The Charles Armstrong School

“The school's endowment consists of 10 individual funds established for a variety of purposes. Its endowment includes only donor-restricted endowment funds. As required by u.s. Gaap, net assets associated with endowment funds are classified and reported based on the existence or absence of donor-imposed restrictions. These net assets include gifts with respect to which donors have stipulated, as a condition in the gift instrument that the principal is to be held indefinitely. The milford-henry endowment fund (the "fund") was established during the year ended june 30, 1995. The fund was established with the understanding that, should the school merge with another organization or cease to exist, the corpus of the fund will revert to the eugene watson milford endowment fund at furman university, greenville, south carolina. Endowment earnings are restricted as follows: to support student scholarships o harvey family financial aid endowment o bill mattison endowment fund o financial assistance endowment o richard m. Botley and malvina botley scholarship endowment fund o mark coplen santana scholarship endowment fund to support teachers' retention and recruitment o teacher retainment and recruitment endowment to support student enrichment o charles dorsey memorial endowment the endowment earnings from the school endowment fund, mattison endowment fund and the milford-henry endowment fund have no purpose restrictions. Interpretation of relevant law the board of trustees of the school has interpreted california's enacted version of the uniform prudent management of institutional funds act ("upmifa") as requiring the preservation of the fair value of the donor-restricted endowment funds absent explicit donor stipulations to the contrary. As a result of this interpretation, the school classifies as permanent net assets (a) the original value of gifts donated to the permanent endowment, (b) the original value of subsequent gifts to the permanent endowment, and (c) accumulations to the permanent endowment made in accordance with the direction of the applicable donor gift instrument. The remaining portion of the donor-restricted endowment fund that is not classified as permanent endowment is classified as expendable restricted net assets until those amounts are appropriated for expenditure by the school in a manner consistent with the standard of prudence prescribed by upmifa. In accordance with upmifa, the school 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 purposes of the school 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 the appreciation of investments (6) other resources of the school (7) the investment policies of the school. Return objectives and risk parameters the school has adopted investment and spending policies for endowment assets that attempt to provide a predictable stream of funding to programs supported by its endowment while seeking to maintain the purchasing power of the endowment assets. Endowment assets include those assets of donor-restricted funds that the school must hold in perpetuity or for donor-specified periods or purposes. Under this policy, as approved by the board of trustees, the donor restricted endowment funds shall be invested with the objectives of safety of corpus, growth, and return and may be invested in any number of authorized investment tools that meet these objectives. The investment goal of these funds is to obtain a minimum total rate of return equal to a comparable market index, while not incurring more risk than such index. Strategies employed for achieving objectives to satisfy its long-term rate-of-return objectives, the performance of these investments is measured against established equity and fixed income indices to provide for the (a) pr”

“The school is a qualified organization exempt from federal income and state franchise taxes under section 501(c)(3) of the internal revenue code ("irc") and section 23701d of the california revenue and taxation code, respectively. Accordingly, the school is exempt from federal and california income taxes and is not liable for federal unemployment taxes. U.s. Gaap requires management to evaluate the tax positions taken and recognize a tax liability (or asset) if the school has taken an uncertain tax position that more-likely-than-not would not be sustained upon examination by taxing authorities. Management evaluated the school's tax positions and concluded that it maintained its tax-exempt status and had taken no uncertain tax positions that would require adjustment to the financial statements. Therefore, no provision or liability for unknown income taxes has been included in the financial statements. The school's tax returns are subject to examination by federal and state taxing authorities. However, there are no examinations in progress nor are there any pending.”