Report of Independent Auditors and

Financial Statements

Ann Arbor Area Community Foundation

December 31, 2024 and 2023

Table of Contents

Page

Report of Independent Auditors 1

Financial Statements

Statements of Financial Position 4

Statements of Activities and Changes in Net Assets 5

Statement of Functional Expenses 6

Statements of Cash Flows 8

Notes to Financial Statements 9

Report of Independent Auditors

The Board of Trustees

Ann Arbor Area Community Foundation

Report on the Audit of the Financial Statements

Opinion

We have audited the financial statements of Ann Arbor Area Community Foundation, which comprise
the statements of financial position as of December 31, 2024 and 2023, and the related statements of
activities and changes in net assets, functional expenses, and cash flows for the years then ended,
and the related notes to the financial statements.
In our opinion, the accompanying financial statements present fairly, in all material respects, the
financial position of Ann Arbor Area Community Foundation as of December 31, 2024 and 2023, and
the changes in its net assets and its cash flows for the years then ended in accordance with
accounting principles generally accepted in the United States of America.
Basis for Opinion

We conducted our audits in accordance with auditing standards generally accepted in the United
States of America (GAAS). Our responsibilities under those standards are further described in the
Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are
required to be independent of Ann Arbor Area Community Foundation and to meet our other ethical
responsibilities, in accordance with the relevant ethical requirements relating to our audits. We
believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our audit opinion.
Responsibilities of Management for the Financial Statements

Management is responsible for the preparation and fair presentation of the financial statements in
accordance with accounting principles generally accepted in the United States of America, and for 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.
In preparing the financial statements, management is required to evaluate whether there are
conditions or events, considered in the aggregate, that raise substantial doubt about Ann Arbor Area
Community Foundation’s ability to continue as a going concern within one year after the date that the
financial statements are available to be issued.

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Auditor’s Responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole
are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report
that includes our opinion. Reasonable assurance is a high level of assurance but is not absolute
assurance and therefore is not a guarantee that an audit conducted in accordance with GAAS will
always detect a material misstatement when it exists. The risk of not detecting a material
misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve
collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
Misstatements are considered material if there is a substantial likelihood that, individually or in the
aggregate, they would influence the judgment made by a reasonable user based on the financial
statements.
In performing an audit in accordance with GAAS, we:
 Exercise professional judgment and maintain professional skepticism throughout the audit.
 Identify and assess the risks of material misstatement of the financial statements, whether due to
fraud or error, and design and perform audit procedures responsive to those risks. Such
procedures include examining, on a test basis, evidence regarding the amounts and disclosures
in the financial statements.
 Obtain an understanding of internal control relevant to the audit 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 Ann Arbor Area Community Foundation’s internal control.
Accordingly, no such opinion is expressed.
 Evaluate the appropriateness of accounting policies used and the reasonableness of significant
accounting estimates made by management, as well as evaluate the overall presentation of the
financial statements.
 Conclude whether, in our judgment, there are conditions or events, considered in the aggregate,
that raise substantial doubt about Ann Arbor Area Community Foundation’s ability to continue as
a going concern for a reasonable period of time.
We are required to communicate with those charged with governance regarding, among other
matters, the planned scope and timing of the audit, significant audit findings, and certain internal
control–related matters that we identified during the audit.

San Francisco, California

May 23, 2025

2
Financial Statements
 Ann Arbor Area Community Foundation
Statements of Financial Position
December 31, 2024 and 2023

2024 2023

ASSETS

Cash and cash equivalents $ 1,536,922 $ 1,789,458

Pledges receivable, net 582,200 481,152
Investments 213,171,419 198,675,612
Mission-related investments 6,089,178 4,641,000
Investments, closely held company 562,500 -
Charitable remainder unitrust 1,645,116 1,520,501
Property, plant, and equipment, net 3,618,213 965,717

Total assets $ 227,205,548 $ 208,073,440

LIABILITIES AND NET ASSETS

LIABILITIES
Accounts payable $ 71,948 $ 48,044
Grants payable 177,810 403,109
Liability to life beneficiaries of planned gifts 511,223 500,795
Annuity payable 104,549 108,821
Other liabilities 90,972 54,374
Assets held for others:
Endowed 5,795,323 5,179,366
Non-endowed - 1,336

Total liabilities 6,751,825 6,295,845

NET ASSETS
Without donor restrictions 218,737,630 200,276,737
With donor restrictions 1,716,093 1,500,858

Total net assets 220,453,723 201,777,595

Total liabilities and net assets $ 227,205,548 $ 208,073,440

See accompanying notes.

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 Ann Arbor Area Community Foundation
Statements of Activities and Changes in Net Assets
Years Ended December 31, 2024 and 2023

2024 2023
Without Donor With Donor Without Donor With Donor
Restrictions Restrictions Total Restrictions Restrictions Total

REVENUE, GAINS (LOSSES),

AND OTHER SUPPORT
Gifts, grants, and pledges $ 5,864,473 $ 575,000 $ 6,439,473 $ 4,547,535 $ 797,896 $ 5,345,431
Net realized and unrealized
gains on investments 20,654,543 - 20,654,543 23,773,378 - 23,773,378
Rental Income 114,277 - 114,277 - - -
Interest and dividends 3,857,583 - 3,857,583 3,211,829 - 3,211,829
Change in value of charitable
remainder trust and deferred
gifts receivable - (78,016) (78,016) - (89,871) (89,871)
Net assets released from
restrictions 281,749 (281,749) - 539,109 (539,109) -

Total revenue, gains (losses),

and other support 30,772,625 215,235 30,987,860 32,071,851 168,916 32,240,767

EXPENSES
Program services:
Grants 8,940,782 - 8,940,782 8,521,643 - 8,521,643
Programs and grants
administration 768,612 - 768,612 815,009 - 815,009

Total program services 9,709,394 - 9,709,394 9,336,652 - 9,336,652

Support services:
Management and general 1,631,682 - 1,631,682 1,345,871 - 1,345,871
Fundraising 970,656 - 970,656 647,185 - 647,185
Total support services 2,602,338 - 2,602,338 1,993,056 - 1,993,056

Total expenses 12,311,732 - 12,311,732 11,329,708 - 11,329,708

NET CHANGE IN NET ASSETS 18,460,893 215,235 18,676,128 20,742,143 168,916 20,911,059
NET ASSETS, beginning of year 200,276,737 1,500,858 201,777,595 179,534,594 1,331,942 180,866,536
NET ASSETS, end of year $ 218,737,630 $ 1,716,093 $ 220,453,723 $ 200,276,737 $ 1,500,858 $ 201,777,595

See accompanying notes.

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 Ann Arbor Area Community Foundation
Statement of Functional Expenses
Year Ended December 31, 2024

Program
Services and Support Services
Community Management
Services and General Development Total

Salaries and wages $ 358,692 $ 890,746 $ 437,932 $ 1,687,370

Payroll taxes and
fringe benefits 68,204 169,373 83,272 320,849

Total salaries and

related expenses 426,896 1,060,119 521,204 2,008,219

Advertising - 513 42,340 42,853

Bad debt - - 2,100 2,100
Conferences and meetings 19,259 33,071 26,855 79,185
Depreciation 19,269 47,326 21,788 88,383
Donor services 10,401 24,943 76,457 111,801
Dues and subscriptions - 8,710 2,780 11,490
Events 2,619 110 79,395 82,124
Grants 8,940,782 - - 8,940,782
Insurance - 21,865 - 21,865
Impact investing 101 - - 101
License and regulatory fees - 32,957 - 32,957
Meals 68 5,737 - 5,805
Miscellaneous - 478 11,330 11,808
Occupancy 35,076 86,150 39,662 160,888
Postage 77 1,249 1,267 2,593
Professional fees 198,088 168,101 79,716 445,905
Supplies 9,664 20,897 10,160 40,721
Tech licenses and fees 25,251 62,017 29,031 116,299
Telephone 352 863 397 1,612
Website - 3,792 1,873 5,665
Interest 21,491 52,784 24,301 98,576

Total expenses $ 9,709,394 $ 1,631,682 $ 970,656 $ 12,311,732

See accompanying notes.

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 Ann Arbor Area Community Foundation
Statement of Functional Expenses
Year Ended December 31, 2023

Program
Services and Support Services
Community Management
Services and General Development Total

Salaries and wages $ 365,570 $ 756,048 $ 291,573 $ 1,413,191

Payroll taxes and
fringe benefits 74,551 154,181 59,461 288,193

Total salaries and

related expenses 440,121 910,229 351,034 1,701,384

Advertising 222 1,500 31,653 33,375

Bad debt - - 18,628 18,628
Conferences and meetings 18,006 45,084 19,169 82,259
Depreciation 12,656 30,345 9,212 52,213
Donor services 9,272 6,443 53,895 69,610
Dues and subscriptions 2,949 5,838 6,452 15,239
Events 4,469 - 43,099 47,568
Grants 8,521,643 - - 8,521,643
Insurance - 15,808 - 15,808
Impact investing 72,336 - - 72,336
License and regulatory fees 6,234 5,494 - 11,728
Meals - 11,745 - 11,745
Miscellaneous 81 1,765 8,212 10,058
Occupancy 8,660 20,765 6,305 35,730
Postage 11 1,499 1,649 3,159
Professional fees 173,007 130,177 36,683 339,867
Supplies 7,983 17,894 5,613 31,490
Tech licenses and fees 58,633 139,504 46,305 244,442
Telephone 369 885 269 1,523
Website - 896 9,007 9,903

Total expenses $ 9,336,652 $ 1,345,871 $ 647,185 $ 11,329,708

See accompanying notes.

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 Ann Arbor Area Community Foundation
Statements of Cash Flows
Years Ended December 31, 2024 and 2023

2024 2023

CASH FLOWS FROM OPERATING ACTIVITIES

Net change in net assets $ 18,676,128 $ 20,911,059
Adjustments to reconcile increase in net assets to net
cash used in operating activities:
Depreciation 88,383 52,213
Noncash contributions of securities (562,500) -
Write offs of uncollectible receivables 2,100 18,628
Noncash charitable remainder unitrust - (333,296)
Net unrealized gain on investment (10,773,483) (24,786,883)
Net realized gain on investments (12,312,382) (994,060)
Changes in operating assets and liabilities:
Pledges receivable (103,148) 236,172
Trust receivable (124,615) (119,217)
Accounts payable and other liabilities 60,502 21,262
Grants payable (225,299) 242,038
Annuity payable (4,272) (4,827)
Assets held for others, endowed 615,957 773,496
Assets held for others, non-endowed (1,336) 110
Liability to life beneficiaries of planned gifts 10,428 28,799

Net cash used in operating activities (4,653,537) (3,954,506)

CASH FLOWS FROM INVESTING ACTIVITIES

Purchase of property and equipment (2,740,879) (40,030)
Purchases of investments (47,500,959) (19,064,080)
Proceeds from sales and maturities of investment 55,716,017 24,689,631
Community impact notes issued (1,073,178) (2,500,000)
Repayments of mission-related investments - 250,000

Net cash provided by investing activities 4,401,001 3,335,521

NET CHANGE IN CASH AND CASH EQUIVALENTS (252,536) (618,985)

CASH AND CASH EQUIVALENTS, beginning of year 1,789,458 2,408,443

CASH AND CASH EQUIVALENTS, end of year $ 1,536,922 $ 1,789,458

SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING

AND FINANCING ACTIVITIES
Noncash contributions $ 562,500 $ -

See accompanying notes.

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 Ann Arbor Area Community Foundation
Notes to Financial Statements

Note 1 – Nature of Activities

The Ann Arbor Area Community Foundation (the Community Foundation or AAACF) enriches the quality
of life in its region through its knowledgeable leadership, engaged grantmaking, and creative partnerships
with donors to make philanthropic investments and build endowment.

Note 2 – Significant Accounting Policies

Basis of accounting – The financial statements of the Community Foundation have been prepared
under accounting principles generally accepted in the United States of America for not-for-profit
organizations (“GAAP”). References to fiscal years 2024 and 2023 refer to the years ended
December 31, 2024 and 2023, respectively.

Use of estimates – The preparation of the financial statements in conformity with GAAP requires
management to make estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported amounts of revenues and expenses
during the reporting period. Accordingly, actual results could differ from these estimates.

Financial statement presentation – The Community Foundation has determined that the use of fund
accounting to segregate assets, liabilities, net assets, income, and expenses, although not required by
accounting standards, is a meaningful practice to continue. While not presented in these financial
statements, internally the Community Foundation utilizes eight fund types to segregate activities as
follows:

 Community impact – Also known as “unrestricted” funds, these are net assets that are not subject
to donor- or Board-imposed restrictions.

 Field of impact – Resources used to support specific areas, such as community development, the
performing arts, health care, environmental preservation, education, services for the elderly, or
programs for youth.

 Scholarship – Resources used to help area students complete their education.

 Donor advised – Resources for which the donors are active participants in the giving process,
sharing their insights and preferences with the Community Foundation’s trustees as fund
distributions are made.

 Non-profit endowments – Resources for which the donors specify certain charities as recipients of
their gifts. Funds received directly from not-for-profit organizations for their own endowment fund
are a subset of this category. Such funds are referred to as “agency” endowment funds and shown
as a liability.

 Special – This fund category is used to account for non-endowed gifts and grants received by the
Community Foundation. Such funds allow for distributions of both income and principal.

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 Ann Arbor Area Community Foundation
Notes to Financial Statements

 Trust – This fund type includes a charitable remainder unitrust gift and a charitable gift annuity.

 Administrative – Resources used to provide financial support for the Community Foundation’s
day-to-day programs and operations.

Description of net assets – Net assets are classified based on existence or absence of donor-imposed
restrictions as follows:

Net assets without donor restrictions are defined as that portion of net assets that has no use or time
restrictions. The bylaws of the Community Foundation include a variance provision giving the Board of
Trustees (the Board) the power to modify any restriction or condition on the distribution of funds for any
specified charitable purpose or to specified organizations if, in the sole judgment of the Board (without the
necessity of the approval of any other party), such restriction or condition becomes, in effect, incapable of
fulfillment, or inconsistent with the charitable needs of the community or area served. Based on that
provision, the Community Foundation classifies contributions, except as noted below, as net assets
without donor restrictions for financial statement presentation.

The Board has designated, from net assets without donor restrictions, net assets for Board-designated
endowments. These Board-designated endowments distribute an annual payout based on the
Board-approved spending policy which is used to provide funding for community impact, administrative,
scholarship, non-profit endowment, and field of impact funds as described above.

Net assets with donor restrictions are defined as that portion of net assets that consist of a restriction on
the specific use or the occurrence of a certain future event. Contributions unconditionally promised,
including irrevocable planned gifts, which are scheduled to be received more than one year in the future,
are recorded at fair value, classified as net assets with donor restrictions until the funds are received, and
are discounted at a rate commensurate with the risk. The Community Foundation also receives grants
from charitable foundations and local agencies for initiatives and special projects for which purpose
restrictions apply. Such grants and contributions are recorded as net assets with donor restrictions until
the purpose restrictions are met, at which time the assets are reclassified to net assets without donor
restrictions and reported as net assets released from restrictions.

Cash and cash equivalents – For financial statement purposes, the Community Foundation considers
all cash accounts, except those being held for investment purposes, and all highly liquid debt instruments
purchased with a maturity of 90 days or less to be cash equivalents.

Investments – Investments are stated at fair value. Fair value is defined as the price that would be
received to sell an asset or paid to transfer a liability in an orderly transaction between willing market
participants at the measurement date. The Community Foundation determines fair value based on the fair
value hierarchy established under applicable accounting guidance which requires an entity to prioritize
the use of observable market-based inputs over the use of unobservable inputs when measuring fair
value. Investment return is recorded when earned and consists of interest, dividends, and realized and
unrealized gains/losses on investments. Investment income immediately reinvested is reflected
simultaneously as investment return and purchases of investments. Investment return is net of external
and direct internal investment expenses. Investments include holdings in closely held companies held as
a result of donations and AAACF’s mission-related investing operations.

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 Ann Arbor Area Community Foundation
Notes to Financial Statements

Investments are exposed to various risks, such as changes in interest rates or credit and market
fluctuations. Due to the level of risk associated with certain investment securities and the level of
uncertainty related to changes in the value of investment securities and other investments, it is at least
reasonably possible that changes in value in the near term could materially affect the Community
Foundation’s investments and total net assets balance.

Mission-related investments – As part of its strategy of using a portion of its investment assets to create
direct community impact in Washtenaw County, the Community Foundation makes investments in notes
receivable and equity investments with local organizations. These investments would not be made were it
not for the relationship of the investment to the Community Foundation’s programmatic mission;
therefore, investments must be consistent with the Community Foundation’s mission. Although the
underlying investments may or may not have a profit motive, that is not the sole focus of the investment
by the Community Foundation.

Community impact notes receivable are recorded at cost, less any principal payments the Community
Foundation has received from the borrower since the note purchase date. Allowance for credit losses
reflects management’s best estimate of losses inherent in the loan portfolio. This estimate is adjusted for
management’s assessment of current conditions, reasonable and supportable forecasts regarding future
events, and any other factors deemed relevant by the Community Foundation. The Community
Foundation believes historical loss information is a reasonable starting point from which to calculate the
expected allowance for credit losses. The Community Foundation has recorded no losses on the
investments made through December 31, 2024, and did not identify specific conditions or future events
which they felt required an adjustment to the allowance. Therefore, the allowance for credit losses was
zero for the years ended December 31, 2024 and 2023.

Equity investments in private companies, which are not traded on stock exchanges and do not have
readily determinable fair values, are investments in which a less-than-20-percent ownership interest is
held by the Community Foundation and the Community Foundation does not exert significant influence
over the investee. Equity Investments are accounted for at cost minus impairment, if any, plus or minus
changes resulting from observable price changes in orderly transactions for the identical or similar
investment of the same issuer, and the value is reflected in investments on the statements of financial
position. The Community Foundation evaluates these investments for impairment whenever events or
changes in circumstances indicate that the carrying value of an asset may not be recoverable. If the
estimated future cash flows (undiscounted and without interest charges) from the use of an asset are less
than the carrying value, then a charge would be recorded to reduce the related asset to its estimated net
realizable value.

Pledges receivable – Pledges receivable are unconditional promises to give that are expected to be
collected in future years. Management determines the allowance for doubtful accounts by evaluating
individual balances and assessing the likelihood of collections. Pledges receivable expected to be
realized in greater than one year are recorded at the present value of the revenue to be received using
discount rates appropriate for the time frame and risk level of the asset, when in the judgment of
management such a calculation would result in a meaningful discount. No such discount was deemed
necessary for the fiscal years ended December 31, 2024 and 2023.

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 Ann Arbor Area Community Foundation
Notes to Financial Statements

Bequests receivable and other deferred gifts receivable – Bequests receivable consist of gifts made
by means of wills and trusts for which the donor is deceased and are otherwise considered irrevocable.
Other deferred gifts receivable consist of other gifts for which payment is expected in the future. Deferred
gifts expected to be realized in greater than one year are recorded at the present value of the revenue to
be received using discount rates appropriate for the time frame and risk level of the asset, when in the
judgment of management such a calculation would result in a meaningful discount. No such discount was
deemed necessary for the fiscal year ended December 31, 2024. Bequests and other deferred gifts
receivable totaled $575,000 and $460,000 as of December 31, 2024 and 2023, respectively.

Split-interest gifts – The Community Foundation has an irrevocable remainder beneficiary interest in
charitable remainder trusts and charitable gift annuities whose maturities are based on the life
expectancies of the income beneficiaries.

Trusts and annuities in which the Community Foundation is both trustee and remainder beneficiary are
recorded at the fair value of the assets in the trusts. The corresponding liability for certain future amounts
due to beneficiaries is recorded at the fair value of the annuity payments. The present value discount rate
used for all trusts and annuities was 5% at December 31, 2024 and 2023, respectively.

Property, plant, and equipment, net – Property, plant, and equipment are recorded at cost when
purchased and at estimated fair value when donated. Depreciation on property and equipment is
calculated on a straight-line basis over the estimated useful lives of the assets, ranging from 3 to 40
years.

Agency transactions – The Community Foundation has adopted established standards for transactions
in which the Community Foundation accepts a contribution from a donor and agrees to transfer those
assets, the return on the investment of those assets, or both to an entity that is specified by the donor.
The Community Foundation refers to these types of resources as non-profit endowments, agency
endowments, or special funds and has accounted for these three types of funds in the non-profit
endowments and/or special fund categories. The statements of financial position refer to agency
endowment funds held within the non-profit endowment category as endowed assets held for others. The
statements of financial position also refer to non-endowed assets held for others. These assets represent
temporary special funds that have an impact on the community and facilitate the individual donors’
support of time-limited initiatives.

The agency fund agreements between the Community Foundation and the organizations allow for
distributions per the spending policy of the Community Foundation. The resources received and any
income generated from these resources, under these agreements, are not considered contributions to the
Community Foundation and, therefore, have been classified as a liability.

In 2024 and 2023, funds of $130,603 and $210,672, respectively, were received under agency
endowment fund agreements and were recorded directly to assets held for others in the statements of
financial position liability account.

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 Ann Arbor Area Community Foundation
Notes to Financial Statements

Accounting treatment for each type of fund

Non-profit endowment funds – Non-profit endowment funds are typically established with gifts from a
donor with a request to distribute the transferred assets, the return on the investment of those assets, or
both to a specified unaffiliated beneficiary. Additionally, the donor has granted the Community Foundation
variance power, which allows the Community Foundation the flexibility to ensure that the donor’s
charitable interest will be served in perpetuity. When accounting for additions to non-profit endowment
funds that are not agency endowment funds (see below), the Community Foundation records the assets
received or promised as contributed revenue.

Agency endowment funds – When a not-for-profit organization (NPO) establishes, with its own funds, a
non-profit endowment fund at the Community Foundation for its own benefit, the transfer of assets to the
Community Foundation is not contribution revenue and is accounted for as a liability. The Community
Foundation refers to such funds as “agency” endowment funds. The Community Foundation continues to
report the fund as an asset of the Community Foundation. Agency endowment funds totaled $5,795,323
and $5,179,366 at December 31, 2024 and 2023, respectively.

Contributions revenue – Contributions are recognized as revenue when received or unconditionally

promised. Unconditional promises to give that are expected to be collected in future years are recognized
at fair value based on discounted cash flows if, in the judgment of management, this adjustment would
result in a meaningful change in value. If calculated, the discount on these amounts is computed using
the rate applicable in the year the promises were received. Amortization of discount is recorded as
additional contribution revenue in accordance with donor-imposed restrictions, if any, on the original
contributions. Contributions of assets other than cash are recorded at their estimated fair value.
Contributions of public stock are recorded at the average of the high and low quoted market prices on the
date of donation.

In-kind donations – Significant donated property and equipment is recorded at estimated fair value at the
date of receipt. Contributed services, which require a specialized skill which the Community Foundation
would have paid for if not contributed, are recorded at their estimated fair value at the date the contributed
services are received. In-kind donations consist of materials and services given without remuneration. No
in-kind donations were received by the Community Foundation in 2024 and 2023.

Grants awarded – Grants are recognized when all conditions are met by grantees, all due diligence has
been completed, and they are approved by staff or board committee. Grant refunds are recorded as a
reduction of grant expense at the time the Community Foundation receives or is notified of the refund.
Grants payable represents the present value of grants to be paid over a year. As of December 31, 2024
and 2023, grants payable are to be paid in less than one year. As such, the Community Foundation has
evaluated that a present value discount is not necessary.

There were no conditional grants awarded as of December 31, 2024 and 2023.

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 Ann Arbor Area Community Foundation
Notes to Financial Statements

Functional allocation of expenses – The Community Foundation allocates expenses on a functional

basis to program and support services. Expenses that can be identified with a specific program or support
service are allocated directly according to their natural expenditure classification. Wages, payroll taxes,
and benefits are allocated based on an estimate of the time each staff member spends related to each of
the functional categories. Other expenses, such as certain administration and occupancy expenses, are
allocated based on estimates of overall staff time allocated to each functional category. Although
allocation methods used are considered reasonable, other methods could be used that would produce
different results. Management and general and development costs are shown as administrative costs
under support services on the statements of activities and changes in net assets. Additionally, advertising
costs are expensed as incurred. Advertising costs of $42,853 and $33,375 were recognized for the years
ended December 31, 2024 and 2023, respectively.

Tax status – The Internal Revenue Service has ruled that the Community Foundation is a public charity,
as described in Section 509(a)(1) of the Internal Revenue Code (“IRC”). Consequently, the Community
Foundation is exempt from federal income tax and certain excise taxes imposed on private foundations
under Section 501(c)(3) of the United States IRC.

Concentration of credit risk arising from deposit accounts – The Community Foundation maintains
cash balances at two institutions. Accounts at these institutions are insured by the Federal Deposit
Insurance Corporation (“FDIC”) in accordance with the program limit. In addition, the Community
Foundation uses a cash management product through its primary depository institution to diversify its
deposits with other banking institutions, keeping each additional deposit under the FDIC limit. At times,
the balances held in the primary deposit account may exceed federally insured amounts.

Reclassifications – Certain accounts in the prior year’s summarized information have been reclassified
for comparative purposes to conform with the presentation in the current-year financial statements.

Subsequent events – Subsequent events are events or transactions that occur after the statement of
financial position date but before the financial statements are available to be issued. The Community
Foundation recognizes in the financial statements the effects of all subsequent events that provide
additional evidence about conditions that existed at the date of the statement of financial position,
including the estimates inherent in the process of preparing the financial statements. The Community
Foundation’s financial statements do not recognize subsequent events that provide evidence about
conditions that did not exist at the date of the statement of financial position but arose after the statement
of financial position date and before the financial statements are available to be issued.

The Community Foundation has evaluated subsequent events through May 23, 2025, which is the date
the financial statements were available to be issued.

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 Ann Arbor Area Community Foundation
Notes to Financial Statements

Note 3 – Investments and Fair Value Measurements

Investments were composed of the following fair values at December 31:

2024 2023

Money market funds $ 966,934 $ 862,524

Fixed income 15,078,560 13,969,376
Equity securities 91,493,226 92,254,447
Alternative investments 105,632,699 91,589,265

Total $ 213,171,419 $ 198,675,612

Investment income and expenses were composed of the following for the years ended December 31:

2024 2023

Interest and dividends $ 3,857,583 $ 3,211,829

Net realized gains 12,312,382 994,060
Net unrealized gains 10,773,483 24,786,883
Investment fees (2,431,322) (2,007,565)

Total $ 24,512,126 $ 26,985,207

Accounting standards require certain assets and liabilities be reported at fair value in the financial
statements and provide a framework for establishing that fair value. The framework for determining fair
value is based on a hierarchy that prioritizes the inputs and valuation techniques used to measure fair
value.

The following tables present information about the Community Foundation’s assets and liabilities
measured at fair value on a recurring basis at December 31, 2024 and 2023, and the valuation
techniques used by the Community Foundation to determine those fair values.

Level 1 – Investments include marketable securities, exchange traded funds, and cash equivalents
that are carried at fair value based on observable quoted market prices in active markets and mutual
funds that are valued based on the net asset value per share computed by the fund manager and
validated by a sufficient level of observable activity (i.e., purchases and sales).

Level 2 – Inputs use other inputs that are observable, either directly or indirectly. These Level 2 inputs
include quoted prices for similar assets and liabilities in active markets and other inputs, such as
interest rates and yield curves, that are observable at commonly quoted intervals.

Level 3 – Unobservable inputs, including inputs that are available in situations where there is little, if
any, market activity for the related asset or liability. These Level 3 fair value measurements are based
primarily on management’s own estimates using pricing models, discounted cash flow methodologies,
or similar techniques taking into account the characteristics of the asset or liability. Level 3
investments include charitable remainder unitrust and liabilities associated with life beneficiaries of
planned gifts. Valuation techniques and inputs for each are described below.

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 Ann Arbor Area Community Foundation
Notes to Financial Statements

Financial instruments such as commingled funds, hedge funds, and private equity funds are valued at net
asset value (“NAV”) when an investment’s value is based on capital statements provided by entities that
qualify to calculate fair value using NAV per share or its equivalent.

Beneficial interests – The Community Foundation uses a discounted cash flow methodology to determine
fair value of the beneficial interests in charitable remainder trusts and to determine the liability associated
with split interest agreements. Inputs used for valuation of remainder interests in charitable trusts include
statements provided by the custodian, the life expectancy of the income beneficiaries, and an applicable
discount rate determined by the Community Foundation. The fair value of beneficial interests is reviewed
and updated annually by adjusting the current life expectancies of the income beneficiaries, applicable
discount rate, and market value of each trust. A decrease in the discount rate and a longer life
expectancy will decrease the fair value of the trust receivable.

In instances where inputs used to measure fair value fall into different levels in the above fair value
hierarchy, fair value measurements in their entirety are categorized based on the lowest level input that is
significant to the valuation. The Community Foundation’s assessment of the significance of particular
inputs to these fair value measurements requires judgment and considers factors specific to each asset
or liability.

The following tables present the balance of assets and liabilities carried at fair value on the statements of
financial position as of December 31, 2024 and 2023:

December 31, 2024

Quoted Prices in
Active Markets Significant
for Identical Other Significant Investments Balance,
Assets Observable Unobservable Measured at Net December 31,
(Level 1) Inputs (Level 2) Inputs (Level 3) Asset Value 2024
Assets:
Investments:
Money market funds:
Short-term investment $ 966,934 $ - $ - $ - $ 966,934
Mutual funds
Fixed income 15,078,560 - - - 15,078,560
Domestic equity 53,409,094 - - - 53,409,094
Foreign equity 38,084,132 - - - 38,084,132
Alternative investments 4,626,007 - - 101,006,692 105,632,699

Subtotal 112,164,727 - - 101,006,692 213,171,419

Charitable remainder unitrust - - 1,645,116 - 1,645,116

Total assets $ 112,164,727 $ - $ 1,645,116 $ 101,006,692 $ 214,816,535

Liability to life beneficiaries

of planned gifts $ - $ - $ 511,223 $ - $ 511,223

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 Ann Arbor Area Community Foundation
Notes to Financial Statements

December 31, 2023

Quoted Prices in
Active Markets Significant
for Identical Other Significant Investments Balance,
Assets Observable Unobservable Measured at Net December 31,
(Level 1) Inputs (Level 2) Inputs (Level 3) Asset Value 2023
Assets:
Investments:
Money market funds:
Short-term investment $ 862,524 $ - $ - $ - $ 862,524
Mutual funds
Fixed income 13,969,376 - - - 13,969,376
Domestic equity 51,261,168 - - - 51,261,168
Foreign equity 40,993,279 - - - 40,993,279
Alternative investments 6,067,429 - - 85,521,836 91,589,265

Subtotal 113,153,776 - - 85,521,836 198,675,612

Charitable remainder unitrust - - 1,520,501 - 1,520,501

Total assets $ 113,153,776 $ - $ 1,520,501 $ 85,521,836 $ 200,196,113

Liability to life beneficiaries

of planned gifts $ - $ - $ 500,795 $ - $ 500,795

Alternative investments may include redeemable interests in domestic equity, global equity, real estate,
real asset, private equity, and hedge funds. Alternative investments may be structured as limited
partnerships, limited liability companies, commingled trusts, and offshore investment funds. These
investments are based on their net asset value.

Investments in entities that calculate net asset value per share – The Community Foundation holds
shares or interests in investment companies at year end for which the fair value of the investment held is
estimated based on net asset value per share (or its equivalent) of the investment company. For assets
totaling $35,980,904 and $29,187,469 at December 31, 2024 and 2023, respectively, the underlying
assets held by these investment managers are primarily publicly traded equities and bonds for which net
asset value is readily determined on a daily basis. For the remaining investments in this category, the
underlying assets are primarily investments in privately owned assets for which current net asset value is
based on the best estimates of the management of those funds; realizable values for these assets may
vary from these estimates.

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 Ann Arbor Area Community Foundation
Notes to Financial Statements

The following table presents the unfunded commitments, redemption frequency, and notice period for
investments in entities that calculate fair value using net asset value per share or its equivalent:

December 31, 2024

Unfunded Redemption
Fair Value, Commitments, Redemption Redemption Restrictions
December 31, December 31, Frequency, Notice and Lock-up
2024 2024 if Eligible Period Period

Domestic equity fund $ 32,267,624 $ - Quarterly 60 days N/A

Foreign/global
equity funds 3,713,280 - Various Various Various
Hedge funds 5,336 - Various Various Various
Private natural resources
and real estate funds 16,839,405 17,765,849 Illiquid N/A N/A
Private equity funds 48,181,047 33,349,261 Illiquid N/A N/A

Total $ 101,006,692 $ 51,115,110

Equity funds are actively managed funds that invest in stocks and other securities issued by companies in
domestic and foreign markets. Funds in the domestic equity fund category provide participants with an
opportunity to invest in companies primarily located in the United States. Funds in the foreign/global
equity fund category invest primarily in diversified portfolios of either foreign or global equity securities.
Investments are held within a commingled trust or limited partnership structure.

Private natural resources and real estate funds include investments in funds that focus on two broad
categories:

1. Private natural resources funds are actively managed funds that invest primarily in private
companies involved in mining, energy and infrastructure, timber, agribusiness, natural resources,
and other hard assets. These investments are generally not redeemable from the fund manager.

2. Real estate funds are actively managed funds that invest in commercial properties in the U.S. and
abroad including, but not limited to, residential, multi-family, office, retail, hotel, industrial, and other
specialties. These investments are generally not redeemable from the fund manager.

Private equity funds are actively managed funds and fund-of-funds that invest in private and public
companies through a variety of strategies including, but not limited to, early and late-stage venture
capital, leveraged buyouts, distressed assets, special situations, and credit strategies. These investments
are generally not redeemable from the fund manager.

The Community Foundation also monitors the liquidity of its investment portfolio to be certain that cash
needs for any particular period of time can be met. At December 31, 2024 and 2023, the entire portfolio
was invested as follows: 54% and 59% in assets with daily redemption terms, 15% and 13% quarterly
redemption, and 31% and 28% illiquid, respectively. These figures are measured and monitored on a
quarterly basis.

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 Ann Arbor Area Community Foundation
Notes to Financial Statements

The table below presents information about significant unobservable inputs related to the categories of
Level 3 financial assets and liabilities at December 31, 2024:

Fair Value, Range

December 31, Valuation Unobservable Weighted
2024 Technique Inputs Average

Charitable remainder Fair value of

unitrust asset $ 1,645,116 trust investments in trust N/A

Liability to life Life expectancy of

beneficiaries Present value of the beneficiary 9.5
of planned gifts $ 511,223 outflows Discount rate 5 percent
Growth rate 5 percent

Note 4 – Mission-Related Investments

The Community Foundation’s mission-related investments include notes receivable and directly-held
noncontrolling equity interests in privately held companies of $6,089,178 and $4,641,000 for the years
ended December 31, 2024 and 2023, respectively.

The Foundation’s program-related investments during the years ended December 31, 2024 and 2023 are
as follows:

Beginning Notes Principal Term Ending

2024 balance originated repayments reclassifications balance

Short-term notes $ - $ 41,450 $ - $ 1,000,000 $ 1,041,450

Long-term notes 3,691,000 1,031,728 - (1,000,000) 3,722,728

Total $ 3,691,000 $ 1,073,178 $ - $ - $ 4,764,178

Beginning Notes Principal Term Ending

2023 balance originated repayments reclassifications balance

Short-term notes $ 250,000 $ - $ (250,000) $ - $ -

Long-term notes 1,191,000 2,500,000 - - 3,691,000

Total $ 1,441,000 $ 2,500,000 $ (250,000) $ - $ 3,691,000

The notes have various interest rates and maturity dates. Of the year ended December 31, 2024,
balance, $4,323,178 consisted of investments from the Community Foundation’s investment portfolio, and
$441,000 consisted of investments made directly by donor-advised funds. Payments on the notes will
consist of interest only, with the full principal balances due at maturity. Management determines the
allowance for credit losses by evaluating individual balances and assessing the likelihood of collections.
Management determined that an allowance for credit losses was not necessary as of December 31, 2024
and 2023.

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 Ann Arbor Area Community Foundation
Notes to Financial Statements

The following represents the net activity for the directly-held noncontrolling equity interests in privately
held companies:

2024 2023

Investment in privately held companies, beginning of year $ 950,000 $ -

Capital contribution 375,000 950,000

Investment in privately held companies, end of year $ 1,325,000 $ 950,000

These investments consist of preferred stock and are currently valued at cost and are included in
mission-related investments in the statement of financial position.

Note 5 – Pledges Receivable

The Community Foundation receives contributions from related parties, such as the Board members. For
the years ended December 31, 2024 and 2023, such contributions were $197,879 and $64,021,
respectively.

Pledges outstanding at December 31, 2024 and 2023, are expected to be collected as follows:

2024 2023

Pledges receivable in less than one year $ 579,700 $ 474,952

Pledges receivable in one to five years 2,500 6,200

Unconditional promises to give $ 582,200 $ 481,152

Note 6 – Property, Plant, and Equipment, Net

The cost of property, plant, and equipment is summarized as follows:

2024 2023

Buildings $ 3,214,881 $ 1,428,238

Furniture and fixtures 158,838 155,928
Computer equipment and software 57,939 51,116

Total cost 3,431,658 1,635,282

Less: accumulated depreciation (754,605) (669,565)

Land 941,160 -

Property and equipment, net $ 3,618,213 $ 965,717

Depreciation expense for 2024 and 2023 was $88,382 and $52,213, respectively.

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 Ann Arbor Area Community Foundation
Notes to Financial Statements

In February 2024, the Community Foundation purchased the office building located at 301 N. Main Street,
Ann Arbor, Michigan, for approximately $2,754,000. At the time of purchase, the allocation to land and
building was approximately $941,000 and $1,813,000, respectively.

To fund this purchase, the Board of Trustees approved a term loan of up to $3,000,000 and a revolving
loan of up to $1,250,000 from a Board-designated endowment fund to the operating fund at an interest
rate of 4.5% and a term of 30 years. The loans will be interest only for the first five years, after which the
principal and interest on the term loan will be due in accordance with the agreed upon payment terms.
The revolving loan is an interfund agreement, and as a result the transactions resulting from this
agreement are eliminated for financial statement purposes.

A portion of the building is leased to a third party.

The estimated useful life of the building is 39 years.

Note 7 – Grants Payable

The following summarizes grants approved, paid, and those committed for future payments for 2024 and
2023:

2024 2023

Grants payable, beginning of year $ 403,109 $ 161,071

Unconditional grants expensed 8,940,782 8,521,643
Payments made (9,166,081) (8,279,605)

Grants payable, end of year $ 177,810 $ 403,109

Note 8 – Charitable Remainder Unitrust

During the year ended December 31, 1999, the Community Foundation began to administer a planned
gift under a charitable remainder unitrust. A charitable remainder unitrust provides for the payment of a
fixed percentage of the net fair value of the trust’s assets, as determined each year. Upon termination of
the income beneficiary’s interest, the assets of the trust are to be transferred in the following amounts:
(1) $50,000 to an unrelated charity, and (2) the balance of the trust to the Community Foundation for
donor-designated purposes.

The portion of the planned gift attributable to the present value of the future benefits to be received by the
Community Foundation, $422,107, was recorded in the statements of activities and changes in net assets
as a contribution in the period in which the planned gift was established. The balance of the charitable
remainder unitrust assets was $1,269,868 and $1,187,205 at December 31, 2024 and 2023, respectively.

The present value of the estimated future payments to the beneficiary was redetermined in 2024 and
2023, using a discount rate of 5.0% and the applicable mortality tables, adjusting the liability and
recognizing loss (gain) of $69,789 and $82,197, respectively. The liability to life beneficiaries of planned
gifts was $511,223 and $500,795 for 2024 and 2023, respectively.

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 Ann Arbor Area Community Foundation
Notes to Financial Statements

During the year ended December 31, 2023, the Community Foundation was notified that it is an
irrevocable beneficiary of an additional charitable remainder unitrust. The portion of the planned gift
attributable to the present value of the future benefits to be received by the Community Foundation,
$333,296, was recorded in the statements of activities and changes in net assets as a contribution in the
period in which the Community Foundation was notified it was irrevocable.

Note 9 – Annuity Payable

Annuity payable is composed of a charitable gift annuity, which is a contract between the Community
Foundation and a donor in which the Community Foundation agrees to pay the donor (or other person
named by the donor) a lifetime annuity in return for a gift of cash or marketable securities. A liability is
recorded for the amount due to an income beneficiary of a charitable gift annuity based on the present
value of the estimated future payments to be distributed during the income beneficiary’s expected life.
Each year, the liability is remeasured by changes in actuarial assumptions, and changes in the liability
due to factors other than cash payments, such as changing life expectancies, are recorded as an
increase or decrease to revenue, gains, and other support.

Note 10 – Board-designated Endowments

The Community Foundation’s net assets without donor restrictions include Board-designated
endowments that would be classified as donor-restricted endowments, except that the Community
Foundation has variance power over those assets. Therefore, the Board treats these funds as Board-
designated endowments, and they are classified and reported based on the absence of donor-imposed
restrictions.

Interpretation of relevant law – The Board of the Community Foundation follows the Uniform Prudent
Management of Institutional Funds Act (“UPMIFA”), which is designed to help ensure the long-term
preservation of the corpus of endowed funds. As a result of this law and variance power provision rights,
the Community Foundation classifies within net assets without donor restrictions (a) the original value of
gifts donated to the designated endowment, (b) the original value of subsequent gifts to the designated
endowment, and (c) accumulations to the designated endowment. In accordance with UPMIFA, the
Community Foundation considers the following factors in making a determination to appropriate or
accumulate Board-designated endowment funds:

 The duration and preservation of the fund

 The purpose of the Community Foundation and the Board-designated endowment fund

 General economic conditions

 The possible effect of inflation and deflation

 The expected total return from income and the appreciation of investments

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 Ann Arbor Area Community Foundation
Notes to Financial Statements

 Other resources of the Community Foundation

 The investment policies of the Community Foundation

Changes in endowment net assets for the year ended December 31, 2024:

Without Donor
Restrictions

Net assets without donor restrictions, beginning of year $ 200,276,737

Investment return:
Investment income 3,857,583
Net increase (realized and unrealized) 20,654,543

Total investment return 24,512,126

Contributions, other support and net assets released from restriction 6,260,499
Appropriation for distributions and administrative fees (12,311,732)

Net assets without donor restrictions, end of year $ 218,737,630

Non-endowed net assets, end of year

Non-endowed donor advised funds $ 26,406,802
Other non-endowed assets 5,050,991

Total non-endowed net assets 31,457,793

Board-designated endowment net assets $ 187,279,837

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 Ann Arbor Area Community Foundation
Notes to Financial Statements

Changes in endowment net assets for the year ended December 31, 2023:

Without Donor
Restrictions

Net assets without donor restrictions, beginning of year $ 179,534,594

Investment return:
Investment income 3,211,829
Net decrease (realized and unrealized) 23,773,378

Total investment return 26,985,207

Contributions, other support and net assets released from restriction 5,086,644
Appropriation for distributions and administrative fees (11,329,708)

Net assets without donor restrictions, end of year $ 200,276,737

Non-endowed net assets, end of year

Non-endowed donor advised funds $ 25,320,824
Other non-endowed assets 4,617,714

Total non-endowed net assets 29,938,538

Board-designated endowment net assets $ 170,338,199

Return objective and risk parameters – The Community Foundation has adopted investment and
spending policies for its net assets that attempt to provide a predictable stream of funding to programs
supported by its net assets while seeking to maintain its purchasing power. Under this policy, as
approved by the Board, the Community Foundation has four objectives: (1) preserve and grow the assets
of the Community Foundation, (2) balance long-term growth with appropriate risk and liquidity, (3) achieve
market returns, and (4) comply with applicable laws, rules, and regulations.

Strategies employed for achieving objectives – To satisfy its long-term rate-of-return objectives, the
Community Foundation relies on a total return strategy in which investment returns are achieved through
both capital appreciation (realized and unrealized) and current yield (interest and dividends). The
Community Foundation targets a broadly diversified asset allocation model with performance benchmarks
based on each asset class.

Spending policy and how the investment objectives relate to spending policy – The Community
Foundation has a policy of appropriating for distributions and administrative fees each year up to 5% of its
endowed investment pool’s average fair value over the prior 16 quarters through September 30 of the
preceding fiscal year in which the distribution is planned. In establishing this policy, the Community
Foundation considered the long-term expected return on its investment portfolio. By limiting its spending
policy, over the long term, the Community Foundation expects the current spending policy to allow its net
assets to grow annually. This is consistent with the Community Foundation’s objective to maintain the
purchasing power of the investment portfolio and net assets, as well as to provide real growth through
new gifts and investment returns.

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 Ann Arbor Area Community Foundation
Notes to Financial Statements

The annual spending amount, as defined above, is used for both amounts available to grant from each
fund, as well as administrative fees charged to each fund. The administrative fee is calculated based on
the fund fee schedule approved by the Board and in effect at the time the calculation is made. Amounts
available to grant are calculated by subtracting the administrative fee from the total calculated spending
amount. Endowed funds that have met minimum contribution levels can make grants six months after
they are funded. Pass-through and donor-advised funds do not have the two-quarter restriction.
Administrative fees are charged to funds from the date that the fund is established, as prescribed by the
fund fee schedule in effect at the time. The annual spending amount is determined and recommended by
the finance committee and approved by the Board. In 2024 and 2023, the Community Foundation used
5% of the 16-quarter rolling average for the spending amount per the spending policy in effect at those
times.

Note 11 – Net Assets with Donor Restrictions

Net assets with donor restrictions are those assets resulting from contributions whose use by the
Community Foundation is limited by donor-imposed stipulations that either expire by the passage of time
or can be fulfilled and removed by actions of the Community Foundation pursuant to those stipulations.

Net assets with donor restrictions consist of the following:

2024 2023

Pledges receivable $ 7,200 $ 20,979

Bequests and other deferred gifts receivable 575,000 460,173
Charitable remainder unitrust, net 1,133,893 1,019,706

Total net assets with donor restrictions $ 1,716,093 $ 1,500,858

Note 12 – Defined Contribution Plan

The Community Foundation has a tax-sheltered retirement plan under IRC Section 403(b). Under this
plan, the Community Foundation made a discretionary profit-sharing contribution (2% of eligible wages for
the years ended December 31, 2024 and 2023) in addition to a match of 100% of each participant’s
contribution, up to a maximum of 3% of eligible wages for the years ended December 31, 2024 and 2023,
respectively. The Community Foundation incurred retirement plan expenses of $90,419 and $76,107
during 2024 and 2023, respectively.

Note 13 – Line of Credit

On March 12, 2021, the Community Foundation entered into a secured, revolving line of credit with its
custodial bank for $10,000,000 with an interest rate equal to the bank’s prime rate minus two percentage
points. It is collateralized by the funds held in the custodial bank account, which had a balance of
$85,016,424 as of December 31, 2024. The note requires monthly payments of interest only, with the
entire principal and unpaid interest due on demand. At December 31, 2024 and 2023, there was no
outstanding balance on this line of credit.

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 Ann Arbor Area Community Foundation
Notes to Financial Statements

Note 14 – Liquidity and Availability of Financial Resources

At December 31, 2024 and 2023, the Community Foundation has $6,442,130 and $4,783,074,
respectively, of financial assets available within one year to meet cash needs for general expenditures. At
December 31, 2024, the $6,442,130 consists of cash and cash equivalents of $2,099,422 and
contributions and notes receivable of $1,621,150, along with an approved endowment spend of
$2,721,558 for 2024 general expenditures. At December 31, 2023, the $4,783,074 consists of cash and
cash equivalents of $1,789,457 and contributions and notes receivable of $474,952, along with an
approved endowment spend of $2,518,665 for 2023 general expenditures. General expenditures include
administrative expenses, fundraising expenses and some program expenses expected to be paid in the
subsequent year. None of the financial assets included above are subject to donor or other contractual
restrictions that make them unavailable for general expenditure within one year of the statement of
financial position date. The contributions receivable included above are subject to implied time restrictions
but are expected to be collected within one year.

The Community Foundation has a goal of maintaining sufficient liquid financial assets, composed of cash
and short-term investments, on hand to meet six months of general expenditures, which are
approximately $1,567,600 and $1,353,800 for the years ended December 31, 2024 and 2023,
respectively. The Community Foundation has a policy to structure its financial assets to be available as its
general expenditures, liabilities, and other obligations come due. In addition, as part of its liquidity
management, the Community Foundation invests cash in excess of daily requirements in various
short-term investments, including certificates of deposit and short-term treasury investments.

26