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National Multiple Sclerosis Society: South Central

Financial Statements and Independent Auditors' Report

for the years ended September 30, 2015 and 2014


Table of Contents

Page

Independent Auditors' Report 1

Financial Statements:

Statements of Financial Position as of September 30, 2015 and 2014 2

Statements of Activities for the years ended September 30, 2015 and 2014 3

Statement of Functional Expenses for the year ended September 30, 2015 5

Statement of Functional Expenses for the year ended September 30, 2014 6

Statements of Cash Flows for the years ended September 30, 2015 and 2014 7

Notes to Financial Statements for the years ended September 30, 2015 and 2014 8

Blazek &Vetterling CERTIFIED PUBLIC ACCOUNTANTS

Independent Auditors' Report

To the Board of Trustees of National Multiple Selerosis Soeiety: South Central:

We have audited the aeeompanying finaneial statements of National Multiple Selerosis Soeiety: South Central, whieh eomprise the statements of finaneial position as of September 30, 2015 and 2014 and the related statements of aetivities, of funetional expenses, and of eash flows for the years then ended, and the related notes to the finaneial statements.

Management's Responsibility for the Financial Statements - Management is responsible for the preparation and fair presentation of these finaneial statements in aeeordanee with aeeounting prineiples generally aeeepted in the United States of Ameriea; this ineludes the design, implementation, and maintenanee of internal eontrol relevant to the preparation and fair presentation of finaneial statements that are free from material misstatement, whether due to fraud or error.

Auditors' Responsibility - Our responsibility is to express an opinion on these finaneial statements based on our audits. We eondueted our audits in aeeordanee with auditing standards generally aeeepted in the United States of Ameriea. Those standards require that we plan and perform our audits to obtain reasonable assuranee about whether the finaneial statements are free from material misstatement.

An audit involves performing proeedures to obtain audit evidenee about the amounts and diselosures in the finaneial statements. The proeedures seleeted depend on the auditors' judgment, ineluding the assessment of the risks of material misstatement of the fmaneial statements, whether due to fraud or error. In making those risk assessments, the auditor eonsiders internal eontrol relevant to the entity's preparation and fair presentation of the finaneial statements in order to design audit proeedures that are appropriate in the eireumstanees, but not for the purpose of expressing an opinion on the effeetiveness of the entity's internal eontrol. Aeeordingly, we express no sueh opinion. An audit also ineludes evaluating the appropriateness of aeeounting polieies used and the reasonableness of signifieant aeeounting estimates made by management, as well as evaluating the overall presentation of the finaneial statements.

We believe that the audit evidenee we have obtained is suffieient and appropriate to provide a basis for our audit opinion.

Opinion - In our opinion, the finaneial statements referred to above present fairly, in all material respeets, the finaneial position of National Multiple Selerosis Soeiety: South Central as of September 30, 2015 and 2014 and the ehanges in its net assets and its eash flows for the years then ended in aeeordanee with aeeounting prineiples generally aeeepted in the United States of Ameriea.

Deeember 30, 2015

2900 Weslayan, Suite 200 Houston, Texas 77027-5132 (713) 439-5757 Fax (713) 439-5758 -1-


Statements of Financial Position as of September 30. 2015 and 2014

ASSETS

See accomvanvins notes to financial statements.

2015 2014

Current assets: Cash and cash equivalents Contributions receivable Prepaid expenses and other assets

Total current assets

Noncurrent assets: Prepaid rent Property and equipment, net Beneficial interest in National Multiple Sclerosis Society's

pooled investments Due from National Multiple Sclerosis Society

Total noncurrent assets

TOTAL ASSETS

4,815,811 1,204,373 260.103

6.280.287

2,162 359,487

4,296,863 21.079

4.679.591

$ 5,398,447 147,656 295.609

5.841.712

1,887 361,549

4,172,188 28.029

4.563.653

S10.959.878 SI 0.405.365

LIABILITIES AND NET ASSETS

Current liabilities: Due to National Multiple Sclerosis Society:

Remittance due to National Due to other chapters

Accounts payable and accrued expenses Deferred revenue

Total current liabilities

Commitments

Net assets: Unrestricted Temporarily restricted Permanently restricted

Total net assets

TOTAL LIABILITIES AND NET ASSETS

53,874 3,559

1,251,684 1.990.691

3.299.808

5,830,519 1,779,551

50.000

7.660.070

42,244 533

1,368,580 2.146.047

3.557.404

6,416,951 381,010 50.000

6.847.961

S10.959.878 SI 0.405.365

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Statements of Activities for the years ended September 30. 2015 and 2014

2015 2014

UNRESTRICTED

TEMPORARILY

RESTRICTED

PERMANENTLY

RESTRICTED UNRESTRICTED

TEMPORARILY

RESTRICTED

PERMANENTLY

RESTRICTED

Revenues: Public support: Received directly:

Special events (includes in-kind donations of $1,091,791 in 2015 and $935,520 in 2014)

Less: Direct benefit to donor costs

Total

Contributions Legacies

Total received directly

Received indirectly: Federated Fund Raising

Organizations

Total received indirectly

Total public support

Other revenues: Investment income (loss) Service program fees Miscellaneous income

Total other revenues

Net assets released from restrictions

Total revenues

$30,507,953

(3.501.245)

27,006,708

1,541,969 $ 125,486 53.716 1.312.167

28.602.393

(211.496)

55.652

1.437.653

16.540

16.540

28.602.393 1.454.193

(227,322) 11,426

4.400

(55-652)

28.446.549 1.398.541

$30,507,953 $29,811,560

(3.501.245) (3.410.382)

27,006,708 26,401,178

1,667,455 1.365.883

1,268,196 106.775

$ 84,915 $ 50,000

30.040.046 27.776.149

16.540 6.620

16.540 6.620

30.056.586 27.782.769

(227,322) 11,426 4.400

(211.496)

25,735 11,320 15.303

52.358

29.845.090 27.994.987

84.915

19.691

19.691

104.606

2,191

2.191

159.860 (159.860)

(53.063)

$29,811,560

(3.410.382)

26,401,178

1,403,111 106.775

50.000 27.911.064

26.311

26.311

50.000 27.937.375

27,926 11,320 15.303

54.549

50.000 27.991.924

(continued)

-3-


(continued)

2015 2014

UNRESTRICTED

TEMPORARILY PERMANENTLY

RESTRICTED RESTRICTED TOTAL UNRESTRICTED

TEMPORARILY

RESTRICTED

PERMANENTLY

RESTRICTED TOTAL

Expenses: Program services:

Research Client programs Public education Community programs Professional education

and training Society activities

8,611,622 4,479,612 3,870,985 3,023,878

910,922

8,611,622 4,479,612 3,870,985 3,023,878

910,922

8,340,438 3,204,684 1,464,438 2,413,686

755,640 4.591.352

8,340,438 3,204,684 1,464,438 2,413,686

755,640 4.591.352

Total program services 20.897.019 20.897.019 20.770.238 20.770.238

Supporting services: Fundraising Management and general

5,355,429 2.780.533

5,355,429 2.780.533

4,682,086 2.301.475

4,682,086 2.301.475

Total supporting services 8.135.962 8.135.962 6.983.561 6.983.561

Total expenses 29.032.981 29.032.981 27.753.799 27.753.799

Changes in net assets (586,432) 1,398,541 812,109 241,188 (53,063) 50,000 238,125

Net assets, beginning of year 6.416.951 381.010 S 50.000 6.847.961 6.175.763 434.073 6.609.836

Net assets, end of year S 5.830.519 S 1.779.551 S 50.000 S 7.660.070 S 6.416.951 S 381.010 S 50.000 S 6.847.961


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Statement of Functional Expenses for the year ended September 30. 2015

PROGRAM SERVICES SUPPORTING SERVICES

Total expenses


Total expenses as reported on the statement of activities

:.611.622

PROFESSIONAL MANAGEMENT TOTAL BENEFIT TO CLIENT PUBLIC COMMUNITY EDUCATION AND PROGRAMS DONOR GRAND

RESEARCH PROGRAMS EDUCATION PROGRAMS AND TRAINING TOTAL FUNDRAISING GENERAL TOTAL AND SUPPORT COSTS TOTAL

Salaries Sl,469,815 X 862,647 Sl,042,717 X 328,287 X 3,703,466 Sl,476,966 Xl,320,298 S2,797,264 X 6,500,730 X 6,500,730 Employee benefits 378,187 221,961 268,294 84,469 952,911 380,027 339,716 719,743 1,672,654 1,672,654 Payroll taxes 128.191 75.236 90.941 28.632 323.000 128.814 115.150 243.964 566.964 566.964

Total salaries and related expenses 1,976,193 1,159,844 1,401,952 441,388 4,979,377 1,985,807 1,775,164 3,760,971 8,740,348 8,740,348

Printing 15,811 76,942 7,788 1,749 102,290 189,405 9,013 198,418 300,708 300,708 Postage and shipping 23,623 39,455 3,450 1,610 68,138 59,647 4,420 64,067 132,205 132,205 Telephone 18,579 10,543 14,051 3,993 47,166 17,966 19,262 37,228 84,394 84,394 Supplies 28,030 10,768 11,590 4,620 55,008 24,743 13,357 38,100 93,108 X 284,919 378,027 Dues and memberships 13,189 2,936 6,726 1,117 23,968 7,588 4,494 12,082 36,050 36,050 Professional and other contract

service fees 400,345 32,382 116,876 10,344 559,947 946,835 63,405 1,010,240 1,570,187 1,570,187 Donated public service announcements

and advertising 452,150 452,150 452,150 452,150 Travel 74,463 14,266 72,998 31,330 193,057 220,836 38,845 259,681 452,738 1,610,642 2,063,380 Meetings 153,869 21,273 20,486 6,698 202,326 75,057 28,186 103,243 305,569 84,946 390,515 Occupancy 165,401 97,075 117,339 36,943 416,758 229,402 148,576 377,978 794,736 390,685 1,185,421 Fumiture and equipment 31,796 18,661 22,556 7,102 80,115 32,636 28,561 61,197 141,312 141,312 Insurance 15,570 15,570 15,570 15,570 Funding of other organizations that

support individuals with MS 601,929 601,929 601,929 601,929 Direct financial assistance 396,325 396,325 396,325 396,325 Prizes and promotional items 16,448 751 5,175 397 22,771 22,691 18,881 41,572 64,343 570,207 634,550 Miscellaneous expense 16,164 8,502 10,944 3,236 38,846 870,102 13,108 883,210 922,056 559,846 1,481,902 Depreciation and amortization 27,762 16,294 19,695 6,201 69,952 27,897 24,938 52,835 122,787 122,787 Restricted contributions to Society

research investment ; 112 000 000 2 000 000 2 000 000 2 000 000

Total expenses before Chapter support of Society initiatives 2,000,000 3,357,998 1,509,692 2,433,555 556,728 9,857,973 5,178,332 2,190,210 7,368,542 17,226,515 3,501,245 20,727,760

Chapter support of Society initiatives 6.611.622 1.121.614 2.361.293 590.323 354.194 11.039.046 177.097 590.323 767.420 11.806.466 11.806.466

.479.612 870.98.-^ X^.02^.878 910.922 X20.897.019 .^.'^.'^.429 X2.780..'^^^ .1^.-^.962 X29.0^2.981 X^..'^01.24.*^ 32,534,226

t3.501.245')

X29.032.981

See accompanvine notes to financial statements.

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Statement of Functional Expenses for the year ended September 30. 2014

PROGRAM SERVICES SUPPORTING SERVICES PROFESSIONAL MANAGEMENT

CLIENT PUBLIC COMMUNITY EDUCATION SOCIETY AND PROGRAMS DONOR GRAND RESEARCH PROGRAMS EDUCATION PROGRAMS AND TRAINING INITIATIVES TOTAL FUNDRAISING GENERAL TOTAL AND SUPPORT COSTS TOTAL

Salaries $1,399,884 $ 842,639 $ 990,107 $ 330,594 $ 3,563,224 $1,505,762 $1,379,121 $2,884,883 $ 6,448,107 $ 6,448,107 Employee benefits 363,485 218,794 257,085 85,840 925,204 390,977 358,094 749,071 1,674,275 1,674,275 Payroll taxes 113.839 68.524 80.516 26.884 289.763 122.449 112.151 234.600 524.363 524.363

Total salaries and related expenses 1,877,208 1,129,957 1,327,708 443,318 4,778,191 2,019,188 1,849,366 3,868,554 8,646,745 8,646,745

Printing 17,821 71,243 9,659 3,049 101,772 154,775 11,375 166,150 267,922 267,922 Postage and shipping 24,733 38,644 4,784 1,981 70,142 59,570 5,554 65,124 135,266 135,266 Telephone 18,264 10,567 13,954 4,116 46,901 18,749 18,821 37,570 84,471 84,471 Supplies 22,943 12,467 10,860 4,045 50,315 29,550 13,832 43,382 93,697 $ 304,886 398,583 Dues and memberships 5,706 4,596 4,687 1,245 16,234 8,138 5,193 13,331 29,565 29,565 Professional and other contract

service fees 406,322 22,876 85,495 10,350 525,043 576,454 68,617 645,071 1,170,114 1,170,114 Donated public service announcements

and advertising 255,000 255,000 255,000 255,000 Travel 70,054 16,198 58,825 19,882 164,959 202,262 32,657 234,919 399,878 1,539,857 1,939,735 Meetings 126,870 14,519 20,069 11,400 172,858 216,075 31,177 247,252 420,110 69,989 490,099 Occupancy 169,184 101,838 119,660 39,954 430,636 218,364 166,675 385,039 815,675 357,394 1,173,069 Fumiture and equipment 20,854 12,553 14,750 4,925 53,082 24,298 20,545 44,843 97,925 97,925 Funding of other organizations that

support individuals with MS 704,600 704,600 704,600 704,600 Direct financial assistance 386,979 386,979 386,979 386,979 Prizes and promotional items 12,944 2,667 7,133 201,046 223,790 30,380 34,011 64,391 288,181 488,089 776,270 Miscellaneous expense 18,552 10,512 12,936 4,130 46,130 841,047 17,791 858,838 904,968 650,167 1,555,135 Depreciation and amortization 26,250 15,801 18,566 6,199 66,816 28,236 25,861 54,097 120,913 120,913 Restricted contributions to Society

research investment $2,000,000 2,000,000 2,000,000 2,000,000 Chapter support of Society research

investment 6.340.438 6.340.438 6.340.438 6.340.438

Total expenses before Chapter support of Society initiatives 8,340,438 3,204,684 1,464,438 2,413,686 755,640 16,178,886 4,682,086 2,301,475 6,983,561 23,162,447 3,410,382 26,572,829

Chapter support of Society initiatives $4,591,352 4.591.352 4.591.352 4.591.352

Total expenses $8 340 438 $3 704 684 $1 464 438 $7413 686 $ 755 640 $4 591 357 $70 770 738 $4 687 086 $7 301 475 $6 983 561 $77 753 799 $3 410 387 31,164,181


Total expenses as reported on the statement of activities

t3.410.382')

5;27.733.799

See accompanvine notes to financial statements.

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Statements of Cash Flows for the years ended September 30. 2015 and 2014

CASH FLOWS FROM OPERATING ACHVIHES:

Changes in net assets Adjustments to reconcile changes in net assets to net cash provided (used) by operating activities:

Depreciation and amortization Permanently restricted contributions Loss on disposal of property and equipment Due from National Multiple Sclerosis Society Net unrealized (gain) loss on investments Changes in operating assets and liabilities:

Contributions receivable Contributions receivable from National Prepaid expenses and other assets Prepaid rent Due to National and/or other chapters Due from other chapters Accounts payable and accrued expenses Deferred revenue

Net cash provided (used) by operating activities

CASH FLOWS FROM INVESTING ACTIVITIES:

Purchases of investments Proceeds from sale of investments Purchases of property and equipment Redemption of certificates of deposit

Net cash used by investing activities

CASH FLOWS FROM FINANCING ACTIVITIES:

Permanently restricted contributions

NET CHANGE IN CASH AND CASH EQUIVALENTS

Cash and cash equivalents, beginning of year

Cash and cash equivalents, end of year


2015 2014

$ 812,109 $ 238,125

122,787 120,913 (50,000)

2,968 6,950 311

332,824 (10,109)

(1,056,717) (39,642) 3,049

35,506 350,093 (275) 3,013

14,656 (131,146) 605

(116,896) 63,133 tl55.356) 335.758

(1.444) 884.103

(1,793,689) (4,162,079) 1,336,190 (123,693) (46,280)

56.356

(5nA92) (4A52.003)

50.000

(582,636) (3,217,900)

5.398.447 8.616.347

S 4.815.811 S 5.398.447

-7-


Notes to Financial Statements for the years ended September 30. 2015 and 2014

1. Organization and Significant Accounting Policies

Organization

The National Multiple Sclerosis Society (the "Society") is a not-for-profit voluntary health and welfare agency that mobilizes people and resources to drive research for a cure and to address the challenges of everyone affected by MS through a 50-state network of chapters. The South Central Chapter (the "Chapter") raises funds in Arkansas, Louisiana, Oklahoma, New Mexico and Texas 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 which are fully available, at the discretion of management and the Board of Trustees, for the Chapter to utilize in any of its program or supporting services.

• Temporarily Restricted Net Assets: Temporarily restricted net assets are comprised of funds that are restricted by donors for specific periods or 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 expend all or part of the income derived from the donated assets.

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.

Revenue Recognition and Deferred Revenue

Contributions are recognized as revenue at fair value when an unconditional commitment is received from the donor. 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.

Concentration of Credit Risk

Bank deposits exceed the federally insured limit per depositor per institution.

Cash and Cash Equivalents

The Chapter considers highly liquid investments with original maturities of three months or less to be cash equivalents. At September 30, 2015 and 2014, the Chapter's cash and cash equivalents were held by four institutions. Cash and cash equivalents consist of the following:

2015 2014

Demand deposits $ 171,842 $ 246,466 Money market mutual funds 4.643.969 5.151.981

Total cash and cash equivalents S 4.815.811 S 5.398.447

Contributions Receivable

Contributions receivable that are expected to be collected within one year are recorded at net realizable value. Amounts expected to be collected in future years, if material, are discounted to estimate the present value of future cash flows. At September 30, 2015, all pledges are expected to be collected within one year. An allowance for uncollectible amounts is estimated based upon management's analysis on an account-by-account basis. It is possible that management's estimate regarding the collectability of these balances will change in the near term resulting in a change in the carrying value of contributions receivable. At September 30, 2015, the Chapter believes contributions receivable are fully collectible, and accordingly, no allowance has been provided. Included in contributions receivable is a bequest from one donor representing 80% of contributions receivable.

Property and Equipment

Property and equipment are recorded at cost. Depreciation and amortization are provided on the straight-line basis over the estimated useful lives of the assets or the terms of the lease, as appropriate. Expenditures for maintenance and repairs are charged to operations as incurred. The Chapter capitalizes all property and equipment purchases that exceed $1,000 with useful lives in excess of one year.

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, the 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.

Change in Estimate

During the year ended September 30, 2015, the Society modified its approach for determining the estimated functional allocation of Chapter Support of Society Initiatives (also referred to as National Programs Expense), based on recent analysis of the current activities that the expense funds. As a result, the fiscal 2015 amount of Chapter Support of Society Initiatives is allocated among all of the functional categories in the accompanying statement of functional expenses, including a 6.5% allocation to supporting services. In fiscal 2014, the expense was allocated between research and Society activities.

Donated Goods and Services

Donated goods and services, including public service announcements and donated advertising, used by the Chapter in programs, special events, and supporting services are reflected as in-kind contributions and expensed in the accompanying financial statements at their estimated fair value at the date of receipt. The value of donated goods and services recorded by the Chapter are as follows:

2015 2014

Donated goods $ 395,460 $ 360,689 Donated services 696.331 574.830

Total S 1.091.791 S 935.519

Public service announcements and donated advertising received in fiscal 2015 and 2014 totaled approximately $452,000 and $255,000, respectively, and are reflected above as contributions and as fundraising expense in the accompanying statement of activities.

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 generally accepted accounting principles.

Chapter Support of Society Initiatives (National Programs Expense)

The National Programs Expense (NPE) is an allocation to chapters that funds a large portion of the Society's budget in areas such as nationwide programs, services, centralized functions and the Society's research investments, as well as investments in the Society's unified plan. The Society's budget is determined through an inclusive budget planning process. The Budget Development Advisory Committee provides consensus advice to the Chief Executive Officer and is comprised of members of the Senior Leadership Team, members of the National Board of Directors and regional volunteer liaisons responsible for communicating with volunteer leadership in each region.

Revenue Tiers with progressively higher percentages are used to determine the NPE allocation amounts. 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. In fiscal 2015 and 2014, the Chapter's NPE was calculated to be $11,806,466 and $10,931,790, respectively. These amounts are reported as Chapter Support of Society Initiatives in the accompanying statement of functional expenses.

In addition to the fixed amount of NPE, the Chapter made an additional investment in the Society's research initiatives in the amount of $2,000,000 in 2015 and $2,000,000 in 2014. This amount is reported as a Research Expense in the accompanying statement of activities.

Advertising Costs

Advertising costs are expensed as incurred. Advertising expense was $646,221 and $283,332 in 2015 and 2014, respectively, including donated advertising of $452,150 in 2015 and $255,000 in 2014.

- 10-

2. Income Taxes

The Chapter qualifies as a charitable organization as defined by Internal Revenue Code §501(c)(3), and, accordingly, it is exempt from federal income taxes under Internal Revenue Code §501(a). The Chapter is also exempt from Texas, New Mexico and Oklahoma states' sales taxes and Texas, Arkansas, Louisiana, Oklahoma and New Mexico income and/or franchise taxes.

Management analyzed the tax positions taken by the Chapter and concluded that, as of September 30, 2015, there were no uncertain tax positions taken or are expected to be taken. Accordingly, no interest or penalties related to uncertain tax positions have been accrued in the accompanying financial statements.

The Chapter is subject to audits by taxing jurisdictions; however, no audit for any tax period is currently in progress. Management believes that the Chapter is no longer subject to such audits for years ended on or prior to September 30, 2012 under federal and Texas, Arkansas, Louisiana, Oklahoma and New Mexico states tax jurisdictions.

3. Fair Value Measurements

Generally accepted accounting principles 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 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 are derived indirectly from observable inputs or from quoted prices from markets that are less liquid. 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 2 inputs 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, 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.

-11 -

The following tables provide the fair value hierarchy of the Chapter's financial assets:

September 30, 2015:

FINANCIAL ASSETS

Money market mutual funds* Beneficial interest in the Society's

pooled investments

Total

September 30, 2014:

FINANCIAL ASSETS

Money market mutual funds* Beneficial interest in the Society's

pooled investments

Total

LEVEL 1

$ 4,643,969

LEVEL 2

S 4.643.969 £

LEVEL 1

$ 5,151,981

LEVEL 2

LEVEL 3

$ 4.296.863

S 4.296.863

LEVEL 3

$ 4.172.188

S 4.172.188

$ 4,643,969

4.296.863

S 8.940.832

$ 5,151,981

4.172.188

S 9.324.169 S 5.151.981 I Q

• Included in cash and cash equivalents in the accompanying statement of financial position.

Valuation methods for assets measured at fair value are as follows:

• Money market mutual funds are valued at the reported net asset value. • Beneficial interest in the Society's pooled investments are valued as using information provided by

the Society based on the fair value of the underlying investments. Even though most of the underlying assets are readily marketable based on quoted fair market values, the beneficial interest in the fund is classified as Level 3 because the Chapter's beneficial interest in the fund cannot be priced on an active exchange.

Changes in the fair value of Level 3 assets consist of the following:

Balance at September 30, 2013 Purchases Realized and unrealized gain

Balance at September 30, 2014 Purchases Sales Realized and unrealized loss

Balance at September 30, 2015

$ 0 4,162,079

10.109

4,172,188 1,793,689

(1,336,190) (332.824)

S 4.296.863

4. Interest in Pooled Investment Fund

The Chapter holds a share of the overall portfolio of the Society's pooled investment fund rather than in the individual financial instruments. The Chapter's share of the Society's pooled investment fund totaled $4,247,814 in 2015 and $4,122,188 in 2014, which represents 6% and 9% in 2015 and 2014, respectively, of the total pooled investment fund. The Chapter's share of the Society's pooled endowment fund totaled $49,049 in 2015 and $50,000 in 2014, which represents 1% of the total pooled endowment fund in both 2015 and 2014.

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At September 30, 2015, the total pooled portfolio was invested as follows:

Equity securities 55% Cash and money market mutual funds 45%

Total 100%

Investment return includes earnings on cash and cash equivalents and consists of the following:

2015 2014

Interest and dividends $ 123,014 $ 22,050 Net realized and unrealized gain (loss) on investments (332,824) 10,109 Administrative fees (17.512) (4.233)

Investment return, net S (227.322) S 27.926

5. Property and Equipment

Property and equipment consists of the following: 2015 2014

Computer hardware and purchased software $ 251,900 $ 389,811 Furniture and fixtures 94,797 253,478 Equipment 469,109 481,724 Leasehold improvements 784.662 703.743

Total 1,600,468 1,828,756 Less: Accumulated depreciation and amortization (1.240.981) (1.467.207)

Property and equipment, net S 359.487 S 361.549

6. Operating Leases

The Chapter generally recognizes rent expense based on the straight-line method over the respective terms of the leases and has recorded an accrued rent liability of approximately $45,000 and $32,000 at September 30, 2015 and 2014, respectively.

Office rent expense for the years ended September 30, 2015 and 2014 was approximately $649,000 and $668,000, respectively.

The future minimum annual rental commitments under non-cancellable lease agreements at September 30, are as follows:

2016 $ 554,646 2017 531,391 2018 413,467 2019 418,734 2020 360,375 Thereafter 108.664

Total $ 2.387.277

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7. Pension Plan

The Chapter participates in the Society's noncontributory Defined Contribution Retirement Plan ("the Plan"), which covers substantially all of the Chapter's employees based on defined eligibility for covered employees. Temporary employees and independent contractors are not eligible. Employees become eligible on the first day of the first month after beginning employment and all covered employees receive a contribution on September 30 of each year. Employees are fully vested at the end of five years. The contribution rate for the years ended September 30, 2015 and 2014, as determined by the Society's President and Chief Executive Officer was 3% of gross annual salary. In accordance with the Plan's provisions, contributions required in any given year are first offset by forfeitures of unvested Chapter contributions for terminated participants. Pension expense related to the Plan for the years ended September 30, 2015 and 2014 was $131,298 and $165,735, respectively.

8. Temporarily Restricted Net Assets

Temporarily restricted net assets are available for the following:

2015 2014

Program restricted:

North Texas Programs $ 1,312,167 Client programs 359,696 $ 296,844 Community programs 85.591 64.475

Total program restricted 1,757,454 361,319

Time restricted:

United Way - Tarrant County 22.097 19.691

Total $ 1.779.551 $ 381.010

Temporarily restricted net assets released from restrictions for the year ended September 30, 2015 are as follows:

Program restricted:

Client programs $ 25,634 Community programs 15.884

Total program restricted 41,518

Time restricted:

United Way - Tarrant County 14.134

Total $ 55.652

9. Endowments

The Chapter's endowment consists of funds established for scholarships.

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Interpretation of Relevant Law

The Chapter has interpreted the State of Texas Uniform Prudent Management of Institutional Funds Act ("TUPMIFA") 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 Chapter classifies as permanently restricted net assets (1) the original value of 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 characterized as temporarily restricted net assets until those amounts are appropriated for expenditure by the Chapter in a manner consistent with the standard for expenditure prescribed by TUPMIFA. In accordance with TUPMIFA, the Chapter considers the following factors in making a determination to appropriate or calculate donor-restricted endowment funds:

1. The duration and preservation of the fund 2. The general purposes of the Chapter 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

The changes in endowment net assets for the years ended September 30, 2015 and 2014 are as follows:

Endowment net assets, October 1, 2013

Investment return: Investment income Net realized and unrealized gain

Total investment return

Contributions

Endowment net assets, September 30, 2014

Investment return: Investment income Net realized and unrealized loss

Total investment return

TEMPORARILY PERMANENTLY

UNRESTRICTED RESTRICTED RESTRICTED TOTAL

$ 0 $ 0 $ 0 $ 0

798 798 1.393 1.393

0 2,191 0 2,191

50.000 50.000

0 2.191 50.000 52.191

816 816 (951) t3.007^ (3.958)

(951) (2.191) 0 (3.142)

S (951) S 0 S 50.000 S 49.049

Funds with Deficiencies

From time to time, the fair value of assets associated with individual donor-restricted endowment funds may fall below the level that the donor or TUPMIFA requires the Chapter to retain the fund as a fund of perpetual duration. These deficiencies resulted from unfavorable market fluctuations and from continued appropriation for expenditure. In accordance with generally accepted accounting principles, deficiencies of this nature are reported in unrestricted net assets.

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Return Objectives and Risk Parameters

The Chapter's endowment fund consists of assets that must be held in perpetuity or for specified time periods stipulated by the donors. The Chapter maintains investment and spending policies for its endowment assets aimed at providing predictable and steady support for the Society's research, programmatic and administrative activities. Under this policy, the endowment assets are invested in a manner intended to preserve their value consistent with such donor stipulations, minimize the effect of high economic volatility and/or low investment return and provide funding for the programs specified by the donors.

Endowment Investment Spending Policy

For all endowment funds that have a value greater than their original gift, the spending rate (stated as a percentage) will be reviewed by the Investment Committee of the Society's Board of Directors and established on an annual basis. The annual spending rate on endowed funds held by the Chapter may range from a minimum of 0% to a maximum of 7%. The Investment Committee will inform the Chief Financial Officer of the spending rate which will be incorporated into the budget review and approval process.

In establishing the spending rate, the Investment Committee shall rely on the three-year rolling average market value (12 quarters) of the endowment fund assets calculated as of six-months prior to the fiscal year commencement date.

10. Charitable Gift Annuities

The Chapter is the beneficiary of a number of charitable gift annuities or split-interest agreements with donors, whereby the Society's home office 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 year-end values of the Chapter's split-interest agreements for 2015 and 2014 were $21,079 and $28,029, respectively. Income derived from changes in value of the agreements for 2015 and 2014 was $(311) and $(311), respectively.

11. Subsequent Events

The Chapter has evaluated subsequent events through December 30, 2015, the date the financial statements were approved for issuance. There were no subsequent events that are required to be recognized or disclosed in the accompanying financial statements.

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Name)

Statement C

Schedule of Compensation, Benefits and Other Payments to Agency Head or Chief Executive Officer (REQUIRED, PLEASE SUBMIT COMPLETED FORM, PER ATTACHED INSTRUCTIONS)

Agency Head Name/Title:

Purpose Amount Salary Benefits-insurance Be nef its-reti re ment Benefits-other (describe) Benefits-other (describe) Benefits-other (describe) Car allowance Vehicle provided by government (enter amount reported on W-2) Per diem Reimbursements Travel Registration fees Conference travel Housing Unvouchered expenses (example: travel advances, etc.) Special meals Other

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