little city foundation and affiliates assistance 703,581 - - 703,581 742,213 rent 125,304 - 9,122...

Little City Foundation and Affiliates Financial Report June 30, 2013

Contents Independent Auditor's Report 1 – 2 Financial Statements Consolidated statement of financial position 3 Consolidated statement of activities 4 Consolidated statement of functional expenses 5 Consolidated statement of cash flows 6 Notes to consolidated financial statements 7 – 16 Supplementary Information Consolidating statement of financial position 17 Consolidating statement of activities 18 Statement of functional expenses - Little City Foundation 19 Statement of functional expenses - Little City for Community Development 20 Statement of functional expenses by program - Little City Foundation 21

1

Independent Auditor's Report To the Board of Directors Little City Foundation and Affiliate Report on the Financial Statements

We have audited the accompanying consolidated financial statements of Little City Foundation and Affiliates (Little City), which comprise the consolidated statement of financial position as of June 30, 2013, and the related consolidated statements of activities, functional expenses and cash flows for the year then ended, and the related notes to the consolidated financial statements. Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these consolidated 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 consolidated 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 consolidated 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 consolidated financial statements are free of material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the consolidated 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 consolidated 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 consolidated financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a reasonable basis for our audit opinion Opinion

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Little City Foundation and Affiliate as of June 30, 2013, and the results of its operations and its cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America.

2

Other Matter

Our audit was conducted for the purpose of forming an opinion on the consolidated financial statements as a whole. The accompanying supplementary information is presented for purposes of additional analysis and is not a required part of the consolidated financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the consolidated financial statements. The information has been subjected to the auditing procedures applied in the audit of the consolidated financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the consolidated financial statements or to the consolidated financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated in all material respects in relation to the consolidated financial statements as a whole. Report on Summarized Comparative Information

We have previously audited Little City’s 2012 consolidated financial statements, and we expressed an unmodified audit opinion on those audited consolidated financial statements in our report dated September 28, 2012. In our opinion, the summarized comparative information presented herein as of and for the year ended June 30, 2012 is consistent, in all material respects, with the audited consolidated financial statements from which it has been derived.

Chicago, Illinois November 12, 2013

3

Little City Foundation and Affiliate

Consolidated Statement of Financial Position

June 30, 2013 (With Comparative Totals for 2012)

2013 2012

Assets

Cash and cash equivalents 912,652 $ 1,537,453 $

Accounts receivable, net 1,024,167 1,046,097

Pledges receivable, net 693,519 304,055

Investments 5,608,074 5,654,701

Prepaid expenses 106,088 126,904

Reserve deposits 481,013 459,998

Deferred financing costs 156,301 171,231

Property and equipment, net of accumulated depreciation 6,598,131 6,550,593

Beneficial interest in irrevocable trust 497,552 495,642

16,077,497 $ 16,346,674 $

Liabilities and Net Assets

Liabilities

Accounts payable 655,816 $ 1,415,600 $

Accrued expenses 1,858,531 1,679,080

Deferred rent revenue 302 195

Note payable - 1,000,000

Bonds payable 8,020,000 8,420,000

10,534,649 12,514,875

Net assets

Unrestricted 3,292,138 2,420,322

Temporarily restricted 1,567,139 731,211

Permanently restricted 683,571 680,266

5,542,848 3,831,799

16,077,497 $ 16,346,674 $

See Notes to Consolidated Financial Statements.

4


Consolidated Statement of Activities

Year Ended June 30, 2013 (With Comparative Totals for 2012)

Temporarily PermanentlyUnrestricted Restricted Restricted Total 2012

Revenue:Contributions 1,021,502 $ 1,530,413 $ 1,395 $ 2,553,310 $ 1,646,393 $ Special events 1,130,509 - - 1,130,509 378,700 Legacies and bequests 1,612,054 - - 1,612,054 1,200,893 State and local government grants and funding 18,937,933 - - 18,937,933 18,201,480 HUD building rental revenue 1,002,061 - - 1,002,061 942,682 Investment income 352,624 - - 352,624 181,618 Contract service revenue 151,252 - - 151,252 181,146 Gain (loss) on sale of assets (21,346) - - (21,346) 1,000 Other revenue 488,750 - - 488,750 304,837 Increase (decrease) in value of beneficial interest in irrevocable trust - - 28,422 28,422 (11,383) Net assets released from

restrictions and distributions 720,997 (694,485) (26,512) - - 25,396,336 835,928 3,305 26,235,569 23,027,366

Expenses:Program services 20,513,928 - - 20,513,928 20,111,642

Management and general 2,254,049 - - 2,254,049 2,291,887

Fundraising:General 1,368,783 - - 1,368,783 1,250,768 Costs and direct benefits to donors related to special events 387,760 - - 387,760 213,192

1,756,543 - - 1,756,543 1,463,960

24,524,520 - - 24,524,520 23,867,489

Increase (decrease) in net assets 871,816 835,928 3,305 1,711,049 (840,123)

Net assets:Beginning of year 2,420,322 731,211 680,266 3,831,799 4,671,922

End of year 3,292,138 $ 1,567,139 $ 683,571 $ 5,542,848 $ 3,831,799 $


2013

5


Consolidated Statement of Functional Expenses


Management

Program and

Services General Fundraising Total 2012

Salaries 11,872,421 $ 1,538,173 $ 932,291 $ 14,342,885 $ 13,804,012 $

Fringe benefits and payroll taxes 3,021,227 287,730 189,455 3,498,412 3,469,990

14,893,648 1,825,903 1,121,746 17,841,297 17,274,002

Professional services 1,319,397 94,155 37,609 1,451,161 1,352,508

Consumables 352,880 5,902 1,333 360,115 351,096

Occupancy 1,600,910 78,437 4,365 1,683,712 1,109,814

Local transportation 319,949 9,444 10,083 339,476 342,372

Specific assistance 703,581 - - 703,581 742,213

Rent 125,304 - 9,122 134,426 178,014

Mortgage and interest fees 174,483 3,727 - 178,210 111,909

Miscellaneous 169,139 80,359 68,862 318,360 312,141

Postage and printing 11,628 19,634 40,139 71,401 41,999

Food 413,071 6,197 643 419,911 447,157

Office supplies 120,421 15,354 1,005 136,780 85,643

Cost and direct benefits to

donors related to special

events - - 387,760 387,760 213,192

Telephone 127,048 31,046 6,963 165,057 158,341

Mail programs - - 54,708 54,708 133,590

20,331,459 2,170,158 1,744,338 24,245,955 22,853,991

Depreciation and amortization 1,035,041 90,454 12,205 1,137,700 1,013,498

21,366,500 $ 2,260,612 $ 1,756,543 $ 25,383,655 $ 23,867,489 $


2013

6


Consolidated Statement of Cash Flows


2013 2012

Cash Flows from Operating Activities

Increase (decrease) in net assets 1,711,049 $ (840,123) $

Adjustments to reconcile increase (decrease) in net assets to net cash

provided by operating activities:

Depreciation and amortization 1,005,754 1,013,498

(Gain) loss on sale of assets 21,346 (1,000)

Realized (gain) on sales of investments (210,740) (89,694)

Unrealized loss on investments 81,568 152,954

Increase (decrease) in value of beneficial interest in irrevocable trust (28,422) 11,383

Noncash in-kind capital contributions (77,232) (77,612)

Changes in:

Accounts receivable 22,843 155,533

Pledges receivable (389,464) 118,981

Prepaid expenses and reserve deposits (199) 2,810

Accounts payable (760,697) 550,805

Deferred rent revenue 107 -

Accrued expenses 179,451 417,125

Net cash provided by operating activities 1,555,364 1,414,660

Cash Flows from Investing Activities

Additions to property and equipment (1,019,381) (960,198)

Purchases of investments (1,751,339) (866,689)

Proceeds from sales of investments 1,953,650 1,060,094

Proceeds on sale of property and equipment 36,905 1,001

Net cash used in investing activities (780,165) (765,792)

Cash Flows from Financing Activities

Payment on notes payable (1,000,000) -

Principal payments on bonds payable (400,000) (250,000)

Net cash used in financing activities (1,400,000) (250,000)

Increase (decrease) in cash and cash equivalents (624,801) 398,868

Cash and cash equivalents:

Beginning of year 1,537,453 1,138,585

End of year 912,652 $ 1,537,453 $

Supplemental Disclosure of Cash Flow Information

Interest paid 14,787 $ 18,683 $


Little City Foundation and Affiliates Notes to Consolidated Financial Statements

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Note 1. Nature of Activities and Significant Accounting Policies

Little City Foundation (Little City) is a nonprofit organization located in Palatine, Illinois whose mission is to ensure that people with intellectual and developmental disabilities are provided with the best options and opportunities to live safely, work productively, explore creatively and learn continuously throughout their lifetime. Little City functions as a parent organization, providing overall direction and control of its affiliate, Little City for Community Development (LCCD). LCCD owns and operates the Port Family Center and three scattered site group homes that service Little City's community residential program. The consolidated financial statements include the accounts of Little City and LCCD. All interorganizational balances and transactions have been eliminated in consolidation. Little City and LCCD are exempt from income taxes under Section 501(c)(3) of the Internal Revenue Code and applicable state law. Cash and cash equivalents: Cash and cash equivalents include highly liquid investments purchased with a maturity of three months or less. Little City is at risk to the extent it maintains balances with financial institutions in excess of federal insured limits. Accounts receivable: Accounts receivable primarily consist of amounts due from the Illinois Department of Children and Family Services and the Illinois Department of Human Services for program services provided. Accounts receivable as of June 30, 2013 are net of a $40,000 allowance for doubtful accounts, determined based on historical experience and analysis of specific accounts. Uncollectible accounts are written off in the year they are deemed to be worthless. Investments: Investments are presented in the consolidated financial statements at fair value in accordance with accounting principles generally accepted in the United States of America. Investments in securities traded on a national securities exchange, or reported on the NASDAQ national market, are stated at the last reported sales price on the day of valuation (Level 1); other securities traded in the over-the-counter market and listed securities for which no sale was reported on that date are stated at the last quoted bid price (Level 2). Contributions of marketable securities are recorded at fair value at the date of the gifts. Investment income, gains and losses, and any investment-related expenses are recorded as changes in unrestricted net assets in the consolidated statement of activities unless their use is temporarily or permanently restricted by explicit donor stipulations or law. Little City invests in various investments. Such investments are exposed to various risks such as interest rate, market and credit risks. Due to the level of risk associated with certain investments, it is at least reasonably possible that changes in the values of investments will occur in the near term and that such changes could materially affect the amounts reported in the consolidated statement of activities. Property and equipment: Property and equipment are carried at cost. Depreciation is being computed using the straight-line method over the following useful lives:

Buildings 30 years Building improvements 5 to 15 years Furniture and equipment 5 years Vehicles 5 years Computer equipment 3 years


8

Note 1. Nature of Activities and Significant Accounting Policies (Continued)

Impairment of long-lived assets: Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset. There were no events or changes in circumstances during the year ended June 30, 2013. Revenue recognition: Contributions and pledges are recorded as revenue in the period received. Revenue from government and other grant and contract agreements is recognized as it is earned through expenditure or service delivery in accordance with the agreement. Special events revenue is included in the period the events take place. Little City recognizes donor’s unconditional promises to give cash and other assets as revenue in the year the promises are made. Contributions received with donor-imposed temporary restrictions are recorded as temporarily restricted revenue. Pledges receivable are recorded at the estimated present value of expected future cash flows. The discounts on those amounts are computed using a risk-free interest rate. Amortization of the discount is included in contribution revenue. Donated improvements, equipment, services and consumables: Donated improvements and equipment are reflected as a contribution at the estimated value at date of receipt. Improvements and equipment valued at $77,232 were donated in fiscal 2013. A substantial number of volunteers have donated significant amounts of their time to Little City's program services and fundraising activities, however (other than approximately $33,129 of donated legal or other services), no amounts have been reflected for their services because they do not meet the criteria for inclusion in the consolidated financial statements. Net asset accounting: In accordance with limitations, designations and restrictions placed on the use of resources available to Little City and LCCD, the following classifications are utilized according to the nature and purpose of the resources.

Unrestricted: Includes undesignated resources with no legal or donor-imposed restrictions. Items included in this net asset category include program service fees, all expenses associated with LCCD, core activities and restricted contributions whose donor-imposed restrictions were met during the fiscal year. Also included within unrestricted net assets are two board designated funds serving as endowments, the Charles Evans Gerber Endowment and the Dorothy Rose Horticultural Endowment Fund (see Note 8). Temporarily Restricted: Temporarily restricted net assets arise from contributions whose use is limited by donor-imposed restrictions that either expire by the passage of time or can be fulfilled by actions of Little City pursuant to those restrictions. Donor-restricted contributions whose restrictions are met within the same year as they are received are reflected as unrestricted contributions in the consolidated financial statements. Little City’s temporarily restricted net assets at June 30, 2013, includes $669,353 which is restricted to time, and $312,661 which is restricted for use in specific programs. During 2013, temporarily restricted net assets of $694,485 were released from restrictions as a result of the funds being utilized for their restricted purposes or satisfaction of donor imposed time. Permanently Restricted: Permanently restricted net assets are subject to donor-imposed restrictions that will not terminate. Funds are held in perpetuity while the income is available for general use. Permanently restricted net assets reflect Little City's beneficial interest in an irrevocable trust and permanently restricted endowment funds held by Little City. Distributions of investment income and principal from the trust have been reflected in unrestricted income and changes in the value of the beneficial interest have been reflected in permanently restricted net assets.


9

Note 1. Nature of Activities and Significant Accounting Policies (Continued)

Functional expenses: Operating expenses directly identified with a functional area are charged to that area and, where those expenses affect more than one area, are allocated by management on the basis of predetermined ratios. Use of estimates: The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions affecting the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results may differ from those estimates. Income taxes: Little City is exempt from federal income taxes under Section 501(c)(3) of the Internal Revenue Code and applicable state law. Accordingly, no provision for such taxes has been recognized in these consolidated financial statements. The accounting standard on accounting for uncertainty in income taxes addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under this guidance, Little City may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by taxing authorities, based on the technical merits of the position. Examples of tax positions include the tax-exempt status of Little City and various positions related to the potential sources of unrelated business income tax (UBIT). The tax benefits recognized in the financial statements from such a position are measured based on the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement. The guidance on accounting for uncertainty in income taxes also addresses de-recognition, classification, interest and penalties on income taxes, and accounting in interim periods. Little City has reviewed the tax positions for the open tax years (current and prior three tax years) and has concluded that no provision for income tax is required in the consolidated financial statements. As of June 30, 2013, there were no unrecognized tax benefits identified or recorded as liabilities. Form 990 filed by Little City are subject to examination by the Internal Revenue Service (IRS) up to three years from the extended due date of each return. Form 990 filed by Little City is no longer subject to examination for tax years before 2009. Comparative totals for prior year: The financial statements include certain prior-year summarized comparative information in total, but not by class of net assets or by changes in class of net assets. This information does not include sufficient detail to constitute a presentation in conformity with accounting principles generally accepted in the United States of America. Accordingly, this information should be read in conjunction with Little City's financial statements for fiscal year 2012 from which the summarized information was derived. Reclassifications: Certain 2012 balances were reclassified to conform to the current year presentation, without any affect on total net assets. Subsequent events: Little City has evaluated subsequent events for potential recognition and/or disclosure through November 12, 2013, the date the consolidated financial statements were available to be issued.


10

Note 2. Pledges Receivable

Pledges receivable consists of amounts pledged for the Children’s Village Initiative and an endowment fund. The Children’s Village Initiative campaign was launched in 2010 to provide funding for the construction of housing designed to accommodate children with autism and the endowment fund pledge was provided to establish a scholarship for education related to autism or other neurodevelopmental disorders. These pledges are payable in future installments and are reflected on the June 30, 2013 consolidated statement of financial position as temporarily restricted net assets for the Children’s Village Initiative and permanently restricted net assets for the endowment fund in an amount equivalent to expected annual collections less a discount, as follows: Expected annual collections - Children's Village Initiative

2014 639,347 $ 2015-2020 33,462

672,809 Less

Discount to present value (at a rate of 3.50%) (3,456) 669,353

Expected annual collections - endowment fund2014 12,083 2015 12,083

24,166

693,519 $

Note 3. Investments and Fair Value Disclosures

GAAP establishes a fair value hierarchy and specifies that a valuation technique used to measure fair value shall minimize the use of nonobservable inputs. The objective of a fair value measurement is to determine the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at measurement dates. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy are described below:

Level 1: Unadjusted quoted prices for identical assets or liabilities in active markets that the reporting entity has the ability to access at the measurement date. The type of investments included in Level 1 included listed equities and mutual funds. Level 2: Inputs other than quoted prices with Level 1 that are observable for the asset or liability, either directly or indirectly; and fair value is determined through the use of models or other valuation methodologies. Level 3: Inputs are unobservable for the asset or liability and include situations where there is little, if any, market activity for the asset or liability.


11

Note 3. Investments and Fair Value Disclosures (Continued)

The availability of observable inputs can vary from security-to-security and is affected by a wide variety of factors, including, for example, the type of security, whether the security is new and not yet established in the marketplace, the liquidity of markets, and other characteristics particular to the security. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised in determining fair value is greatest for instruments categorized in Level 3. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an investment’s level within the hierarchy is based on the lowest level of input that is significant to the fair value measurement. Little City's assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the investment. Investments in mutual funds and equities traded on a national securities exchange or reported on the NASDAQ national market are stated at the last reported sales price on the day of valuation. These financial instruments are classified as Level 1 in the fair value hierarchy. Investments traded in the over-the-counter market and listed securities, including corporate bonds, government bonds and municipal bonds, for which no sale was reported on that date are stated at the last quoted bid price. These financial instruments are classified as Level 2 in the fair value hierarchy. The fair value of the beneficial interest in irrevocable trust is determined based upon Little City’s proportional interest in the fair value of the trusts’ assets. The underlying trusts’ assets are either readily marketable and have fair values which are determined by obtaining quoted market prices in active markets, or are determined by the trusts using information provided by the related investments managers. The beneficial interest in irrevocable trust is classified as Level 3. Little City assesses the levels of the investments at each measurement date, and transfers between levels are recognized on the actual date of the event or change in circumstances that caused the transfer in accordance with Little City’s accounting policy regarding the recognition of transfers between levels of the fair value hierarchy. For the year ended June 30, 2013, there were no such transfers. The following table summarizes Little City's investments accounted for at fair value as of June 30, 2013 using the fair value hierarchy:

Quoted Prices Significant In Active Other Significant

Markets for Observable Unobservable Identical Assets Inputs Inputs

(Level 1) (Level 2) (Level 3) Total

Mutual funds and equities 2,493,096 $ -$ -$ 2,493,096 $ Corporate bonds - 3,000,516 - 3,000,516 Government bonds - 114,462 - 114,462 Beneficial interest in irrevocable

trust (primarily invested in equities and fixed income) - - 497,552 497,552

2,493,096 $ 3,114,978 $ 497,552 $ 6,105,626 $


12

Note 3. Investments and Fair Value Disclosures (Continued)

The following table presents a reconciliation of the activity for the Level 3 investments: Balance, July 1, 2012 495,642 $

Unrealized gain in beneficial interest 28,422

Distribution from trust (26,512)

Balance, June 30, 2013 497,552 $

Net investment returns were as follows: Interest and dividends 251,874 $

Realized gain on sales of investment 210,740

Unrealized loss on investments (81,568)

381,046 $

Investment income 352,624 $

Increase in value of beneficial trust 28,422

381,046 $

Note 4. Property and Equipment

Property and equipment consisted of the following: Land 579,047 $

Land improvements 1,529,734

Buildings and improvements 19,784,451

Furniture and equipment 3,330,459

Vehicles 677,167

25,900,858

Accumulated depreciation (19,302,727)

6,598,131 $

Depreciation and amortization charged to expense was $1,005,754 for the year ended June 30, 2013.

Note 5. Beneficial Interest in Irrevocable Trust

Little City is a beneficiary of the Sara Edelstein and Joseph Judson and Martin Horrell Charitable Trust, of which there are other beneficiaries and there are independent trustees. The trust's assets are valued at fair value based on the applicable percentage ownership of the trust value at the measurement date as determined by management (Level 3). In determining fair value, management utilizes valuations provided by the trust. The trust securities are all Level 1 and Level 2 in the fair value hierarchy. The trust’s assets are to be held in perpetuity. Little City expects to receive an annual distribution of 5 percent of its share of the principal value of the trust (subject to the discretion of the trustees), as well as its share of annual income. The gift has been recognized in the consolidated financial statements as beneficial interest in an irrevocable trust at the fair value of Little City's interest in the trust, which amounted to $497,552 as of June 30, 2013.


13

Note 6. Bonds Payable

Bonds payable consisted of the following: Special Facility Limited Obligation Revenue Bond, Series 1998, due in 2028 5,000,000 $ Illinois Development Finance Authority (IDFA) bonds due in 2019 3,020,000

8,020,000 $

Future maturities of the bonds are expected to be as follows: 2014 425,000 $ 2015 455,000 2016 485,000 2017 515,000 Thereafter 6,140,000

8,020,000 $

1998 Revenue Bonds: LCCD is obligated under a $5 million tax-exempt Special Facility Limited Obligation Revenue Bond (Series 1998) through the Village of Palatine, Illinois (Palatine) pursuant to a bond indenture between Palatine and US Bank, as trustee. The entire obligation matures in 2028 and bears interest at a weekly rate, a monthly rate, an adjustable rate or a fixed rate, as determined by the remarketing agent. The bonds are secured by the property owned by LCCD and SLP. The average interest rate during fiscal year 2013 was approximately 0.16 percent. IDFA Bonds Payable: Little City is obligated under credit-enhanced tax-exempt Special Facility Revenue Bonds issued through the Illinois Development Finance Authority (IDFA) pursuant to a bond trust indenture between IDFA and The Bank of New York Mellon, as trustee. The bonds bear a variable interest rate, limited to 5 percent, based on an index used for similar issues. During fiscal year 2013, the average interest rate was approximately 0.15 percent. The bonds, issued in 1994, mature in 2019 and are secured by a first mortgage on all of the property at Little City's Palatine campus and a letter of credit which expires on October 15, 2013, unless otherwise extended by written agreement. Deferred financing costs: Costs incurred in connection with the issuance of the 1998 Revenue Bonds and the 1994 IDFA Bonds are being amortized over the lives of the respective bond issues.

Note 7. Line of Credit

Little City has a $1,000,000 line of credit from Chase Bank. Borrowings under the line bear interest at the LIBOR rate plus 3.525 percent, are payable on June 6, 2014, and are secured by Little City’s real estate. As of June 30, 2013, $0 is outstanding.

Note 8. Endowment Funds

Little City's endowment consists of donor-restricted endowment funds and two board designated endowment funds. As required by accounting principles generally accepted in the United States of America, net assets associated with endowment funds, including funds designated by the Board to function as endowments, are classified and reported based on the existence or absence of donor-imposed restrictions.


14

Note 8. Endowment Funds (Continued)

Interpretation of Relevant Law The Board of Directors of Little City has interpreted the Illinois Prudent Uniform Management of Institutional Funds Act (UPMIFA) 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, Little City classified as permanently restricted 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 at the time the accumulation is added to the fund. In accordance with UPMIFA, Little City considers the following factors in making a determination to appropriate or accumulate earnings on donor-restricted endowment funds:

1) The duration and preservation of the fund; 2) The purpose of Little City 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; and 6) Other resources of Little City.

Little City’s endowment net asset composition by type of fund is as follows for the year ended June 30, 2013: Board designated endowments:

Charles Evans Gerber Fund 454,237 $ Dorothy H. Rose Fund 465,000

919,237 Permanently restricted endowments:

Donor restricted 683,571 1,602,808 $

Endowment Contribution Appreciation Distribution

Net Assets, of of from Endowment

Beginning of Endowment Endowment Endowment Net Assets,

Year Assets Assets Assets End of Year

Board designated endowment:

Charles Evans Gerber Fund 454,237 $ -$ -$ -$ 454,237 $

Dorothy H. Rose Fund 465,000 - - - 465,000

919,237 - - - 919,237

Permanently restricted:

Donor restricted 680,266 1,395 28,422 (26,512) 683,571

1,599,503 $ 1,395 $ 28,422 $ (26,512) $ 1,602,808 $

The permanently restricted endowment consists of two permanently restricted funds where the donor requires that the principal be maintained in perpetuity. Another permanently restricted fund is the beneficial interest in irrevocable trust. As a result, Little City does not have a spending policy or investment policy as it relates to permanently restricted endowment funds.


15

Note 8. Endowment Funds (Continued)

Little City's investment policy provides that transfers of income from the Charles Evans Gerber Fund be used to support the arts programs and the income from the Dorothy H. Rose Fund be used to support the horticulture program. During fiscal 2013, these funds earned dividend and interest income of $26,150 and $19,117, respectively.

Note 9. Employees' Benefit Plan

Little City sponsors a benefit plan which covers substantially all full-time employees who meet certain eligibility requirements as to age and length of service. Little City made a matching contribution of $0.50 for each dollar contributed by an employee up to a maximum of 6 percent of eligible payroll. Pension and incentive savings plan expense during 2013 was $120,493.

Note 10. Operating Rental Properties

Pursuant to Section 8 of the U.S. Housing Act of 1937, Little City has executed two Housing Assistance Payment Contracts with HUD providing for rental subsidy payments for all units leased to eligible lower income persons. These subsidy payments are designed to provide for the difference between the cash needs of the HUD projects and the cash generated by the tenants' rental payments, which are usually 30 percent of their disposable income, and are adjusted annually. Due to occupancy levels and tenant mixes, the amounts of the HUD subsidies will vary from year-to-year. Total subsidies in 2013 were $645,009. The contracts extend through November 2015 and May 2017. Agreements with HUD provide for regulation of rental charges, restrictions on disposition of the properties, annual deposits of any residual receipts (as defined by the regulatory agreements) to a residual receipts account and $524 monthly deposits to the reserve for replacements and the maintenance of tax and insurance escrow accounts. Amounts reserved for residual receipts and replacements are maintained in interest-bearing cash accounts and are stated at market value, with all interest earned being added to the respective balances. As of June 30, 2013, Little City's properties were approximately 96 percent occupied. At full occupancy, gross annualized rentals, including HUD rental subsidies, would be $1,027,644. Actual rentals are generally less than gross annualized rentals due to vacancies which occur during the year. Leases are generally for one-year terms and expire at various times throughout the year. Reserve deposits were as follows: Reserve for residual receipts 282,965 $ Reserve for replacements 55,913 Bond reserve 142,135

481,013 $


16

Note 11. Commitments and Contingencies

Operating leases: Little City leases office space under an operating lease agreement that expires in 2017. Subsequent to year end, Little City entered into a lease for additional office space at 650 East Algonquin Road in Schaumburg, Illinois. The term of the lease is approximately 64 months beginning August 15, 2013 and ending December 15, 2018. The lease includes free rent for specified months throughout the lease term. Approximate minimum annual rental commitments, including the new lease and excluding any additional payments that may be required for certain increases in operating costs, are as follows: 2014 214,558 $ 2015 235,130 2016 237,386 2017 166,285 2018 112,787 Thereafter 57,333

1,023,479 $

Little City's rent expense for fiscal 2013 was approximately $134,000. Litigation: Little City is a defendant in various litigation matters arising in the normal course of its activities. The outcomes of these matters cannot presently be determined. However, in the opinion of management, the ultimate resolution of all such litigation matters will not have a significant adverse effect on the consolidated financial position or results of activities.

Supplementary Information

17


Consolidating Statement of Financial Position

June 30, 2013 (With Comparative Totals for 2012)

Little City

Little for

City Community

Foundation Development Elimination Total 2012

Assets

Cash and cash equivalents 908,732 $ 3,920 $ -$ 912,652 $ 1,537,453 $

Accounts receivable, net 1,017,387 6,780 - 1,024,167 1,046,097

Pledges receivable, net 693,519 - - 693,519 304,055

Investments 5,608,074 - - 5,608,074 5,654,701

Prepaid expenses 75,507 30,581 - 106,088 126,904

Reserve deposits - 481,013 - 481,013 459,998

Deferred financing costs 42,937 113,364 - 156,301 171,231

Due from affiliates 3,079 - (3,079) - -

Investment in affiliates 189,293 - (189,293) - -

Property and equipment, net of

accumulated depreciation 5,979,215 618,916 - 6,598,131 6,550,593

Beneficial interest in irrevocable trust 497,552 - - 497,552 495,642

15,015,295 $ 1,254,574 $ (192,372) $ 16,077,497 $ 16,346,674 $

Liabilities and Net Assets

Accounts payable 647,034 $ 8,782 $ -$ 655,816 $ 1,415,600 $

Accrued expenses 1,858,531 - - 1,858,531 1,679,080

Deferred rent revenue - 302 - 302 195

Due to affiliates - 192,374 (192,372) 2 -

Note payable - - - - 1,000,000

Bonds payable 3,020,000 5,000,000 - 8,020,000 8,420,000

Net assets (deficit) 9,489,730 (3,946,884) - 5,542,846 3,831,799

15,015,295 $ 1,254,574 $ (192,372) $ 16,077,497 $ 16,346,674 $

2013

18


Consolidating Statement of Activities


Little CityLittle forCity Community

Foundation Development Elimination Total 2012Revenue:

Contributions 2,553,310 $ -$ -$ 2,553,310 $ 1,646,393 $ Special events 1,130,509 - - 1,130,509 378,700 Legacies and bequests 1,612,054 - - 1,612,054 1,200,893 State and local government grants and funding 18,937,933 - - 18,937,933 18,201,480 HUD building management fees 61,335 - (61,335) - - HUD building rental revenue - 1,002,061 - 1,002,061 942,682 Investment income 352,359 265 - 352,624 181,618 Contract service revenue 151,252 - - 151,252 181,146 Gain (loss) on sale of assets (21,346) - - (21,346) 1,000 Other revenue 488,750 - - 488,750 304,837 Increase (decrease) in value of beneficial interest in irrevocable trust 28,422 - - 28,422 (11,383)

25,294,578 1,002,326 (61,335) 26,235,569 23,027,366

Expenses:Program services 19,457,494 1,117,769 (61,335) 20,513,928 20,111,642

Management and general 2,244,969 9,080 - 2,254,049 2,291,887

Fundraising:General 1,368,783 - - 1,368,783 1,250,768 Cost and direct benefits to donors related to special events 387,760 - - 387,760 213,192

1,756,543 - - 1,756,543 1,463,960

23,459,006 1,126,849 (61,335) 24,524,520 23,867,489

Increase (decrease) in net assets 1,835,572 (124,523) - 1,711,049 (840,123)

Net assets (deficit):Beginning of year 7,654,158 (3,822,359) - 3,831,799 4,671,922

End of year 9,489,730 $ (3,946,882) $ -$ 5,542,848 $ 3,831,799 $

2013

19


Statement of Functional Expenses - Little City Foundation


Management

Program and

Services General Fundraising Total 2012

Salaries and wages 11,480,527 $ 1,538,173 $ 932,291 $ 13,950,991 $ 13,596,989 $

Fringe benefits 2,872,667 287,730 189,455 3,349,852 3,399,698

14,353,194 1,825,903 1,121,746 17,300,843 16,996,687

Professional services 1,181,987 94,155 37,609 1,313,751 1,245,465

Consumables 352,880 5,902 1,333 360,115 351,096

Office supplies 120,421 13,413 1,005 134,839 84,505

Food 413,071 6,197 643 419,911 447,157

Occupancy 871,333 78,437 4,365 954,135 824,021

Local transportation 289,237 9,444 10,083 308,764 322,200

Specific assistance 703,581 - - 703,581 742,213

Rent 125,304 - 9,122 134,426 178,014

Mortgage/bond/operating interest 33,534 3,727 - 37,261 24,513

Postage and printing 11,628 17,306 40,139 69,073 41,717

Miscellaneous expense 169,139 68,985 68,862 306,986 279,118

Cost and direct benefits to

donors related to special

events - - 387,760 387,760 213,192

Telephone 113,490 31,046 6,963 151,499 148,743

Mail program - - 54,708 54,708 133,590

18,738,799 2,154,515 1,744,338 22,637,652 22,032,231

Depreciation and amortization 718,695 90,454 12,205 821,354 781,320

19,457,494 $ 2,244,969 $ 1,756,543 $ 23,459,006 $ 22,813,551 $

2013

20


Statement of Functional Expenses - Little City for Community Development


Management

Program and

Services General Total 2012

Salaries 214,545 $ -$ 214,545 $ 207,023 $

Fringe benefits and payroll taxes 80,627 - 80,627 70,292

295,172 - 295,172 277,315

Professional services 115,285 - 115,285 107,043

Occupancy 413,728 - 413,728 342,100

Local transportation 17,987 - 17,987 20,172

Mortgage and interest fees 83,248 - 83,248 87,396

Office supplies - 1,258 1,258 1,138

Postage and printing - 1,320 1,320 282

Telephone 7,949 - 7,949 9,598

Miscellaneous - 6,502 6,502 33,023

933,369 9,080 942,449 878,067

Depreciation and amortization 184,400 - 184,400 232,178

1,117,769 $ 9,080 $ 1,126,849 $ 1,110,245 $

2013

21


Statement of Functional Expenses by Program - Little City Foundation


Children's Therapeutic Foster Care Home-Based Adult

Residential Day School Adoptions Support Residential Vocational 2013 2012

Salaries and wages 4,074,250 $ 415,349 $ 646,545 $ 298,446 $ 4,582,520 $ 1,463,417 $ 11,480,527 $ 11,428,376 $

Fringe benefits 1,099,085 81,257 141,542 37,256 1,124,034 389,493 2,872,667 2,815,584

5,173,335 496,606 788,087 335,702 5,706,554 1,852,910 14,353,194 14,243,960

Professional fees 471,333 125,835 70,703 15,567 374,401 124,148 1,181,987 1,074,917

Consumables 193,603 11,459 2,456 10 98,595 46,757 352,880 339,508

Office supplies 44,979 1,311 11,616 760 51,182 10,573 120,421 67,210

Food 104,134 6,549 292 11 296,431 5,654 413,071 433,025

Occupancy 432,740 18,385 70,734 9,882 232,024 107,568 871,333 768,312

Local transportation 91,693 897 30,696 13,755 51,011 101,185 289,237 306,859

Specific assistance 7,501 - 696,080 - - - 703,581 742,213

Lease and rent - - 85,034 25,410 14,860 - 125,304 164,525

Mortgage/bond/operating interest 12,073 1,173 4,702 739 10,877 3,970 33,534 22,061

Postage and printing 1,088 309 6,002 1,458 582 2,189 11,628 11,466

Miscellaneous expense 52,746 10,219 25,082 3,382 56,493 21,217 169,139 130,405

Telephone 23,595 4,995 15,042 6,382 57,708 5,768 113,490 97,467

6,608,820 677,738 1,806,526 413,058 6,950,718 2,281,939 18,738,799 18,401,928

Depreciation and amortization 273,771 27,558 29,563 17,023 259,602 111,178 718,695 690,219

6,882,591 $ 705,296 $ 1,836,089 $ 430,081 $ 7,210,320 $ 2,393,117 $ 19,457,494 $ 19,092,147 $

Total Program Services

little city foundation and affiliates assistance 703,581 - - 703,581 742,213 rent 125,304 - 9,122...

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