national multiple sclerosis society ... multiple sclerosis society connecticut chapter (a nonprofit...

NATIONAL MULTIPLE SCLEROSIS SOCIETY CONNECTICUT CHAPTER

(A NONPROFIT ORGANIZATION)

YEARS ENDED SEPTEMBER 30, 2014 AND 2013




CONTENTS

Page Independent Auditors' Report 1-2 Financial statements: Statements of financial position 3 Statements of activities 4 Statements of functional expenses 5-6 Statements of cash flows 7 Notes to financial statements 8-22

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Independent Auditors’ Report Board of Directors National Multiple Sclerosis Society Connecticut Chapter (a Nonprofit Organization) Hartford, Connecticut We have audited the accompanying financial statements of the National Multiple Sclerosis Society Connecticut Chapter (a Nonprofit Organization) (the Chapter) which comprise the statements of financial position as of September 30, 2014 and 2013, the related statements of activities, functional expenses, and cash flows for the years 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. Auditors’ Responsibility 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. 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 entity’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 entity’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.

A Limited Liability Partnership

10 Weybosset Street, Suite 700, Providence, RI 02903 • (p) 401.421.4800 • 1.800.927.LGCD • (f) 401.421.0643 • www.lgcd.com

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Board of Directors National Multiple Sclerosis Society Connecticut Chapter (a Nonprofit Organization) Auditors’ Responsibility (Continued) 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 National Multiple Sclerosis Society Connecticut Chapter as of September 30, 2014 and 2013, and the changes in its net assets and its cash flows for the years then ended, in accordance with accounting principles generally accepted in the United States of America.

Providence, Rhode Island December 4, 2014

2014 2013

Current assets:Cash 1,081,121$ 206,981$ Short-term investments 573,256 Contributions receivable 141,261 5,450 Contributions receivable from Home Office 1,386 11,343 Due from other Chapters 64,199 45,584 Prepaid expenses and other assets 38,301 60,540

Total current assets 1,326,268 903,154

Noncurrent assets:Contributions receivable – long-term, net of discount of $3,205 36,795 Long-term investments 587,078 883,924 Rent and equipment security deposits 4,346 Property and equipment, net 12,657 25,582 Restricted cash 2,734 17,799 Beneficial interest in trust managed by third party 97,694 168,922 Due from Home Office – charitable remainder trust 6,370

Total noncurrent assets 747,674 1,096,227

Total assets 2,073,942$ 1,999,381$

Current liabilities:Due to Home Office 793$ 727$ Due to other Chapters 1,744 Accounts payable and accrued expenses 136,101 137,406 Deferred revenue 119,007 156,732 Deferred rent 852 7,066

Total current liabilities 258,497 301,931

Long-term liability, due to Home Office – Charitable Gift Annuity 58,850 46,559

Total liabilities 317,347 348,490

Commitments (Note 4)

Net assets:Unrestricted 770,762 621,439 Temporarily restricted 380,353 358,916 Permanently restricted 605,480 670,536

Total net assets 1,756,595 1,650,891

Total liabilities and net assets 2,073,942$ 1,999,381$

NATIONAL MULTIPLE SCLEROSIS SOCIETYCONNECTICUT CHAPTER

STATEMENTS OF FINANCIAL POSITION

SEPTEMBER 30, 2014 AND 2013

ASSETS

LIABILITIES AND NET ASSETS


See notes to financial statements. 3

Temporarily Permanently Temporarily Permanently

Unrestricted restricted restricted Total Unrestricted restricted restricted Total

Public support:

Received directly:

Special events (includes in-kind donations of $154,783 in 2014 and $185,493 in 2013) 2,897,592$ 8,303$ 2,905,895$ 2,642,911$ 8,624$ 2,651,535$

Less direct benefit to donor costs (238,497) -$ - (238,497) (244,324) -$ - (244,324)

2,659,095 - 8,303 2,667,398 2,398,587 - 8,624 2,407,211

Contributions 891,415 (1,770) 152,603 1,042,248 910,475 (7,565) 24,826 927,736

Legacies and loss on charitable remainder trust 94,534 (71,228) 23,306 69,359 69,359

Total public support 3,645,044 (72,998) 160,906 3,732,952 3,378,421 (7,565) 33,450 3,404,306

Other revenue:

Investment income 68,691 55,855 - 124,546 75,679 58,497 - 134,176

Service program fees - - - - 3,295 - - 3,295

Miscellaneous income 11,746 - - 11,746 10,148 - - 10,148

Total other revenue 80,437 55,855 - 136,292 89,122 58,497 - 147,619

Net assets released from restrictions 187,382 38,580 (225,962) - 64,477 (15,526) (48,951) -

Total revenue 3,912,863 21,437 (65,056) 3,869,244 3,532,020 35,406 (15,501) 3,551,925

Expenses:

Program services:

Research 806,821 - - 806,821 754,245 - - 754,245

Society activities 583,526 - - 583,526 588,693 - - 588,693

Client programs 424,785 - - 424,785 450,335 - - 450,335

Community programs 507,297 - - 507,297 519,844 - - 519,844

Professional education and training 84,155 - - 84,155 87,965 - - 87,965

Public education 634,486 - - 634,486 662,727 - - 662,727

Total program services 3,041,070 - - 3,041,070 3,063,809 - - 3,063,809

Supporting services:

Fundraising 473,919 - - 473,919 503,323 - - 503,323

Management and general 248,551 - 248,551 262,581 - - 262,581

Total supporting services 722,470 - - 722,470 765,904 - - 765,904

Total expenses 3,763,540 - - 3,763,540 3,829,713 - - 3,829,713

Change in net assets 149,323 21,437 (65,056) 105,704 (297,693) 35,406 (15,501) (277,788)

Net assets, beginning of year 621,439 358,916 670,536 1,650,891 919,132 323,510 686,037 1,928,679

Net assets, end of year 770,762$ 380,353$ 605,480$ 1,756,595$ 621,439$ 358,916$ 670,536$ 1,650,891$

2014 2013

NATIONAL MULTIPLE SCLEROSIS SOCIETY

CONNECTICUT CHAPTER

STATEMENTS OF ACTIVITIES




Professional Management Society Client Community education Public and Benefit to Grand

Research activities programs programs and training education Total Fundraising general Total donor costs total

Salaries -$ -$ 190,328$ 337,039$ 59,477$ 429,559$ 1,016,403$ 129,529$ 175,789$ 305,318$ -$ 1,321,721$ Employee benefits 19,462 34,464 6,082 43,925 103,933 13,245 17,975 31,220 135,153 Payroll taxes 15,086 26,715 4,714 34,049 80,564 10,267 13,934 24,201 104,765

Total salaries and related expenses - - 224,876 398,218 70,273 507,533 1,200,900 153,041 207,698 360,739 - 1,561,639 -

Printing 4,958 19,178 148 29,016 53,300 33,935 541 34,476 87,776 Postage and shipping 7,422 2,052 364 7,887 17,725 13,190 618 13,808 31,533 Telephone 2,130 804 142 1,025 4,101 309 419 728 4,829 Supplies 2,482 2,148 317 5,369 10,316 2,282 3,774 6,056 41,339 57,711 Dues and memberships 4,401 24 4 31 4,460 9 13 22 4,482 Professional and other contract service fees 44,315 23,140 2,384 17,420 87,259 63,597 7,045 70,642 157,901 Donated public service announcements and advertising 109,650 109,650 109,650 Travel 7,897 5,863 392 1,383 15,535 15,825 634 16,459 129,959 161,953 Meetings 34,001 5,495 45 325 39,866 4,273 637 4,910 9,600 54,376 Occupancy 23,177 41,043 7,243 52,310 123,773 15,773 21,407 37,180 26,977 187,930 Furniture and equipment 2,301 3,854 680 4,912 11,747 1,481 2,010 3,491 15,238 Insurance (property and casualty) - Funding of other organizations that support individuals with MS 23 23 23 Direct financial assistance 61,400 61,400 61,400 Awards and prizes 1,591 - - - 1,591 2,748 910 3,658 28,047 33,296 Miscellaneous expense 1,973 2,159 1,581 3,075 8,788 56,539 1,126 57,665 2,575 69,028 Depreciation and amortization 1,861 3,296 582 4,200 9,939 1,267 1,719 2,986 12,925 Restricted contributions to Society Research Investment 1,000 1,000 1,000 Chapter Support of Society Research Investment 805,821 805,821 805,821

Total expenses before Chapter Support of Society activities 806,821 - 424,785 507,297 84,155 634,486 2,457,544 473,919 248,551 722,470 238,497 3,418,511

Chapter Support of Society activities 583,526 583,526 - 583,526

Total expenses 806,821$ 583,526$ 424,785$ 507,297$ 84,155$ 634,486$ 3,041,070$ 473,919$ 248,551$ 722,470$ 238,497$ 4,002,037

Less direct benefit to donor costs (238,497)

Total expenses as reported on the statement of activities 3,763,540$

Program activities Supporting services


STATEMENT OF FUNCTIONAL EXPENSES

YEAR ENDED SEPTEMBER 30, 2014



Professional Management Society Client Community education Public and Benefit to Grand

Research activities programs programs and training education Total Fundraising general Total donor costs total

Salaries -$ -$ 201,153$ 350,979$ 62,427$ 449,475$ 1,064,034$ 135,952$ 187,281$ 323,233$ -$ 1,387,267$ Employee benefits 24,869 43,391 7,718 55,568 131,546 16,808 23,153 39,961 171,507 Payroll taxes 15,244 26,598 4,731 34,062 80,635 10,303 14,192 24,495 105,130

Total salaries and related expenses - - 241,266 420,968 74,876 539,105 1,276,215 163,063 224,626 387,689 - 1,663,904 -

Printing 11,008 5,327 218 27,351 43,904 33,873 522 34,395 78,299 Postage and shipping 7,768 1,914 97 7,183 16,962 19,144 357 19,501 36,463 Telephone 2,206 795 141 1,018 4,160 308 424 732 4,892 Supplies 4,579 2,138 500 2,440 9,657 5,063 1,017 6,080 26,177 41,914 Dues and memberships 3,845 392 7 47 4,291 14 20 34 4,325 Professional and other contract service fees 29,124 27,618 2,130 15,335 74,207 60,268 6,389 66,657 140,864 Donated public service announcements and advertising 139,030 139,030 139,030 Travel 6,841 2,824 534 2,384 12,583 16,236 989 17,225 146,785 176,593 Meetings 41,965 4,994 60 75 47,094 53 31 84 3,232 50,410 Occupancy 24,194 42,215 7,509 54,062 127,980 16,352 22,526 38,878 34,036 200,894 Furniture and equipment 2,466 4,302 765 5,509 13,042 1,666 2,296 3,962 17,004 Insurance (property and casualty) - Funding of other organizations that support individuals with MS 15 15 15 Direct financial assistance 63,884 63,884 63,884 Awards and prizes 249 101 18 129 497 1,461 54 1,515 34,094 36,106 Miscellaneous expense 8,969 2,802 498 3,685 15,954 45,460 1,495 46,955 62,909 Depreciation and amortization 1,971 3,439 612 4,404 10,426 1,332 1,835 3,167 13,593 Restricted contributions to Society Research Investment 5,000 5,000 5,000 Chapter Support of Society Research Investment 749,245 749,245 749,245

Total expenses before Chapter Support of Society activities 754,245 - 450,335 519,844 87,965 662,727 2,475,116 503,323 262,581 765,904 244,324 3,485,344

Chapter Support of Society activities 588,693 588,693 - 588,693

Total expenses 754,245$ 588,693$ 450,335$ 519,844$ 87,965$ 662,727$ 3,063,809$ 503,323$ 262,581$ 765,904$ 244,324$ 4,074,037

Less direct benefit to donor costs (244,324)

Total expenses as reported on the statement of activities 3,829,713$

Program activities Supporting services


STATEMENT OF FUNCTIONAL EXPENSES

YEAR ENDED SEPTEMBER 30, 2013



2014 2013Cash flow from operating activities:

Change in net assets 105,704$ (277,788)$ Adjustments to reconcile change in net assets to net cash used in operating activities:

Depreciation and amortization 12,925 13,593 Net gains on investments (91,648) (91,506) Loss on charitable remainder trust 71,228 Permanently restricted contributions (160,906) (33,450) Long-term liability, due to home office – Charitable Gift Annuity 5,921 12,013 Changes in operating assets and liabilities:

Contributions receivable (172,606) 20,580 Contributions receivable from Home Office 9,957 (8,956) Due from other Chapters (18,615) (12,771) Prepaid expenses and other assets 22,239 (6,757) Rent and security deposits (4,346) Due to Home Office 66 (5,491) Due to other Chapters 1,744 Accounts payable and accrued expenses (1,305) (14,090) Deferred revenue (37,725) 120,892 Deferred rent (6,214) 7,066

Net cash used in operating activities (263,581) (276,665)

Cash flows from investing activities:(Increase) decrease in restricted cash 15,065 (4,588) Purchases of investments (2,517) (9,620) Proceeds from sales of investments 964,267 297,215

Net cash provided by investing activities 976,815 283,007

Cash used in financing activities, permanently restricted contributions 160,906 33,450

Net increase in cash 874,140 39,792

Cash, beginning of year 206,981 167,189

Cash, end of year 1,081,121$ 206,981$


STATEMENTS OF CASH FLOWS




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NOTES TO FINANCIAL STATEMENTS


1. Description of organization and summary of significant accounting policies: Description of organization: The National Multiple Sclerosis Society (the “Society”) is a not-for-profit voluntary health and

welfare agency that helps each person address the challenges of living with MS through a 50-state network of chapters. The Connecticut Chapter (the “Chapter”) raises funds in the state of Connecticut to fund cutting-edge research, drive change through advocacy, facilitate professional education, and provide programs and services that help people with MS and their families move their lives forward.

Net asset classifications: Resources for various purposes are classified for accounting and financial reporting purposes into

net asset categories established according to their nature and purpose as follows: • Unrestricted net assets – Unrestricted net assets represent funds that do not have donor-

imposed restrictions and which are fully available, at the discretion of management and the Board of Trustees (Board), for the Chapter to utilize in any of its programs or supporting services. Unrestricted net assets may also include such funds designated by the Board for future purposes. No amount was designated by the Board for future purposes at September 30, 2014 or 2013.

• Temporarily restricted net assets – Temporarily restricted net assets are comprised of funds

which are restricted by donors for specific purposes. The restrictions are satisfied either by the passage of time or by actions of the Chapter.

• Permanently restricted net assets – Permanently restricted net assets include resources with

permanent donor-imposed restrictions, which require the assets to be maintained in perpetuity but permit the Chapter to use all or part of the income derived from the donated assets. Income and/or appreciation that is unrestricted is classified as temporarily restricted until appropriated by the Board.

When both restricted and unrestricted resources are available for use, it is the Chapter’s policy to

use restricted resources first, then unrestricted resources as they are needed.

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NOTES TO FINANCIAL STATEMENTS (CONTINUED)


1. Description of organization and summary of significant accounting policies (continued): Revenue recognition and deferred revenue: Revenue, gains and other support are reported as increases in unrestricted net assets unless use of

the related assets is limited by donor-imposed restrictions or by law. Expenses are reported as decreases in unrestricted net assets. Gains and losses on investments or other assets or liabilities are reported as increases or decreases in unrestricted net assets unless their use is restricted by explicit donor stipulation or by law.

Contributions are recorded as revenue when received or promised (pledged) unconditionally, at

their fair value. The fair value of long-term contributions receivable is measured based on the present value of future cash flows, with consideration of expectation about possible variations in the amount and/or timing of the cash flows and other specific factors that would be considered by market participants. The fair value measurements also consider donors’ credit risk. The Chapter recognizes income from legacies and bequests when an unassailable right to the gift has been established by the court and the proceeds are measurable in amount. It is the Chapter’s policy to record temporarily restricted contributions received and fulfilled in the same accounting period in the unrestricted net asset class. When a prior year’s donor restriction expires, that is, when a time restriction ends or purpose restriction is fulfilled, temporarily restricted net assets are reclassified as unrestricted net assets and reported in the statement of activities as net assets released from restrictions. Conditional contributions are recognized as revenue when the conditions on which they depend have been substantially met.

All revenue received in advance for special events that are held subsequent to year-end is deferred

and recognized in the year of the event. Expense allocations: Functional expenses which are not specifically attributable to program services or supporting

services are allocated by management based on various allocation factors. Concentration of credit risk: Deposits at the Chapter’s financial institutions are insured by the Federal Deposit Insurance

Corporation up to $250,000. The Chapter has not experienced any losses in such accounts. The Chapter believes it is not exposed to any significant credit risk on its cash and investments. The Chapter had approximately $874,000 and -$0- in uninsured cash and investment balances at September 30, 2014 and 2013, respectively.

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1. Description of organization and summary of significant accounting policies (continued): Concentration of credit risk (continued): The Chapter’s revenue is principally derived from individuals, corporations and foundations

primarily in the state of Connecticut. The Chapter invests in various debt and equity securities, which are recorded at fair value. The fair

value of investment securities can fluctuate because of interest rates, liquidity, credit and other risks depending on the nature of the specific investment. Therefore, it is at least reasonably possible that these factors will result in changes in the fair value of the Chapter’s investments which could materially affect amounts reported in the financial statements.

Cash and cash equivalents: The Chapter considers all highly liquid investments purchased with a maturity of three months or

less to be cash equivalents. At September 30, 2014 and 2013, the Chapter’s cash was held by one bank.

Investments: The Chapter’s investments in equity and debt securities are stated at their quoted market prices,

with the net change in unrealized gains or losses on investments included in the statements of activities. Donated securities are recorded as contributions at their fair value at the date of gift.

Contributions and other receivables: Contributions and other receivables consist of accruals of public support received after year-end

that pertained to fundraising events held during fiscal years 2014 and 2013. Receivables are recorded at net realizable value, net of an allowance for uncollectible amounts. The Chapter believes that the pledges receivable are fully collectible. There are no identifiable concentrations of credit risk related to these receivables.

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1. Description of organization and summary of significant accounting policies (continued): Property and equipment: Property and equipment are recorded at cost or, if donated, at the fair value at the date of the gift.

Depreciation is provided using the straight-line method over the estimated useful lives of the assets or the term of the lease, as appropriate. Amortization of leasehold improvements is included with depreciation expense. Expenditures for maintenance and repairs are charged to operations as incurred. The Chapter capitalizes all equipment purchases exceeding $1,000 with useful lives in excess of one year.

Donated goods and services: Donated goods and services, including public service announcements, used by the Chapter in

programs, special events, and supporting services are recorded as in-kind revenue and a corresponding expense at their estimated fair value at the date of receipt.

2014 2013 Donated goods $ 31,868 $ 40,333Donated services 122,915 145,160 $ 154,783 $ 185,493

Donated public service announcements received during the year ended September 30, 2014 and

2013 totaled approximately $109,000 and $139,000, respectively and are reflected as donated services and as fundraising expense in the accompanying statements of activities.

In addition, a number of volunteers have donated significant amounts of their time to the Chapter’s

program services and supporting services. No amounts have been reflected in the accompanying financial statements for those donated services because they do not meet the criteria for revenue recognition established by ASC Section 958-605 (formerly Statement of Financial Accounting Standards No. 116, Contributions Received and Contributions Made).

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1. Description of organization and summary of significant accounting policies (continued): 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 disclosure 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.

Research and national activities expense: The National Multiple Sclerosis Society (the Society) calculates the National Programs Expense,

which funds research and other Society activities, for each Chapter in advance of the fiscal year after a complete review by the Budget Review Committee and National Board. The Chapter’s National Programs Expense (“NPE”) is calculated using the average of the previous two years’ audited results as the revenue base. The remittance percentage is subject to adjustment each year to ensure that the Society meets its programmatic goals and that all donor restrictions are honored. The Chapter’s NPE was calculated to be $1,389,347 and $1,337,938 in fiscal years 2014 and 2013, respectively. By setting the Chapter’s NPE in advance, the Chapters and the national organization are in a better position to control resources through their respective budgeting and planning processes. NPE is allocated to Society activities and research expense in the accompanying statements of activities.

In addition to the fixed amount of National Programs Expense for fiscal years 2014 and 2013, the

Chapter made additional contributions to the Society in the amounts of $1,000 and $5,000, respectively, which were earmarked for research and other national programs. These amounts are included in research expenses in the accompanying statements of activities.

Advertising costs: Advertising costs are expensed as incurred. Advertising expense was $109,650 and $139,030 in

2014 and 2013, respectively, consisting principally of donated advertising and public service announcements.

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1. Description of organization and summary of significant accounting policies (continued): Income taxes: The Chapter qualifies as a charitable organization as defined by Internal Revenue Code (IRC)

Section 501(c)(3); accordingly, it is exempt from federal income taxes under IRC Section 501(a). Additionally, since the Chapter is publicly supported, contributions made to the Chapter qualify for the maximum charitable contributions deduction under the IRC. The Chapter is also exempt from Connecticut state income tax.

Accounting guidance pertaining to income taxes prescribes the minimum standard required to be

met before a tax position is recognized in the financial statements. The Chapter has no uncertain tax positions.

The Chapter is generally no longer subject to federal and state examinations by tax authorities for

years before 2011. Subsequent events: The Chapter has evaluated subsequent events through December 4, 2014, the date that the

accompanying financial statements were available to be issued. 2. Investments: A summary of the Chapter’s short and long-term investments at September 30 is as follows:

2014 2013 Cost Fair value Cost Fair value Mutual (equity and commodity) funds

$ 154,294

$ 217,763

$ 621,254

$ 759,800

Mutual (bond) funds 66,858 66,327 357,291 359,462Other investment – annuity 277,475 277,475 302,216 302,216Money market funds 25,513 25,513 35,702 35,702 $ 524,140 $ 587,078 $ 1,316,463 $ 1,457,180

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2. Investments (continued): During the year ended September 30, 2014, the Society adopted a reserves policy which requires

local chapters, including the Chapter, to transfer liquid assets in excess of working capital, as defined, to the Society’s pooled investment fund during the fiscal year ending September 30, 2015. In September 2014, the Chapter sold investments with a fair value of approximately $964,000, in anticipation of the transfer. The proceeds are included in cash at September 30, 2014 and were transferred to the Society’s pooled investment fund on October 1, 2014. The Chapter’s remaining investments at September 30, 2014, other than the annuity as described on the preceding page, are expected to be transferred to the Society’s pooled investment fund by September 30, 2015.

Investment income consists of the following:

2014 2013 Interest and dividend income $ 14,668 $ 21,521Interest and dividend income restricted for local use 18,230 21,149Realized and unrealized gains on investments 91,648 91,506 $ 124,546 $ 134,176

3. Property and equipment:

2014 2013 Computer hardware and purchased software $ 60,630 $ 60,630Furniture, fixtures and equipment 3,406 7,506Leasehold improvements 3,923 3,923 67,959 72,059Less accumulated depreciation 55,302 46,477 $ 12,657 $ 25,582

During the year ended September 30, 2014, the Society disposed of fully depreciated equipment

with an original cost of $4,100.

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4. Operating leases and subsequent event: The Chapter leases office space and equipment under noncancelable operating lease agreements

expiring through June 2019. Office rent for the years ended September 30, 2014 and 2013 was approximately $154,000 and $160,000, respectively. Subsequent to September 30, 2014, the lease for the Chapter’s main location in Hartford, CT, set to expire on December 31, 2014, was extended to December 31, 2018.

At September 30, 2014, aggregate future minimum lease payments under these noncancelable

leases are as follows for the years ending September 30:

2015 $ 148,459 2016 148,459 2017 148,459 2018 143,724 2019 47,401

$ 636,502

5. Retirement plan: The Chapter maintains a 403(b) Plan covering employees meeting certain age and service

requirements. Plan expenses were approximately $40,000 and $39,000 for the years ended September 30, 2014 and 2013, respectively.

6. Temporarily restricted net assets: Temporarily restricted net assets are available for the following purposes:

2014 2013 Charitable remainder trusts $ 45,213 $ 122,364Temporarily restricted endowments (Note 8) 335,140 236,552 $ 380,353 $ 358,916

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7. Fair value measurements: The Chapter adopted the provisions of ASC Section 820-10 (formerly known as FASB Statement of

Financial Accounting Standards No. 157, Fair Value Measurements (“FAS 157”) effective October 1, 2008. FAS 157 establishes a fair value hierarchy for the inputs used to measure fair value based on the nature of the data input, which generally range from quoted prices for identical instruments in a principal trading market (Level 1) to estimates determined using related market data (Level 3). Multiple inputs may be used to measure fair value; however, the level of fair value of each financial asset or liability presented below is based on the lower significant input level within this fair value hierarchy.

Fair value measurements based on Level 1 inputs: Measurements that are most observable

are based on quoted prices of identical instruments obtained from the principal markets in which they are traded. Closing prices are both readily available and representative of fair value. Market transactions occur with sufficient frequency and volume to ensure liquidity.

Fair value measurements based on Level 2 inputs: Measurements derived indirectly from

observable inputs or from quoted prices from markets that are less liquid are considered Level 2. Measurements may consider inputs that other market participants would use in valuing a portfolio, quoted market prices for similar securities, interest rates, credit risks, and others.

Fair value measurements based on Level 3 inputs: Measurements that are least observable are

estimated from related market data, determined from sources with little or no market activity for comparable contracts, or are positions with longer durations.

The methods described above may produce a fair value calculation that may not be indicative of net

realizable value or reflective of future fair values. Furthermore, while the Chapter believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date.

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7. Fair value measurements (continued): The following tables set forth the fair values of the Chapter’s financial assets:

September 30, 2014 Total Level 1 Level 2 Level 3 Mutual (equity and commodity)

funds:

Large blend $ 65,847 $ 65,847 Small/mid cap blend 56,634 56,634 Foreign large blend 84,954 84,954 Commodities 10,328 10,328 Total mutual (equity and commodity) funds

217,763

217,763

Mutual (bond) funds: Intermediate-term 27,919 27,919 Short-term government 25,745 25,745 Inflation-protected 12,663 12,663 Total mutual (bond) funds 66,327 66,327 Other investment – annuity 277,475 $ 277,475 Charitable remainder trusts 104,064 $ 104,064 Money market funds 25,513 25,513 Total $ 691,142 $ 309,603 $ 277,475 $ 104,064

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7. Fair value measurements (continued):

September 30, 2013 Total Level 1 Level 2 Level 3 Mutual (equity and commodity) funds:

Large blend $ 236,254 $ 236,254 Small/mid cap blend 222,789 222,789 Foreign large blend 247,255 247,255 Commodities and natural resources

53,502

53,502

Total mutual (equity and commodity) funds

759,800

759,800

Mutual (bond) funds: Intermediate-term 110,974 110,974 Short-term government 109,981 109,981 High yield 83,937 83,937 Inflation-protected 54,570 54,570 Total mutual (bond) funds 359,462 359,462 Other investment – annuity 302,216 $ 302,216 Charitable remainder trusts 168,922 $ 168,922 Money market funds 35,702 35,702 Total $ 1,626,102 $1,154,964 $ 302,216 $ 168,922

The fair value of other investment – annuity is determined based on yields currently available for

comparable securities of issuers with similar credit ratings. Charitable remainder trusts held by others are valued by calculating the present value of the future distributions expected to be received using published life expectancy tables and a discount rate of 6.075% (see Note 9).

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7. Fair value measurements (continued): The table below sets forth a summary of the changes in the Chapter’s Level 3 financial assets for

the years ended September 30, 2014 and 2013.

2014 2013 Fair value, beginning of year $ 168,922 $ 168,922Additions 6,370 Unrealized loss (71,228) Fair value, end of year $ 104,064 $ 168,922

8. Endowment: The Chapter’s endowment consists of all donor-restricted endowment funds established for a

variety of purposes. As required by accounting principles generally accepted in the United States of America, net assets associated with endowment funds are classified and reported based on the existence of absence of donor-imposed restrictions. Management of the Chapter has interpreted the Connecticut Uniform Prudent Management of Institutional Funds Acts (CTUPMIFA) as requiring the preservation of the fair value of the original gift as of the date of the donor-restricted endowment funds absent explicit donor stipulations to the contrary. As a result of this interpretation, the Chapter classified as permanently restricted net assets (1) the original value of the gifts donated to the permanent endowment, (2) the original value of subsequent gifts to the permanent endowment, and (3) 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 these amounts are appropriated for expenditure by the Board in a manner consistent with the standard of prudence prescribed by CTUPMIFA. In accordance with CTUPMIFA, the Chapter 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 general purposes of the organization 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 appreciation of investments 6. Other resources of the Chapter 7. The investment policies of the Chapter

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8. Endowment (continued): Changes in endowment assets for the years ended September 30, 2014 and 2013 follow:

2014

Unrestricted Temporarily

restricted Permanently

restricted

Total Endowment net assets, beginning of year $ - $ 236,552 $ 670,536 $ 907,088Investment income 18,198 18,198Net realized and unrealized appreciation 37,624 37,624Contributions 4,186 160,906 165,092Amounts appropriated for expenditure (136,420) (50,961) (187,381)Transfer 175,000 (175,000) Endowment net assets, end of year $ - $ 335,140 $ 605,481 $ 940,621

During the year ended September 30, 2014, an unrelated party (the developer) agreed to construct a

residential community in Simsbury, CT (the community) for people living with MS. The developer donated naming rights for the community to the Chapter. In September 2014, a donor who had previously made permanently restricted contributions to the Chapter authorized release of $175,000 from permanently restricted net assets for the naming rights. Such amounts are reported as a transfer to temporarily restricted net assets for the year ended September 30, 2014, and will be released to unrestricted net assets when the community is placed in service.

2013

Unrestricted Temporarily

restricted Permanently

restricted

Total Endowment net assets, beginning of year $ - $ 189,135 $ 686,037 $ 875,172Investment income 21,149 21,149Net realized and unrealized appreciation 37,348 37,348Contributions 4,446 33,450 37,896Amounts appropriated for expenditure (15,526) (48,951) (64,477) Endowment net assets, end of year $ - $ 236,552 $ 670,536 $ 907,088

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8. Endowment (continued): Endowment funds classified as temporarily restricted net assets are available for the following

purposes as of September 30:

2014 2013 Susan Hyams Fund (income from this fund is restricted for

local family programs; principal may be spent by joint agreement of the Board of Trustees and the Hyams family)

$ 83,369

$ 73,021

Ray Howell Fund (income from this fund is restricted for local chapter services only; however, the Board of Trustees may decide to spend the fund’s principal in accordance with National’s guidelines)

19,455

50,009

Moeller Endowment Fund (investment income is restricted for local use)

2

71,039

Hayley’s Hope and Michaela’s Miracle MS Memorial Fund (investment income is restricted for family programs, pediatric MS and scholarships)

232,314

42,483

$ 335,140 $ 236,552

Endowment funds classified as permanently restricted net assets are available for the following

purposes as of September 30:

2014 2013 Hayley’s Hope and Michaela’s Miracle MS Memorial Fund

(investment income is restricted for family programs, pediatric MS and scholarships; up to 10% of the principal may be spent in each fiscal year)

$ 505,481

$ 570,536

Moeller Endowment Fund (investment income is restricted for local use)

100,000

100,000

$ 605,481 $ 670,536

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9. Charitable remainder trust and split-interest arrangements: The Chapter is the beneficiary of an irrevocable charitable remainder trust that is held by a third-

party trustee. At the creation of the trust, the beneficial interest was measured at the present value of estimated future cash receipts expected to be received by the Chapter. The fair value of the trust’s assets was used in the determination of the present value of the future receipts. The amortization of the discount and changes in actuarial assumptions are reflected during the term of the trust. The net present value and any changes to the trust are recorded as temporarily restricted net assets. The trust was valued at $97,694 and $168,922 in the accompanying statements of financial position at September 30, 2014 and 2013, respectively. The fair value of the trust’s assets was $232,853 and $235,960 at September 30, 2014 and 2013, respectively. The net change in the value of the aforementioned trust was ($71,228) and $0 for the years ended September 30, 2014 and 2013, respectively, and is included in temporarily restricted legacies received by the Chapter in the accompanying statements of activities.

The Chapter was also the beneficiary of two split-interest agreements with donors held at the

Society, whereby the Society controls and invests the donated assets and shares with the donor or the donor’s designee income generated from these assets until such time as stated in the agreement, usually upon the death of the donor or the donor’s designee. The annuities are valued at their present value based on the life expectancy of the respective annuitant and were valued at ($58,850) and ($46,559), (net of the liability to the annuitant) at September 30, 2014 and 2013, respectively, and are presented as a long-term liability in the accompanying statements of financial position. The net change in the values of the charitable gift annuities held at the Society was ($12,291) and ($12,011) for the years ended September 30, 2014 and 2013, respectively, and is included in temporarily restricted membership and contributions received by the Chapter in the accompanying statements of activities.

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