Better Government Association, Inc. Financial Statements Years Ended December 31, 2014 and 2013 The report accompanying these financial statements was issued The report accompanying these financial statements was issued byby BDO USA, LLP, a Delaware limited liability partnership and the U.S. member BDO USA, LLP, a Delaware limited liability partnership and the U.S. member ofof BDO International Limited, a UK company limited guarantee. BDO International Limited, a UK company limited byby guarantee Better Government Association, Inc. Financial Statements Years Ended December 31, 2014 and 2013 Better Government Association, Inc. Contents Independent Auditor’s Report 3-4 Financial Statements Statements of Financial Position as of December 31, 2014 and 2013 5-6 Statements of Activities for the Years Ended December 31, 2014 and 2013 7-8 Statements of Functional Expenses for the Years Ended December 31, 2014 and 2013 Statements of Cash Flows for the Years Ended December 31, 2014 and 2013 Notes to Financial Statements 9-10 11 12-21 2 Tel: 847-824-4000 Fax: 847-824-4012 www.bdo.com 1665 Elk Blvd. Des Plaines, IL 60016 Independent Auditor’s Report Board of Directors Better Government Association, Inc. Chicago, Illinois We have audited the accompanying financial statements of Better Government Association, Inc. (an Illinois nonprofit corporation), which comprise the statement of financial position as of December 31, 2014, and the related statements of activities, functional expenses, and cash flows for the year then ended, and the related notes to the financial statements. Management’s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor’s Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the 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. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. BDO USA, LLP, a Delaware limited liability partnership, is the U.S. member of BDO International Limited, a UK company limited by guarantee, and forms part of the international BDO network of independent member firms. BDO is the brand name for the BDO network and for each of the BDO Member Firms. 3 Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Better Government Association, Inc. as of December 31, 2014, and the changes in its net assets and its cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America. Other Matter The 2013 financial statements of Better Government Association, Inc. were audited by SS&G, Inc. whose directors and professional staff joined BDO USA, LLP as of January 1, 2015, and has subsequently ceased operations. SS&G, Inc.’s report dated June 10, 2014 expressed an unmodified opinion on those statements. July 1, 2015 4 Financial Statements Better Government Association, Inc. Statements of Finanical Position December 31, 2014 2013 Assets Current Assets Cash and cash equivalents Accounts receivable Investments Pledges receivable Prepaid expenses $ Total Current Assets 707,261 5,400 1,473,581 251,000 15,382 $ 1,182,109 808,524 230,355 24,288 2,452,624 2,245,276 Property and Equipments, net Computers Furniture and equipment Leasehold improvements 31,402 20,350 4,995 28,768 26,196 2,949 Net Property and Equipment 56,747 57,913 6,391 162,322 6,391 14,000 20,000 20,391 188,713 Other Assets Long term pledges receivable, net of discount of $0 and $2,678 at December 31, 2014 and 2013, respectively Security deposit Website, net of amortization of $134,555 and $128,555 in 2014 and 2013, respectively $ 5 2,529,762 $ 2,491,902 Better Government Association, Inc. Statements of Finanical Position December 31, 2014 2013 Liabilities and Net Assets Current Liabilities Accounts payable Accrued liabilities Deferred rent $ 61,859 22,551 22,070 $ 16,845 16,110 28,588 Total Current Liabilities 106,480 61,543 Total Liabilities 106,480 61,543 Net Assets Unrestricted Temporarily restricted 2,081,533 341,749 1,989,544 440,815 Total Net Assets 2,423,282 2,430,359 $ 2,529,762 $ 2,491,902 See accompanying independent auditor's report and notes to the financial statements. 6 Better Government Association, Inc. Statement of Activities 2014 Year ended December 31, Temporarily Restricted Unrestricted Revenues, Gains, and Other Support Public support: Contributions Contribution in-kind Special events revenue Total public support $ 827,347 470,301 1,402,877 2,700,525 $ 138,778 138,778 Total $ 966,125 470,301 1,402,877 2,839,303 Other revenues: Miscellaneous Total other revenues 35,601 35,601 - 35,601 35,601 Investment income: Interest and dividends Realized gain on investments Unrealized gain on investments Total investment income 13,398 4,315 73,054 90,767 - 13,398 4,315 73,054 90,767 Total revenues 2,826,893 138,778 2,965,671 237,844 (237,844) Total Revenues, Gains, and Other Support 3,064,737 (99,066) Operating Expenses Program Management and general Fundraising 2,167,912 373,065 431,771 - 2,167,912 373,065 431,771 Total Operating Expenses 2,972,748 - 2,972,748 Released from restrictions Change in Net Assets 91,989 Net Assets, beginning of year Net Assets, end of year 2,081,533 2,965,671 (99,066) 1,989,544 $ - (7,077) 440,815 $ 341,749 2,430,359 $ 2,423,282 See accompanying independent auditor's report and notes to the financial statements. 7 Better Government Association, Inc. Statement of Activities Year ended December 31, 2013 Temporarily Restricted Unrestricted Revenues, Gains, and Other Support Public support: Contributions Contribution in-kind Special events revenue Total public support $ 1,556,013 550,134 996,428 3,102,575 $ 432,677 432,677 Total $ 1,988,690 550,134 996,428 3,535,252 Other revenues: Miscellaneous Total other revenues Investment income: Interest and dividends Realized gain on investments Unrealized gain on investments Total investment income Total Revenues 10,600 - 10,600 10,600 - 10,600 8,109 402 735 9,246 - 8,109 402 735 9,246 3,122,421 Released from restrictions 432,677 300,000 3,555,098 (300,000) - Total Revenues, Gains, and Other Support 3,422,421 Operating Expenses Program Management and general Fundraising 2,055,439 326,621 421,263 - 2,055,439 326,621 421,263 Total Operating Expenses 2,803,323 - 2,803,323 Change in Net Assets Net Assets, beginning of year Net Assets, end of year $ 132,677 3,555,098 619,098 132,677 751,775 1,370,446 308,138 1,678,584 1,989,544 $ 440,815 $ 2,430,359 See accompanying independent auditor's report and notes to the financial statements. 8 Better Government Association, Inc. Statement of Functional Expenses 2014 Year ended December 31, PROGRAM Policies Advocate Investigative SUPPORT Citizen Watchdog Civic Engagement Total Management and General Fundraising Total Organization Total Salaries and wages Employee benefits Payroll taxes Accounting Conference and meetings Depreciation and amortization Dues and subscriptions Equipment rental Fundraising Insurance Investigative Legal Marketing Postage Policy and government affairs Rent Event expenses Strategic plan Supplies Telephone Training and development Travel Utilities Watchdog training unit Website $ 582,458 88,507 51,397 28,000 1,437 8,152 4,634 7,814 29,049 256,748 151,534 417 37,896 10,100 9,811 1,268 3 2,862 45,600 $ 197,569 30,395 13,356 10,922 560 3,637 2,437 3,048 11,331 59,106 155 52,354 14,782 4,444 3,827 85 162 1,117 28,758 $ 32,549 6,784 3,424 1,584 81 1,169 60 442 1,644 8,575 23 2,145 5,298 572 555 12 23 162 59,843 19,551 $ 122,744 20,823 9,504 5,603 288 2,231 1,992 1,563 5,813 30,323 23,695 80 7,583 2,271 7,250 1,751 83 573 23,514 $ 935,320 146,509 77,681 46,109 2,366 15,189 9,123 12,867 47,837 256,748 249,538 23,695 675 52,354 62,406 5,298 17,387 21,443 3,116 271 4,714 59,843 117,423 $ 157,295 65,991 12,597 8,728 448 2,308 262 2,436 9,056 47,237 124 11,813 37,610 3,148 3,058 26 540 892 9,496 $ 96,144 14,139 8,991 4,258 219 1,726 504 1,188 9,586 4,417 23,043 9,777 60 5,763 228,248 1,894 2,531 18 63 435 18,767 $ 253,439 80,130 21,588 12,986 667 4,034 766 3,624 9,586 13,473 70,280 9,777 184 17,576 228,248 37,610 5,042 5,589 44 603 1,327 28,263 $ 1,188,759 226,639 99,269 59,095 3,033 19,223 9,889 16,491 9,586 61,310 256,748 319,818 33,472 859 52,354 79,982 233,546 37,610 22,429 27,032 3,160 874 6,041 59,843 145,686 Total functional expenses $ 1,317,687 $ 438,045 $ 144,496 $ 267,684 $ 2,167,912 $ 373,065 $ 431,771 $ 804,836 $ 2,972,748 See accompanying independent auditor's report and notes to the financial statements. 9 Better Government Association, Inc. Statements of Functional Expenses 2013 Year ended December 31, PROGRAM Policies Advocate Investigative SUPPORT Citizen Watchdog Civic Engagement Management and General Total Fundraising Total Organization Total Salaries and wages Employee benefits Payroll taxes Accounting Conference and meetings Depreciation and amortization Dues and subscriptions Equipment rental Fundraising Insurance Investigative Legal Marketing Postage Policy and governement affairs Rent Event expenses Supplies Telephone Training and development Travel Utilities Watchdog training unit Website $ 587,783 97,907 45,212 29,974 1,311 8,363 3,524 12,871 40,598 253,133 171,373 841 36,722 11,431 9,680 1,629 84 2,410 49,020 $ 100,692 21,320 9,845 8,519 373 2,914 3,235 3,658 11,539 48,708 232 70,458 10,437 3,249 2,751 466 950 685 26,925 $ 26,285 8,318 3,841 2,037 89 1,268 136 875 2,760 11,649 56 2,496 777 658 261 57 164 3,565 20,250 $ 117,071 17,441 8,054 4,388 192 1,864 3,192 1,884 5,943 25,086 54,080 120 5,375 1,673 7,747 1,743 199 353 22,670 $ 831,831 144,986 66,952 44,918 1,965 14,409 10,087 19,288 60,840 253,133 256,816 54,080 1,249 70,458 55,030 17,130 20,836 4,099 1,290 3,612 3,565 118,865 $ 148,431 45,804 21,153 9,173 401 2,330 605 3,939 12,425 52,446 250 11,238 3,495 2,962 106 1,093 738 10,032 $ 91,944 12,780 5,901 2,767 121 1,303 916 1,188 27,711 3,748 15,821 76 3,390 227,660 1,304 1,079 3,253 799 223 19,279 $ 240,375 58,584 27,054 11,940 522 3,633 1,521 5,127 27,711 16,173 68,267 326 14,628 227,660 4,799 4,041 3,359 1,892 961 29,311 $ 1,072,206 203,570 94,006 56,858 2,487 18,042 11,608 24,415 27,711 77,013 253,133 325,083 54,080 1,575 70,458 69,658 227,660 21,929 24,877 7,458 3,182 4,573 3,565 148,176 Total functional expenses $ 1,363,866 $ 326,956 $ 85,542 $ 279,075 $ 2,055,439 $ 326,621 $ 421,263 $ 747,884 $ 2,803,323 See accompanying independent auditor's report and notes to the financial statements. 10 Better Government Association, Inc. Statements of Cash Flows Year ended December 31, 2014 Operating Activities Change in net assets $ Adjustments to reconcile change in net assets to net cash from operating activities: Depreciation and amortization Deferred rent Realized gain on sale of investments Unrealized gain on investments Changes in operating assets and liabilities: Accounts receivable Pledges receivable Prepaid expenses Accounts payable Accrued liabilities Net cash from operating activities Investing Activities Purchases of property and equipment Purchases of investments Proceeds on sale of investments (7,077) 2013 $ 751,775 19,223 (6,518) (4,315) (73,054) 18,042 (2,640) (402) (735) (5,400) 141,677 8,906 45,014 6,441 (92,677) 26,899 6,834 (12,777) 124,897 694,319 (12,057) (1,470,605) 882,917 (1,527) (807,562) 21,661 Net cash for investing activities (599,745) (787,428) Net decrease in cash (474,848) (93,109) Cash, beginning of year 1,182,109 Cash, end of year $ 707,261 1,275,218 $ 1,182,109 See accompanying independent auditor's report and notes to the financial statements. 11 Better Government Association, Inc. Notes to Financial Statements 1. Summary of Significant Accounting Policies Nature of Activities Better Government Association, Inc. (the Organization) works to fight waste, corruption and inefficiency in government by using investigative journalism techniques, litigation, and public policy studies to expose problems, inform citizens about the operations of their government and lay the groundwork for substantive legislative and administrative reforms. Basis of Presentation The accompanying financial statements are prepared in accordance with accounting principles generally accepted in the United States of America as recommended in the American Institute of Certified Public Accountants’ Audit and Accounting Guide for Not-for-Profit Organizations. The net assets of the Organization are classified as follows: Unrestricted, which represents the portion of expendable net assets that are available for operations. Temporarily Restricted, which represents the portion of net assets that were restricted due to a time restraint or for a specific use and available for expenditure when needed for those respective purposes. Upon satisfaction of the restriction, a reclassification is made to unrestricted net assets. Cash and Cash Equivalents Money market funds maintained in investment accounts are included with investments. Money market funds used for operations and maintained at the Organization’s banking institution are included in cash and cash equivalents. Use of Estimates The process of preparing financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Investments Investments in marketable securities, bonds, exchange traded funds and mutual funds are reported at fair value based upon market quotations. Investments in certificates of deposit are reported at cost plus interest accrued which approximates market value. Donated investments are reflected as contributions at their fair values at date of receipt and totaled approximately $58,161 and $277 for the years ended December 31, 2014 and 2013, respectively. In accordance with the See accompanying independent auditor’s report. 12 Better Government Association, Inc. Notes to Financial Statements Codification, stock contributions of $58,161 were immediately converted to cash and have been included in cash from operating activities in the statement of cash flows. Realized and unrealized gains and losses are included in the accompanying statements of activities. Money market accounts that are held in a portfolio at the same institution as other investments are classified as investments. Allowance for Doubtful Accounts The Organization recognizes an allowance for losses on accounts receivable and pledges receivable in an amount equal to the estimated probable losses net of recoveries. The allowance is based on an analysis of historical bad debt experience, current receivables aging, and expected future write-offs, as well as an assessment of specific identifiable customer accounts considered at risk or uncollectible. The expense associated with the allowance for doubtful accounts is recognized as program expense. As of December 31, 2014 and 2013, management has determined that no allowance for doubtful accounts is deemed necessary. Property and Equipment Property and equipment are carried at cost if purchased or fair value if contributed. Depreciation is computed on the straight-line method over 3-10 years for computers, 5-10 years for furniture and equipment, and 5 years for leasehold improvements. The Organization follows the practice of capitalizing all expenditures for fixed assets in excess of $500. Maintenance and repairs are expensed as incurred. When property and equipment are retired or otherwise disposed of, the costs and related accumulated depreciation are removed from the respective accounts and any gain or loss on disposition is credited or charged to operations. Other Assets The Organization incurred $157,447 of computer software and website development costs in previous years. Under ASC 350, Intangibles – Goodwill and Other, these costs are able to be recognized as an intangible asset, and are being amortized using the straight-line method over 5 years. Amortization expense was $6,000 and $6,276 for the years ended December 31, 2014 and 2013. Amortization expense for the next three years is expected to be as follows: Year ended December 31, 2015 2016 2017 $6,000 5,500 2,500 14,000 See accompanying independent auditor’s report. 13 Better Government Association, Inc. Notes to Financial Statements Deferred Rent Rent expense on non-cancelable leases containing known future scheduled rent increases or free rent periods is recorded on a straight-line basis over the respective lease term. The lease term begins when the Organization has right to control the use of the leased property and includes the initial non-cancelable lease term plus any periods covered by renewal options that the Organization is reasonably assured of exercising. The difference between rent expense and rent paid is accounted for as deferred rent and is amortized over the lease term. The Organization received six months of free rent valued at $37,200 which is included in contributions on the accompanying statement of activities. The straight-line rent was recalculated to include the free rent months. Contributions Contributions received are recorded as unrestricted, temporarily restricted, or permanently restricted support, depending on the existence and/or nature of any donor restrictions. Support that is restricted by the donor is reported as an increase in unrestricted net assets if the restriction expires in the reporting period in which the support is recognized. All other donorrestricted support is reported as an increase in temporarily or permanently restricted net assets, depending on the nature of the restriction. When a restriction expires (that is, when a stipulated time restriction ends or purpose restriction is accomplished), temporarily restricted net assets are reclassified to unrestricted net assets and reported in the statements of activities as net assets released from restrictions. Subsequent Events Subsequent events were evaluated through July 1, 2015, which is the date the financial statements were available to be issued. The Organization subsequently received an unrestricted stock donation of $1,000,000. Income Taxes The Organization is exempt from income taxes under Section 501(c)(3) of the Internal Revenue Code, except for net income derived from unrelated business activities. In addition, the Organization qualifies for the charitable contribution deduction under Section 170(b)(1)(A) and has been classified as an organization other than a private foundation under IRC Section 509(a). The Organization’s income tax filings are subject to audit by various taxing authorities. The Organization’s open audit periods are 2011 through the current year. In evaluating the Organization’s activities, management believes its position of tax-exempt status is based on current facts and circumstances and there have been no uncertain positions taken related to recording income taxes. In the opinion of management, there are no activities unrelated to the purpose of the Organization and therefore no tax is to be recognized. See accompanying independent auditor’s report. 14 Better Government Association, Inc. Notes to Financial Statements It is the policy of the Organization to include in management and general expenses penalties and interest assessed by income taxing authorities. There are no penalties or interest from taxing authorities included in management and general expenses for the years ended December 31, 2014 and 2013. Functional Allocation of Expenses In the statements of functional expenses, the expenses are charged directly to program, management and general or fundraising categories based upon specific identification where possible. Additionally, certain costs have been allocated among the program and supporting services benefited, based on direct charges or appropriate methods determined by management. These costs include among others, salaries and related taxes and employee benefits, conferences and meetings, dues and subscriptions, insurance, occupancy costs, telephone, supplies, professional fees, and website expenses. Reclassifications Certain items in the financial statements as of and for the year ended December 31, 2013 have been reclassified for presentation purposes. Such reclassification had no impact on the change in net assets. 2. Fair Value Measurements Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 820, Fair Value Measurements and Disclosures, provides the framework for measuring fair value. That framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements). The three levels of the fair value hierarchy under FASB ASC 820 are described as follows: Level 1 Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the Organization has the ability to access. Level 2 Inputs to the valuation methodology include  Quoted prices for similar assets or liabilities in active markets;  Quoted prices for identical or similar assets or liabilities in inactive markets;  Inputs other than quoted prices that are observable for the asset or liability;  Inputs that are derived principally from or corroborated by observable market data by correlation or other means. If the asset or liability has a specified (contractual) term, the level 2 input must be observable for substantially the full term of the asset or liability. See accompanying independent auditor’s report. 15 Better Government Association, Inc. Notes to Financial Statements Level 3 Inputs to the valuation methodology are unobservable and significant to the fair value measurement. The asset’s or liability’s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs. There are no changes in valuation methodologies used at December 31, 2014. Fair values of assets measured on a recurring basis were as follows: Fair Value Measurements at December 31, 2014 Level 1 Assets Money market Fixed income funds: Certificates of deposit Bonds Total fixed income funds Equities: Consumer goods Financial Technology Healthcare Services Basic materials Industrial goods Utilities Total equities Exchange traded funds: Mid-cap blend Small blend Diversified emerging mkts Foreign large blend Total exchange traded funds $ 83,551 158,629 158,629 $ Level 2 Level 3 - $ 380,244 380,244 Total - $ 83,551 - 380,244 158,629 538,873 129,826 126,232 115,108 110,231 78,878 68,045 66,546 14,349 709,215 - - 129,826 126,232 115,108 110,231 78,878 68,045 66,546 14,349 709,215 62,640 35,886 24,556 18,860 141,942 - - 62,640 35,886 24,556 18,860 141,942 - $ 1,473,581 $ 1,093,337 $ 380,244 See accompanying independent auditor’s report. 16 $ Better Government Association, Inc. Notes to Financial Statements Fair Value Measurements at December 31, 2013 Level 1 Assets Mutual funds: Short-term bond $ 808,524 Level 2 $ - Level 3 $ - Total $ 808,524 3. Concentrations of Credit Risk The Organization maintains its cash at several financial institutions. All deposit accounts at Federal Deposit Insurance Corporation (FDIC) insured institutions are insured up to $250,000. At times during the years ending December 31, 2014 and 2013, the Organization’s bank balances may have exceeded the federally insured limits; however, it has not experienced any losses with respect to its bank balances in excess of government provided insurance. Investments in certificates of deposit at FDIC-insured institutions are insured up to $250,000 per institution. The Organization maintains reserve cash at a brokerage firm. This account is insured by the Securities Investor Protection Corporation up to $500,000 including a maximum of $250,000 for claims for cash and additional coverage is provided by the brokerage firm. At December 31, 2014 and 2013, the Organization has no uninsured cash investment balances at brokerage firms. As of December 31, 2014 and 2013, 34% and 56% of its total revenues was from contributions and 16% and 15% of its total revenues was from in-kind contributions. As of December 31, 2014, 96% of pledges receivable was from five donors and as of December 31, 2013, 83% of total pledges receivable was from two donors. 4. Pledges Receivable The Organization has received pledges to contribute to the Organization. These amounts are classified as temporarily restricted until received. The total amount of the pledges receivable as of December 31, 2014 and 2013 was $251,000 and $392,677, respectively. See accompanying independent auditor’s report. 17 Better Government Association, Inc. Notes to Financial Statements Pledges due in more than one year are discounted at 1.65% for the year ended December 31, 2013. The discount amortization is reflected in contributions on the statement of activities. As of December 31, 2014, there was no long-term pledges receivable. As of December 31, 2013, pledges receivable were as follows: Receivables in less than one year $ 230,355 Receivables in one to five years 165,000 Less discounts to net present value 395,355 (2,678) Net pledges receivable $ 392,677 5. Property and Equipment The costs of the Organization’s property and equipment as of December 31 were as follows: 2014 Computers Furniture and equipment Leasehold improvements 2013 $ 71,930 92,789 7,994 172,713 (115,966) $ 63,198 92,789 4,669 160,656 (102,743) $ 56,747 $ 57,913 Less accumulated depreciation Depreciation expense for the years ended December 31, 2014 and 2013 was $13,223 and $11,766, respectively. 6. Conditional Promises to Give During 2011, the Organization received a pledge from The Richard H. Driehaus Charitable Lead Trust. The pledge was a matching grant up to $1 million and is a $1 to $1 matching grant conditional upon the Organization meeting the required amounts each year. The Organization had up to four years to meet the match, but they were allowed to match within three years if possible. The grant is for general operations. During the year ended December 31, 2013, the Organization met the match of $300,000. See accompanying independent auditor’s report. 18 Better Government Association, Inc. Notes to Financial Statements 7. Temporarily Restricted Net Assets The following items were temporarily restricted as of December 31 due to either use or time restrictions: 2014 Support for strategic plan Support for investigator Support for operational costs 2013 $ 80,000 261,749 $ 119,351 8,138 313,326 $ 341,749 $ 440,815 The following items were released from time and/or donor restrictions during the years ended December 31, 2014 and 2013 by incurring expenses satisfying the restricted purpose or by occurrence of other events specified by the donors as follows: 2014 Support for strategic plan Support for investigator Support for operational costs 2013 $ 39,351 8,138 190,355 $ 300,000 $ 237,844 $ 300,000 8. Contributions In-Kind Donations of services are recorded if they create or enhance a non-financial asset or are specialized skills that would be purchased if they were not donated. During the years ended December 31, 2014 and 2013, the Organization received donated legal, consulting, and website development services valued at $470,301 and $550,134, respectively. The 2013 donation of legal services was received from a law firm in which a board member was employed. 9. Lease Obligation and Rental Expense Effective August 15, 2011, the Organization entered into a lease agreement for office space located in Chicago, Illinois for the period August 15, 2011 through January 31, 2018 with base rent in the amount of $5,750, which increases annually. In addition, the Organization leases office equipment with an expiration date of February 28, 2015. These leases are being accounted for as operating leases. Rental expense on all leases for the years ended December 31, 2014 and 2013 was $96,473 and $74,155, respectively. See accompanying independent auditor’s report. 19 Better Government Association, Inc. Notes to Financial Statements The estimated future minimum rental and lease obligation for the succeeding years under noncancelable operating leases in effect as of December 31, 2014 are as follows: Year ended December 31, 2015 2016 2017 2018 $ 64,065 77,700 79,500 6,650 $ 227,915 The Organization is also liable for its proportionate share of increases, if any, of the landlord’s total cost for operation of the building. 10. Special Events Revenues and expenses from special events are shown at the gross amounts in the statements of activities. Gross revenue and expense for each event for the years ended December 31 was as follows: 2014 Revenue Annual Luncheon Spring Luncheon Young Professionals 2013 Expense Net Revenue Expense Net $1,280,122 90,660 32,095 $ 174,415 37,788 16,045 $1,105,707 52,872 16,050 $ 904,880 62,200 29,348 $ 170,568 40,495 16,597 $ 734,312 21,705 12,751 $1,402,877 $ 228,248 $1,174,629 $ 996,428 $ 227,660 $ 768,768 11. Litigation In the normal course of business, the Organization is involved in disputes related to certain investigation projects. Management believes that the resolution of these matters will not have a material effect on the Organization’s financial position or change in net assets. 12. Retirement Plans During the year ended December 31, 2010, the Organization established a defined contribution plan under Internal Revenue Service Code Section 401(k). There is no minimum contribution requirement for participants and contributions are subject to maximum amount limitation under current tax law. During the years ended December 31, 2014 and 2013, the Organization made a discretionary match of $24,039 and $17,501, respectively. See accompanying independent auditor’s report. 20 Better Government Association, Inc. Notes to Financial Statements 13. Related Party Transactions A member of the Board of Directors is associated with a local law firm which provided pro bono professional services to the Organization recognized as contributions in-kind. Contributions in-kind recognized from this law firm for services provided to the Organization amounted to $314,662 for the year ended December 31, 2013. There were no services received for the year ended December 31, 2014. See accompanying independent auditor’s report. 21