Southwest Resource Management Association

“The Association has adopted investment and spending policies for endowment assets to provide a predictable stream of revenues for operating activities and to preserve the purchasing power of the endowment assets. Under these policies, endowment assets are invested to produce a return that is expected to meet or exceed the rate of inflation as measured by the Consumer Price Index. Actual results during any period may vary from these expectations. The Association relies on a total return strategy which allows the earnings objective to be achieved through both capital appreciation and current yield. This strategy involves a diversified asset allocation that provides a balance among equity investments. The Association's spending policy was established considering the long-term expected return on assets and the long-term growth of the asset.”

“In accordance with California state law (UPMIFA), the Association has classified as permanently restricted the fair value of donations restricted by donors to be held as endowments in perpetuity. The finance committee has interpreted the state law as requiring preservation of the fair value of the original endowment gift, as of the gift date, unless there are explicit donor stipulations to the contrary. As a result of this interpretation, the Association classifies as permanently restricted the original value of gifts made to the permanent endowment.”

“The Association receives conservation easements. The original amount of the endowment is considered to be permanently restricted. All gains are recorded as permanently restricted additions to the endowment; after recording of the easement, the amount of the principal is adjusted for inflation and the remaining earnings will be recorded as temporarily restricted.”

“In accordance with accounting standards, which provide accounting and disclosure guidance about uncertain tax positions taken by the Association, management believes that all of the positions taken by the Association in its federal and state income tax returns are more likely than not to be sustained upon examination. The Association files returns in the U.S. Federal jurisdiction and the State of California. The Association's federal income tax returns for the prior three tax years remain subject to examination by the Internal Revenue Service. The Association's California income tax returns for the prior four tax years remain subject to examination by the Franchise Tax Board.”