Hockaday School

“Schedule d, part iii, line 4 over a period of time, the school has received contributions of works of art and furnishings to be exhibited in various locations on the campus. These items have been capitalized as collections. The collection not only enhances the aesthetic environment of the school, it supports the curriculum of the school by making art available to students. The collections are recorded at appraised value when donated. The school undertakes to care for, protect, and preserve such contributed works of art and furnishings, and the board has adopted a policy to use proceeds of deaccession or insurance recoveries for the sole purpose of acquisition of other such works of art and furnishings. Collection items are inspected periodically and cleaned and repaired as required.”

“Schedule d, part v, line 4 the school manages the endowment fund to preserve the real purchasing power for the fund while providing a predictable, stable, and constant stream of earnings consistent with the school's spending needs. The endowment investment policy reduces the endowment draw spending policy by ten basis points each year over a five year period: from 5.0% in 2016 to 4.5% in 2021 and for each year thereafter. Accordingly, the current spending policy for 2018 is a maximum of 4.8% of a three-year moving average market value of the total endowment fund assets with the exception of a specific endowment which has donor restrictions limiting spending to 4.0%. The endowment fund supports the general operations of the school including faculty salaries, faculty/staff professional development, student financial aid, library services, and student programs.”

“Schedule d, part x, line 2 the school is exempt from federal income taxes under section 501(a) of the internal revenue code ("irc") of 1986, as amended, as an organization described in section 501(c)(3) of the irc, as evidenced by the schools determination letter dated october 1938. The school has been classified as an organization that is not a private foundation under irc sections 509(a)(1), and as such, contributions to the school qualify for deduction as charitable contributions. However, income generated from activities unrelated to the schools exempt purpose is subject to tax under irc section 511. The school has processes presently in place to ensure the maintenance of its tax-exempt status; to identify and report unrelated income; to determine its filing and tax obligations in jurisdictions for which it has nexus; and to identify and evaluate other matters that may be considered tax positions. The school did not have any material unrelated business income tax liability or expense for the years ended june 30, 2018 and 2017. The school does not have any outstanding interest or penalties, and none have been recorded in the statement of activities for the years ended june 30, 2018 or 2017. The school follows guidance that clarifies the accounting for uncertainty in tax positions taken or expected to be taken in a tax return, including issues relating to financial statement recognition and measurement. The guidance provides that the tax effects from an uncertain tax position can only be recognized in the financial statements if the position is "more-likely-than-not" to be sustained if the position were challenged by a taxing authority. The assessment of the tax position is based solely on the technical merits of the position, without regard to the likelihood that the tax position may be challenged. The tax years ending june 30, 2018, 2017, 2016 and 2015 are still open to audit for both federal and state purposes. The school has concluded that it does not have any unrecognized tax benefits resulting from current or prior period tax positions.”

“Schedule d, part xi, lines 2d & 4b line 2d rental activity expenses 15,109 fundraising event expenses 427,061 gaming 10,219 cost of goods sold 359,874 change in value of split-interest agreement (29,217) ---------- total $ 783,046 line 4b grants netted against revenue 3,257,050 childcare income netted against expense 346,890 ------------ total $ 3,603,940”

“Schedule d, part xii, lines 2d & 4b line 2d rental activity expenses 15,109 fundraising event expenses 427,061 gaming 10,219 cost of goods sold 359,874 provision for uncollectible pledges 156,523 ---------- total $ 968,786 line 4b grants netted against revenue 3,257,050 childcare income netted against expense 346,890 ------------ total $ 3,603,940”