Unobservable inputs reflect the FoodBank’s assumption about the inputs market participants would use in pricing the asset or liabilitydeveloped based on the best information available in the circumstances.

The fair value hierarchy is categorized into three levels based on the inputs as follows:

Level 1 - Values are unadjusted quoted prices for identical assets and liabilities in activemarkets accessible at the measurement date.

Level 2 - Inputs include quoted prices for similar assets or liabilities in active markets,quoted prices from those willing to trade in markets that are not active, or other inputs thatare observable or can be corroborated by market data for the term of the instrument. Suchinputs include market interest rates and volatilities, spreads and yield curves.

Level 3 - Certain inputs are unobservable (supported by little or no market activity) andsignificant to the fair value measurement. Unobservable inputs reflect the Food Bank’sbest estimate of what hypothetical market participants would use to determine atransaction price for the asset or liability at the reporting date.

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All of the Food Bank's assets and liabilities are classified as Level 1 with the exception of donatedfood. All donated non-government food and USDA food commodities inventory are classified asLevel 2 assets. The Food Bank did not have any assets or liabilities classified as Level 3.

Accrued vacation

Accrued vacation represents vacation earned, but not taken as of June 30. The maximum vacationtime that can be accrued and carried over to the next year is 200 hours. The accrued vacationbalance as of June 30, 2015 and 2014 was $287,867 and $280,798, respectively, and is included inaccrued expenses.

Revenue recognition

The Food Bank recognizes support and revenue on the accrual basis of accounting. Revenue fromgrants which have been classified as "exchange transactions" and program fees are recognized asrevenue in the period in which the service is provided.

Contributions

Contributions are recognized when the donor makes a pledge to give that is, in substance, anunconditional promise. Contributions are recorded as unrestricted, temporarily restricted, orpermanently restricted depending on the nature of donor restrictions. Restricted contributions arereported as increases in restricted net assets. When the restriction is met the amount is shown as areclassification of restricted net assets to unrestricted net assets.

Contributions in-kind

Donated non-government food and donated government food for the years ended June 30, 2015and 2014 was valued at $1.70 and $1.72 per pound, respectively. This valuation is based on a coststudy conducted for Feeding America. Donated equipment and other donated goods are recordedat their estimated fair value as of the date of the donation. Contributed services, which require aspecialized skill and which the Food Bank would have paid for if not donated, are recorded at theestimated fair value at the time the services are rendered. The Food Bank also receives donatedservices that do not require specific expertise but which are nonetheless central to the Food Bank'soperations. While these contributed services are not reflected in the financial statements theestimated value of these services is disclosed in Note 13.

Allocation of functional expenses

The costs of providing the various programs and other activities have been summarized on afunctional basis in the statement of activities and in the statement of functional expenses.Accordingly, certain costs have been allocated among the programs and supporting servicesbenefited based on an analysis of personnel time and poundage of food distributed by eachprogram.

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Allocation of joint costs

The Food Bank accounts for joint costs in accordance with accounting principles generallyaccepted in the United States of America. San Francisco Food Bank is required to record all of thecosts of certain activities as fundraising expenses, rather than allocating certain costs to variousprograms of the Organization. For the years ended June 30, 2015 and 2014, the Food Bankincurred costs of $910,585 and $540,241, respectively, for informational materials and activitiesthat include fundraising appeals. Of these costs, $867,395 and $498,636, respectively wasallocated to fundraising expense, $43,190 and $41,605, respectively was allocated to programs,and no amounts required allocation to management and general expense.

Income taxes

San Francisco Food Bank is exempt from federal income taxes under Section 501(c)(3) of theInternal Revenue Code and California state income taxes under Section 23701(d) of the CaliforniaRevenue Taxation Code. Accordingly, no provision for income taxes has been made in theaccompanying statements. In addition, the Food Bank qualifies for the charitable contributiondeduction under Section 170(b)(1)(A) and has been classified as an organization that is not aprivate foundation under Section 509(a).

Uncertainty in income taxes

Generally accepted accounting principles provide accounting and disclosure guidance aboutpositions taken by an organization in its tax returns that might be uncertain. Management hasconsidered its tax positions and believes that all of the positions taken by the Food Bank in itsfederal and state exempt organization tax returns are more likely than not to be sustained uponexamination.

The Food Bank's federal returns for the years ended June 30, 2014, 2013 and 2012 could besubject to examination by federal taxing authorities, generally for three years after they are filed.The Food Bank's state returns for the years ended June 30, 2014, 2013, 2012 and 2011 could besubject to examination by state taxing authorities, generally for four years after they are filed.

Advertising

Advertising costs are charged to operations when incurred. Advertising costs for the years endedJune 30, 2015 and 2014 totaled $12,600 and $12,043, respectively.

Reclassifications

Certain amounts in the prior year have been reclassified in order to be consistent with the currentyear presentation.

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Subsequent events

Management of the Food Bank has evaluated events and transactions subsequent to June 30, 2015for potential recognition or disclosure in the financial statements. The Food Bank did not havesubsequent events that required recognition or disclosure in the financial statements for the fiscalyear ended June 30, 2015. Subsequent events have been evaluated through the date the financialstatements became available to be issued, October 21, 2015.

5. Inventory

Inventory consists of donated non-government food, purchased food and United States Departmentof Agriculture (USDA) food commodities received from the government. Donated non-government food and donated government food for the years ended June 30, 2015 and 2014 wasvalued at $1.70 and $1.72 per pound, respectively. This valuation is based on a cost studyconducted for Feeding America. All donated non-government food and USDA food commoditiesinventory are classified as Level 2 assets and all purchased food inventory is classified as a Level 1asset (see Note 4).

The Food Bank's inventory as of June 30, consisted of the following:

2015 2014Inventory at fair value:

USDA food commodities $ 2,238,759 $ 1,961,237Donated non-government food 1,206,686 1,337,964Purchased food 321,920 366,299

Total inventory at fair value $ 3,767,365 $ 3,665,500

6. Property and Equipment

The cost and accumulated depreciation of property and equipment as of June 30, consisted of thefollowing:

2015 2014

Building $ 5,403,731 $ 5,403,731Land 3,328,645 3,328,645Vehicles 2,672,051 2,344,996Office furniture and equipment 957,532 887,265Building improvements 959,661 882,452Warehouse equipment 600,600 535,555Other depreciable property 56,339 56,339

13,978,559 13,438,983Less: accumulated depreciation and amortization (6,262,784) (5,703,855)

Property and equipment, net $ 7,715,775 $ 7,735,128

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6. Property and Equipment (continued)

Depreciation and amortization expense for the years ended June 30, 2015 and 2014 totaled$606,936 and $549,666, respectively.

7. Investments in Marketable Securities

All of the following investments are classified as Level 1 investments (see Note 4). Investments inmarketable securities as of June 30, consisted of the following:

2015

Fair market Unrealizedvalue Cost appreciation

Bond fund $ 3,211,102 $ 3,114,138 $ 96,964Equity fund 2,430,804 1,942,469 488,335

Total investments in marketablesecurities $ 5,641,906 $ 5,056,607 $ 585,299

2014

Fair market Unrealizedvalue Cost appreciation

Bond fund $ 3,186,709 $ 3,035,810 $ 150,899Equity fund 2,426,073 1,786,254 639,819

Total investments in marketablesecurities $ 5,612,782 $ 4,822,064 $ 790,718

The following schedule summarizes the net investment income in the statement of activities for theyears ended June 30:

2015 2014

Net realized and unrealized gains (losses) $ (60,661) $ 357,205Interest and dividend income 179,297 152,435

Total net investment income $ 118,636 $ 509,640

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8. Line of Credit

The Food Bank has a revolving unsecured line of credit for borrowings up to $1,000,000 bearinginterest at one-half percent in excess of the reference rate. The line of credit matures on February1, 2016. There were no amounts outstanding under this line of credit as of June 30, 2015 and2014.

Under the terms of the line of credit agreement, the Food Bank is required to comply with certainfinancial covenants. As of June 30, 2015 and 2014, the Food Bank has met these financialcovenants.

9. Board Designated Net Assets

Operating reserve

The Food Bank maintains a reserve to cover unexpected expense or revenue needs such asresponding to a natural disaster, a significant decrease in private donations, or a change in itsgovernment support.

Facilities reserve

The Food Bank maintains a reserve fund to attend to significant long-term building repairs andequipment replacement over the next ten years as well as address future increased capacity orexpansion.

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10. Temporarily Restricted Net Assets

The Food Bank's temporarily restricted net assets as of June 30, consisted of the following:

2015 2014Temporarily restricted net assets

Purpose restrictionsSite development $ 450,000 $ 50,000Marin County only - FY 15-16 290,000 -Capital grants 281,164 147,800Food purchase - FY 15-16 303,650 -Food purchase - FY 16-17 177,650 -Healthy children pantries - FY 15-16 87,500 -Food stamp outreach - FY 14-15 - 50,000Food stamp outreach - FY 15-16 75,000 -Brown bag pantries serving seniors - FY 15-16 7,500 -Advocacy and education - 72,000

Time restrictionsGeneral support for future periods 140,000 -

Total temporarily restricted net assets $ 1,812,464 $ 319,800

11. Net Assets Released From Restrictions

Net assets were released from restrictions during the year by incurring expenses satisfying therestricted purpose or by the expiration of time as follows:

2015

Food purchase $ 425,351San Francisco only 334,437Healthy children pantries 235,223Marin County only 106,320Brown bag pantries serving seniors 94,887Pantry programs 94,000Advocacy and education 89,000Food stamp outreach 50,000Capital grants 37,637Morning snack 31,200Holiday programs 11,000Nutrition education 6,000

Total net assets released from restrictions $ 1,515,055

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12. Shared Maintenance Fees

The Food Bank receives fees from participating agencies to assist in the costs of distributing food.These shared maintenance fees are based upon predetermined rates from $0 to $0.18 per pound oran average of $0.005 per pound for the year ended June 30, 2015. Total shared maintenance feesduring the years ended June 30, 2015 and 2014, totaled $254,120 and $335,678, respectively.

13. Contributions In-Kind

The estimated fair value of donated food, equipment, supplies and expert services received arerecorded as contributions. During the years ended June 30, the following in-kind contributionswere received by the Food Bank:

2015 2014

Contributions in-kind - governmentFood - government $ 11,969,112 $ 11,393,077

Contributions in-kind - non-governmentFood - non-government 60,859,304 61,098,745Outside services 154,465 73,834Equipment 40,150 189,747Other - 7,594

In-kind contribution for operations 61,053,919 61,369,920

Special event supplies 14,700 15,400

Total contributions in-kind - non-government 61,068,619 61,385,320

Total contributions in-kind $ 73,037,731 $ 72,778,397

The Food Bank also receives donated services that do not require specific expertise but which arenonetheless central to the Food Bank's operations. The Food Bank relies on volunteers from thecommunity to sort, glean, and repack donated food. The estimated value of these services for theyears ended June 30, 2015 and 2014, which were based on the estimated dollar value of volunteertime calculated using the San Francisco Minimum Compensation Ordinance (MCO) rate of $11.03per hour, and Marin County's Living Wage Ordinance rate of $12.55 and $12.10 per hour for theyears ended June 30, 2015 and 2014, respectively, amounted to $1,649,691 and $1,619,371,respectively. In accordance with accounting principles generally accepted in the United States ofAmerica, the value of these services is not reflected in the financial statements.

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14. Retirement Plan

The Food Bank provides retirement benefits to its employees through an annuity thrift plan. TheFood Bank contributes 3% of salary to the plan for all eligible employees and matches up to anadditional 3% for employees who make contributions. Employees are eligible to begin makingcontributions immediately upon hire regardless of age. Employees are eligible for the employermatching contributions after one year of service. Employer contributions to the plan for the yearsended June 30, 2015 and 2014 totaled $327,357 and $326,310, respectively.

15. Conflict of Interest Policy

Included among the Food Bank's Board of Directors and Officers are volunteers from thecommunity who provide valuable assistance to the Food Bank in the development of policies andprograms and in the evaluation of business transactions. The Food Bank has adopted a conflict ofinterest policy whereby board members are disqualified from participation in the final decisionsregarding any action affecting their related company or organization.

16. Commitments and Contingencies

Feeding America

The Food Bank has a contractual agreement with Feeding America. The agreement improves thecapacity of the Food Bank to provide solutions to the problem of hunger in America. Under theterms of the agreement, the Food Bank is required to maintain certain financial covenants, whichthey complied with for each of the years ended June 30, 2015 and 2014. The Food Bank canterminate the agreement by a written notice 30 days in advance subject to the terminationprovisions as defined by the agreement. Feeding America can terminate the agreement with causeas provided by the compliance standards per the agreement.

Grants and contracts

Grants and contracts awarded to San Francisco Food Bank are subject to the funding agencies'criteria, contract terms and regulations under which expenditures may be charged and are subjectto audit under such terms, regulations and criteria. Occasionally, such audits may determine thatcertain costs incurred against the grants do not comply with the established criteria that governthem. In such cases, the Food Bank could be held responsible for repayments to the fundingagency for the costs or be subject to the reductions of future funding in the amount of the costs.Management does not anticipate any material questioned costs for the contracts and grantsadministered during the period.

Legal proceedings

The Food Bank is engaged in certain legal and administrative proceedings in the normal course ofits operations. While it is not possible to determine the ultimate outcome of these matters at thistime, management believes that any liabilities from such proceedings, or claims that are pending orknown to be threatened, will not have a material adverse effect on the Food Bank’s financialcondition, results of activities or cash flows.

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Documents

San Francisco Food Bank dba SF-Marin Food Bank · SAN FRANCISCO FOOD BANK dba SF-Marin Food Bank Notes to Financial Statements June 30, 2015 _____ 1. Nature of Operations The San