United Way Of The National Capital AreaWe have audited the accompanying statements of financial position of United Way of the National Capital Area (United Way NCA) as of June 30,

United Way Of The National Capital Area Financial Report June 30, 2012

Contents Management’s Certification 1

Independent Auditor’s Report 2 Financial Statements Statements Of Financial Position 3 Statement Of Activities – 2012 4 – 5 Statement Of Activities – 2011 6 – 7 Statement Of Functional Expenses – 2012 8 Statement Of Functional Expenses – 2011 9 Statements Of Cash Flows 10 Notes To Financial Statements 11 – 25

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Independent Auditor’s Report To the Board of Directors United Way of The National Capital Area Vienna, Virginia We have audited the accompanying statements of financial position of United Way of the National Capital Area (United Way NCA) as of June 30, 2012 and 2011, and the related statements of activities, functional expenses, and cash flows for the years then ended. These financial statements are the responsibility of United Way NCA’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits 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 financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of United Way of the National Capital Area as of June 30, 2012 and 2011, and the changes in its net assets and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

Frederick, Maryland November 13, 2012

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United Way Of The National Capital Area

Statements Of Financial PositionJune 30, 2012 And 2011

Assets 2012 2011

Cash And Cash Equivalents 9,709,086 $ 9,161,634 $ Investments (Notes 1 and 2) 21,488,868 22,557,371 Promises To Give, net (Note 3) 12,335,677 12,397,223 Accounts Receivable 103,055 55,141 Prepaid Expenses 163,118 134,663 Property And Equipment, net (Note 4) 881,661 273,319 Deposits 45,256 - Investments Held For Deferred Compensation Plan 34,500 34,500

44,761,221 $ 44,613,851 $

Liabilities And Net AssetsLiabilities

Accounts payable and accrued expenses 1,023,104 $ 1,192,807 $ Deferred revenue 9,526 100,000 Contributor designations payable (Note 5) 13,425,046 12,377,184 Community impact funds grants payable (Note 6) 1,281,298 871,119 Community impact initiatives payable (Note 7) 210,073 244,100 Defined benefit pension liability (Note 10) 4,857,094 3,131,242 Deferred compensation (Note 10) 51,500 34,500

20,857,641 17,950,952

Commitment And Contingencies (Notes 9 – 12)

Net AssetsUnrestricted

Operating 3,499,850 6,022,074 Board designated (Note 1) 18,387,446 17,767,446

21,887,296 23,789,520

Temporarily restricted (Note 1 and 13) 1,841,284 2,698,379 Permanently restricted (Notes 1 and 14) 175,000 175,000

23,903,580 26,662,899

44,761,221 $ 44,613,851 $

See Notes To Financial Statements.

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Statement Of ActivitiesYear Ended June 30, 2012(With Comparative Totals For 2011)

Temporarily Permanently 2011

Unrestricted Restricted Restricted Total Total

Campaign results and other support:

Campaign results:

Amounts raised and processed

by UWNCA 15,405,081 $ 2,253,393 $ -$ 17,658,474 $ 16,733,192 $

Amounts raised for UWNCA by CFC 14,256,696 - - 14,256,696 12,203,530

Campaign results 29,661,777 2,253,393 - 31,915,170 28,936,722

Provisions for cancellations and

uncollectible promises to give (Note 1) (1,246,963) - - (1,246,963) (667,599)

Net campaign results before

designations honored 28,414,814 2,253,393 - 30,668,207 28,269,123

Campaign designations honored:

Contributor designations to participating

agencies (22,575,829) - - (22,575,829) (19,951,108)

Third party processing fees (1,202,395) - - (1,202,395) (1,025,775)

Net contributors’

designations honored (23,778,224) - - (23,778,224) (20,976,883)

Net campaign results 4,636,590 2,253,393 - 6,889,983 7,292,240

Fee revenue from pledges 1,769,396 - - 1,769,396 1,708,018

Investment income (Note 2) 374,688 14,008 - 388,696 1,059,104

Other revenue (Note 8) 1,946,054 - - 1,946,054 309,218

Noncampaign contributions and grants 628,455 - - 628,455 421,410

Net assets released from restrictions 3,124,496 (3,124,496) - - -

Net campaign results and

other support 12,479,679 (857,095) - 11,622,584 10,789,990

2012

(Continued)

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Statement Of Activities (Continued)Year Ended June 30, 2012(With Comparative Totals For 2011)

Temporarily Permanently 2011

Unrestricted Restricted Restricted Total Total


other support 12,479,679 $ (857,095) $ -$ 11,622,584 $ 10,789,990 $

Expenses:

Program services:

Community impact funds grants

(Note 6) 1,964,293 - - 1,964,293 689,367

Community initiatives and events 1,015,318 - - 1,015,318 584,219

Community services 2,663,930 - - 2,663,930 2,467,276

5,643,541 - - 5,643,541 3,740,862

Supporting services:

Annual campaign fundraising 3,858,275 - - 3,858,275 3,496,464

Management and general 4,880,087 - - 4,880,087 3,523,370

8,738,362 - - 8,738,362 7,019,834

Total expenses 14,381,903 - - 14,381,903 10,760,696

Change in net assets (1,902,224) (857,095) - (2,759,319) 29,294

Net assets:

Beginning 23,789,520 2,698,379 175,000 26,662,899 26,633,605

Ending 21,887,296 $ 1,841,284 $ 175,000 $ 23,903,580 $ 26,662,899 $


2012

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Statement Of ActivitiesYear Ended June 30, 2011

Temporarily Permanently

Unrestricted Restricted Restricted Total

Campaign results and other support:

Campaign results:

Amounts raised and processed

by UWNCA 14,162,747 $ 2,570,445 $ -$ 16,733,192 $

Amounts raised for UWNCA by CFC 12,203,530 - - 12,203,530

Campaign results 26,366,277 2,570,445 - 28,936,722

Provisions for cancellations and

uncollectible promises to give (Note 1) (667,599) - - (667,599)

Net campaign results before

designations honored 25,698,678 2,570,445 - 28,269,123

Campaign designations honored:

Contributor designations to participating

agencies (19,951,108) - - (19,951,108)

Third party processing fees (1,025,775) - - (1,025,775)

Net contributors’

designations honored (20,976,883) - - (20,976,883)

Net campaign results 4,721,795 2,570,445 - 7,292,240

Fee revenue from pledges 1,708,018 - - 1,708,018

Investment income (Note 2) 1,057,876 1,228 - 1,059,104

Other revenue (Note 8) 309,218 - - 309,218

Noncampaign contributions and grants 421,410 - - 421,410

Net assets released from restrictions 329,263 (329,263) - -


other support 8,547,580 2,242,410 - 10,789,990

(Continued)

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Statement Of Activities (Continued)Year Ended June 30, 2011

Temporarily Permanently

Unrestricted Restricted Restricted Total


other support 8,547,580 $ 2,242,410 $ -$ 10,789,990 $

Expenses:

Program services:

Community impact funds grants

(Note 6) 689,367 - - 689,367

Community initiatives and events 584,219 - - 584,219

Community services 2,467,276 - - 2,467,276

3,740,862 - - 3,740,862

Supporting services:

Annual campaign fundraising 3,496,464 - - 3,496,464

Management and general 3,523,370 - - 3,523,370

7,019,834 - - 7,019,834

Total expenses 10,760,696 - - 10,760,696

Change in net assets (2,213,116) 2,242,410 - 29,294

Net assets:

Beginning 26,002,636 455,969 175,000 26,633,605

Ending 23,789,520 $ 2,698,379 $ 175,000 $ 26,662,899 $


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Statement Of Functional ExpensesYear Ended June 30, 2012(With Comparative Totals For 2011)

Program

Awards To Total Annual Total

Participating Community Program Campaign Management Supporting 2011

Agencies Services Services Fundraising And General Services Total Total

Community impact funds grants 1,964,293 $ -$ 1,964,293 $ -$ -$ -$ 1,964,293 $ 689,367 $

Other community initiatives and events 1,015,318 50,000 1,065,318 - - - 1,065,318 584,752

2,979,611 50,000 3,029,611 - - - 3,029,611 1,274,119

Operating expenses:

Salaries and benefits - 1,343,898 1,343,898 2,159,804 3,740,133 5,899,937 7,243,835 5,203,275

Occupancy - 304,890 304,890 373,789 70,033 443,822 748,712 737,133

Professional fees - 465,042 465,042 541,021 696,991 1,238,012 1,703,054 2,070,847

Advertising and marketing - 257,721 257,721 411,321 26,783 438,104 695,825 730,175

Dues - 131,097 131,097 153,869 22,772 176,641 307,738 339,348

Depreciation - - - - 256,220 256,220 256,220 79,735

Meetings, special events and travel - 49,908 49,908 124,060 24,616 148,676 198,584 183,803

Postage, supplies and other - 26,717 26,717 49,094 29,568 78,662 105,379 81,023

Insurance - 15,427 15,427 18,207 2,680 20,887 36,314 38,157

Staff development - 19,230 19,230 27,110 10,291 37,401 56,631 23,081

2,979,611 $ 2,663,930 $ 5,643,541 $ 3,858,275 $ 4,880,087 $ 8,738,362 $ 14,381,903 $ 10,760,696 $


Supporting ServicesProgram Services

2012

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Statement Of Functional ExpensesYear Ended June 30, 2011

Program

Awards To Total Annual Total

Participating Community Program Campaign Management Supporting

Agencies Services Services Fundraising And General Services Total

Community impact funds grants 689,367 $ -$ 689,367 $ -$ -$ -$ 689,367 $

Other community initiatives and events 584,219 533 584,752 - - - 584,752

1,273,586 533 1,274,119 - - - 1,274,119

Operating expenses:

Salaries and benefits - 983,593 983,593 2,058,331 2,161,351 4,219,682 5,203,275

Occupancy - 250,139 250,139 387,256 99,738 486,994 737,133

Professional fees - 768,877 768,877 232,499 1,069,471 1,301,970 2,070,847

Advertising and marketing - 212,824 212,824 497,611 19,740 517,351 730,175

Dues - 144,562 144,562 169,674 25,112 194,786 339,348

Depreciation - - - - 79,735 79,735 79,735

Meetings, special events and travel - 65,999 65,999 90,346 27,458 117,804 183,803

Postage, supplies and other - 17,092 17,092 31,332 32,599 63,931 81,023

Insurance - 16,422 16,422 18,933 2,802 21,735 38,157

Staff development - 7,235 7,235 10,482 5,364 15,846 23,081

1,273,586 $ 2,467,276 $ 3,740,862 $ 3,496,464 $ 3,523,370 $ 7,019,834 $ 10,760,696 $


Program Services Supporting Services

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Statements Of Cash FlowsYears Ended June 30, 2012 And 2011

2012 2011Cash Flows From Operating Activities

Change in net assets (2,759,319) $ 29,294 $ Adjustments to reconcile change in net assets to net cash

provided by (used in) operating activities:Net provision for allowance for doubtful promises to give 3,767 (141,362) Depreciation expense 256,220 79,735 Gift-in-kind property and equipment (366,742) - Realized and unrealized (gain) loss on investments 127,860 (502,772) Changes in assets and liabilities:

(Increase) decrease in:Accounts receivable (47,914) (54,941) Prepaid expenses (28,455) (9,955) Promises to give 57,779 287,189 Deposits (45,256) -

Increase (decrease) in:Accounts payable and accrued expenses (169,703) (67,183) Deferred revenue (90,474) 100,000 Defined benefit pension liability 1,725,852 225,909 Community impact funds grants payable 410,179 (1,316,212) Community impact initiatives payable (34,027) 6,968 Contributor designations payable 1,047,862 467,041 Deferred compensation 17,000 -

Net cash provided by (used in) operating activities 104,629 (896,289)

Cash Flows From Investing ActivitiesFixed asset purchases (497,820) (263,078) Purchase of investments (4,029,386) (11,198,180) Proceeds from sale of investments 4,970,029 10,382,745

Net cash provided by (used in) investing activities 442,823 (1,078,513)

Net increase (decrease) in cash and cash equivalents 547,452 (1,974,802)

Cash And Cash Equivalents:Beginning 9,161,634 11,136,436

Ending 9,709,086 $ 9,161,634 $


United Way Of The National Capital Area Notes To Financial Statements

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Note 1. Nature Of Activities And Significant Accounting Policies

Nature of activities: The mission of United Way of The National Capital Area (United Way NCA) is to mobilize individuals and organizations in the DC metro region to improve education, financial stability, and health – the building blocks of a good quality of life. United Way NCA is a not-for-profit organization locally governed by a board of community volunteers. The organization works to create the opportunity for all members of the community to have a better life. United Way NCA brings together the voices, expertise, and the resources to define, articulate, and implement a common agenda for change in the DC metro region. That is what it means to “Live United” in the National Capital Area. United Way NCA raises contributions from individuals, corporations, and other public and private institutions in the national capital area through an annual campaign. United Way NCA manages one of the largest annual development campaigns in the country, raising $31,915,170 and $28,936,722 for the years ended June 30, 2012 and 2011, respectively. Its development activities provide financial support to over 730 accredited member non-profit agencies providing essential services in the national capital area. Several thousand other 501(c)(3) organizations are also supported through the United Way campaigns. United Way NCA also encourages donors to contribute to community impact funds in each of the eight regions represented by United Way NCA. These regions are: Prince George’s County, Montgomery County, District of Columbia, Alexandria, Arlington, Fairfax-Falls Church, Prince William County, and Loudoun County. These funds are distributed in a competitive grant process by United Way NCA to agencies that provide services targeting the region’s most vulnerable residents. During fiscal year 2012, the Affordable Housing Initiative Committee continued to meet in order to structure three grant opportunities that will have a lasting impact in the fight to preserve and promote production of market-rate affordable housing in the national capital area. Two place-based advocacy and organizing grants were made concerning development of the Metro Purple Line Corridor and the Georgia Avenue corridor in DC and Maryland, and the third grant facilitated the creation of a regional affordable housing communications network. United Way NCA’s Child Wellness Initiative (CWI) for fighting childhood obesity focuses on the following three areas: affordable eating solutions, prevention and awareness of childhood obesity, and community partnerships. The Fun Fly & Fit program was developed as part of Child Wellness Initiative to help combat the childhood obesity crisis. The Fun Fly & Fit program is designed to achieve four goals: encourage children to have fun through fitness; educate children and caregivers about nutrition; promote lasting change for healthy eating; and provide program sites with the tools to succeed. The Earned Income Tax Credit (EITC) – and promoting its availability to as many eligible households as possible – remained a focus point for Financial Stability efforts throughout DC, Maryland and Virginia. By forging strategic partnerships with organizations throughout the United Way NCA service area we were able to promote the success of the most effective anti-poverty program available to lower income families. A summary of United Way NCA’s significant accounting policies follows: Basis of accounting: The accompanying financial statements are presented in accordance with the accrual basis of accounting, whereby, revenue is recognized when earned and expenses are recognized when incurred. Basis of presentation: The financial statement presentation follows the recommendations of the Financial Accounting Standards Board (FASB) Accounting Standards Codification (the Codification). As required by the Non-Profit Entities Topic of the Codification, United Way NCA is required to report information regarding its financial position and activities according to three classes of net assets: unrestricted net assets, temporarily restricted net assets, and permanently restricted net assets. United Way NCA’s financial statement presentation conforms with United Way Worldwide financial reporting guidelines.


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Note 1. Nature Of Activities And Significant Accounting Policies (Continued)

Cash and cash equivalents: Cash and cash equivalents include highly liquid short-term investments with original maturities of three months or less. Cash equivalents include investments in money market funds that are carried at cost plus accrued interest, which approximates fair value. Financial risk: United Way NCA maintains its cash in bank deposit accounts which, at times, may exceed federally insured limits. United Way NCA has not experienced any losses in such accounts. United Way NCA believes it is not exposed to any significant financial risk on cash. Investments: Investments with readily determinable fair values are reflected at fair market value. Donated securities are recorded at the fair value on the date of the gift. To adjust the carrying value, unrealized gains and losses are reported in the statements of activities as a component of investment income or loss. The United Way NCA invests in a professionally managed portfolio that contains fixed income bonds, publicly traded equities, a special purpose entity, and mutual funds. Such investments are exposed to various risks, such as market and credit. Due to the level of risk associated with such investments and the level of uncertainty related to changes in the value of such investments, it is at least reasonably possible that changes in risks in the near term could materially affect investment balances and the amounts reported in the financial statements. Promises to give: Contributions are recognized when the donor makes a written promise to give to United Way NCA that is, in substance, unconditional. Provision for uncollectible promises to give: Unconditional promises to give (pledges) are recognized as revenue in the period acknowledged. Conditional promises to give are recognized when the conditions on which they depend are substantially met. The provision for doubtful accounts is based on management’s evaluation of the collectability of promises to give. Management determines the allowance for doubtful accounts by regularly evaluating promises to give and considering financial condition, credit history, current economic conditions, and historical collection trends. Property and equipment: Property and equipment are recorded at cost and depreciated on the straight-line basis over their estimated lives, which range from three to ten years. United Way NCA capitalizes all property and equipment acquisitions greater than $1,000. Contributor designations payable: Certain campaign contributions which are made to United Way NCA are designated to be paid out to other agencies. These campaign contributions are recognized as campaign revenue and contributor designations expense. United Way NCA disburses the amounts to agencies when the pledge is collected. The balance of unpaid amounts designated to agencies remains as a liability. United Way NCA records campaign contributions, where the contributor pays the designated agency directly (pay directs). United Way NCA recognizes the contributions as revenue and designations paid as an expense of the campaign. Total pay directs for the years ended June 30, 2012 and June 30, 2011, were $4,914,691 and $3,848,038, respectively. It is United Way NCA’s policy to pay agencies based on cash received. Agencies are paid out by United Way NCA based on the cash received from donors who designate to that specific agency. Designations are paid to agencies net of the administrative fees. United Way NCA campaigns are named based on the year in which the official fall kick-off occurs. Each fall’s campaign solicits payroll deductions for the upcoming calendar year. Campaigns are closed when the final campaign has been audited and all donations that United Way NCA has received are paid out to agencies. The 2009 and all prior-year campaigns are officially closed.


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Unrestricted net assets: Unrestricted net assets are the net assets that are neither permanently restricted nor temporarily restricted by donor-imposed stipulations.

Operating net assets – Represent resources available for support of operations and mission related activities.

Board designated net assets – The board designated unrestricted net assets can only be used for purposes approved by the Board of Directors. The Board of Directors has established a reserve for the following purposes as of June 30, 2012 and 2011:

2012 2011

Community Impact Fund (CI) 1,667,446 $ 1,667,446 $ Child Wellness Initiative (CWI) - 100,000 Crisis Relief Fund (CRF) 100,000 - Spong Gift 720,000 - Activities related to the strategic mission of the organization for substantial future needs 15,900,000 16,000,000

18,387,446 $ 17,767,446 $

Restricted net assets: Restricted net assets are the net assets that are either permanently restricted or temporarily restricted by donor-imposed stipulations.

Temporarily restricted net assets – Represent resources restricted due to time and/or purpose. As of June 30, 2012 and 2011, there were temporarily restricted net assets of $1,841,284 and $2,698,379, respectively.

Permanently restricted net assets – Represent a charitable bequest restricted to invest in perpetuity for community impact funds and a charitable bequest restricted to invest in perpetuity for general operations. Interest earned is restricted for use to the community impact funds and general operations. As of June 30, 2012 and 2011, there were permanently restricted net assets of $175,000.

Campaign results and other support: Contributions from campaigns are recognized when promises to give are acknowledged in writing and are recorded as unrestricted, temporarily restricted, or permanently restricted, depending on the existence and/or nature of any donor restrictions. All donor-restricted support is reported as an increase in temporarily or permanently restricted net assets, depending on the nature of the restriction. When a restriction expires (that is, when a stipulated time restriction ends or purpose of the restriction is accomplished), temporarily restricted net assets are reclassified to unrestricted net assets and reported in the statements of activities as net assets released from restriction. Fee revenue from promises to give: Fee revenue is charged on designated donations to support United Way NCA’s fundraising and operational efforts. Donated services: No amounts have been reflected in the financial statements for donated services, as no objective basis is available to measure the value of such services; however, a substantial number of volunteers have donated significant amounts of time to the organization’s program services and its fundraising campaigns. Contributions of tangible assets are recognized at fair market value when received. The amounts reflected in the accompanying financial statements as other contributions are offset by like amounts included in expenses.


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Allocation of expenses by activities: The costs of providing United Way NCA’s various programs and services have been summarized on a functional basis in the statements of functional expenses. Accordingly, certain costs have been allocated among the benefiting programs and supporting services. Advertising: Advertising costs are expensed when incurred or when donated to United Way NCA. Advertising expense for the years ended June 30, 2012 and 2011, was $41,366 and $156,963, respectively. Income taxes: United Way NCA is generally exempt from federal income taxes under the provisions of Section 501(c)(3) of the Internal Revenue Code. In addition, United Way NCA qualifies for charitable contributions deductions and has been classified as an organization that is not a private foundation. Income that is not related to tax-exempt purposes, less applicable deductions, is subject to federal and state corporate income taxes. United Way NCA did not have any net unrelated business income for the years ended June 30, 2012 and 2011. 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, United Way NCA 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. 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% 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. Management evaluated United Way NCA’s tax positions and concluded that United Way NCA had taken no uncertain tax positions that require adjustment to the financial statements to comply with the provisions of this guidance. Generally, United Way NCA is no longer subject to income tax examinations by the U.S. federal, state or local tax authorities for years before 2009. Cash receipts policy: Donors give money all year round. Cash received is applied to the prior campaign balance if applicable, or the new campaign cycle. Donor intent is always reviewed. Use of estimates: The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amount of revenue and expenses during the reporting period. Actual amounts could differ from those estimates. Reclassification: Certain amounts in the 2011 financial statements have been reclassified to conform to the presentation of the 2012 financial statements. These reclassifications had no effect on previously reported change in net assets. Subsequent events: United Way NCA evaluated subsequent events through November 13, 2012, which is the date the financial statements were available to be issued.


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Note 2. Investments And Fair Value Measurements

Investments at June 30, 2012 and 2011, consist of the following:

2012 2011

Fixed income bonds 16,864,452 $ 17,875,402 $ Equities 4,434,183 4,505,743 Fixed income mutual fund 190,233 176,226

21,488,868 $ 22,557,371 $

Investments held for deferred compensation plan:Equity mutual fund 34,500 $ 34,500 $

Investment income at June 30, 2012 and 2011, consists of the following:

2012 2011

Interest income 537,397 $ 602,315 $ Unrealized gains (losses) (111,821) 255,124 Realized gains (losses) (16,039) 247,648 Dividends 104,085 67,488 Investment fees (124,926) (113,471)

388,696 $ 1,059,104 $

The Codification Topic on Fair Value Measurements requires disclosures of financial position in periods subsequent to initial recognition, whether the measurements are made on a recurring basis or a non-recurring basis, establishes a framework for measuring fair value in generally accepted accounting principles (GAAP), and expands disclosure about fair market value measurements. The Fair Value Topic applies to all assets and liabilities that are being measured and reported on a fair value basis. The Fair Value Topic requires new disclosure that establishes a framework for measuring fair value in GAAP and expands disclosure about fair value measurements. This statement enables the reader of the financial statements to assess the inputs used to develop those measurements by establishing a hierarchy for ranking the quality and reliability of the information used to determine fair values. The statement requires that assets and liabilities carried at fair value will be classified and disclosed in one of the following three categories:

Level 1 – Inputs to the valuation methodology are unadjusted quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date. Level 2 – Inputs to the valuation methodology include (a) quoted prices for similar assets or liabilities in active markets, (b) quoted prices for identical or similar assets or liabilities in inactive markets, (c) inputs other than quoted prices that are observable for the asset or liability, and (d) inputs that are derived principally from or corroborated by observable market data by correlation or other means. If the asset or liability has a specified (contractual) term, the Level 2 input must be observable for substantially the full term of the asset or liability. Level 3 – Inputs to the valuation methodology are unobservable for the asset or liability, significant to the fair value measurement, and include situations where there is little, if any, market activity for the asset or liability. The inputs into the determination of fair value are based upon the best information in the circumstances and may require significant judgment or estimation.


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Note 2. Investments And Fair Value Measurements (Continued)

The asset or liability’s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs. In determining the appropriate levels, United Way NCA performs a detailed analysis of the assets and liabilities that are subject to the Fair Value Topic. At each reporting period, all assets and liabilities for which the fair value measurement is based on significant unobservable inputs are classified as Level 3. The table below presents the balances of assets and liabilities measured at fair value on a recurring basis by level within the hierarchy as of June 30, 2012:

Level I Level II Level III TotalAssets:

Fixed income bonds:U.S. government intermediate duration -$ 11,165,351 $ -$ 11,165,351 $ U.S. government short-term duration - 4,166,621 - 4,166,621 U.S. bank corporate bonds 756,905 - - 756,905 Special purpose entity – foreign bank - 775,575 - 775,575

756,905 16,107,547 - 16,864,452

Equities:Non-U.S. equity 1,203,556 - - 1,203,556 Large cap core 1,355,177 - - 1,355,177 Large cap value 911,253 - - 911,253 Large cap growth 964,197 - - 964,197

4,434,183 - - 4,434,183

Fixed income mutual fund 190,233 - - 190,233 5,381,321 $ 16,107,547 $ -$ 21,488,868 $

Investments held for deferred compensation plan:

Non-U.S. equity mutual fund 34,500 $ -$ -$ 34,500 $

Liability:Deferred compensation -$ 51,500 $ -$ 51,500 $

2012

The equity securities and equity and fixed income mutual funds are publicly traded on the New York Stock Exchange and are considered Level 1 items. The fair value of corporate bonds is determined based on quoted market prices, when available, or market prices provided by recognized broker dealers; thus, they are categorized as Level 1. The government fixed income bonds and foreign bank fixed income bonds are priced based on their stated interest rates and quality ratings. The interest and quality ratings are observable at commonly quoted intervals for the full term of the instruments and are, therefore, considered Level 2 items. The deferred compensation liability is based on the fair market value of the deferred compensation plan assets that are observable inputs, but the liability is not publicly traded and is, therefore, classified as Level 2. There were no Level 3 investments as of June 30, 2012.


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Note 2. Investments And Fair Value Measurements (Continued)

The table below presents the balances of assets and liabilities measured at fair value on a recurring basis by level within the hierarchy as of June 30, 2011:

Level I Level II Level III TotalAssets:

Fixed income bonds:U.S. government intermediate duration -$ 10,743,539 $ -$ 10,743,539 $ U.S. government short-term duration - 4,790,745 - 4,790,745 U.S. bank corporate bonds 1,533,368 - - 1,533,368 Special purpose entity – foreign bank - - 807,750 807,750

1,533,368 15,534,284 807,750 17,875,402

Equities:Non-U.S. equity 1,342,623 - - 1,342,623 Large cap core 1,343,254 - - 1,343,254 Large cap value 915,356 - - 915,356 Large cap growth 904,510 - - 904,510

4,505,743 - - 4,505,743

Fixed income mutual fund 176,226 - - 176,226

6,215,337 $ 15,534,284 $ 807,750 $ 22,557,371 $

Investments held for deferred compensation plan:

Non-U.S. equity mutual fund 34,500 $ -$ -$ 34,500 $

Liability:Deferred compensation -$ 34,500 $ -$ 34,500 $

2011

The following table represents a reconciliation of the balance sheet amounts for the financial instruments measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the years ended June 30, 2012 and 2011.

2012 2011

Balance July 1, 807,750 $ -$ Transfer (to) from level 2 (807,750) 821,550 Interest / dividend income - 38,438 Unrealized loss - (52,238)

Balance June 30, -$ 807,750 $

The special purpose entity – foreign bank instrument was transferred from Level 3 to Level 2 in 2012 based on an increase in observable inputs such as more frequent trading resulting in more information available to assess the quality of the inputs. In 2011, the special purpose entity – foreign bank instrument was transferred from Level 2 to Level 3 based on a decrease of observable inputs such as less frequent trading resulting in less information available to assess the quality of the inputs


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Note 3. Promises To Give

All promises to give at June 30, 2012 and 2011, are due within one year. Included in promises to give are the following unconditional promises to give:

2012 2011

Promises to give 15,146,312 $ 15,204,091 $

Calculation for doubtful promises to give:Allowance for doubtful promises to give – beginning of year (2,806,868) (2,948,230) Write-off of doubtful promises to give 1,674,355 1,701,557 Current year provision for cancellations and uncollectible

promises to give (1,678,122) (1,560,195) Allowance for doubtful promises to give – end of year (2,810,635) (2,806,868)

Promises to give, net 12,335,677 $ 12,397,223 $

2012 2011

Provision for doubtful promises to give – current year campaign 1,678,122 $ 1,560,195 $ Provision for doubtful promises to give – prior years campaigns 1,132,513 1,246,673 Allowance for doubtful promises to give 2,810,635 $ 2,806,868 $

Note 4. Property And Equipment

Property and equipment and accumulated depreciation at June 30, 2012 and 2011, and depreciation expense for the years ended June 30, 2012 and 2011, consist of the following:

Estimated Accumulated Net DepreciationUseful Lives Cost Depreciation Property Expense

Property and equipment 3 to 10 years 1,171,365 $ 416,666 $ 754,699 $ 215,445 $ Website development 3 years 167,737 40,775 126,962 40,775

1,339,102 $ 457,441 $ 881,661 $ 256,220 $

Estimated Accumulated Net DepreciationUseful Lives Cost Depreciation Property Expense

Property and equipment 3 to 10 years 330,078 $ 201,221 $ 128,857 $ 79,735 $ Website development 3 years 144,462 - 144,462 -

474,540 $ 201,221 $ 273,319 $ 79,735 $

2012

2011


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Note 5. Contributor Designations Payable

Designations payable of $13,425,046 and $12,377,184 at June 30, 2012 and 2011, respectively, are considered payable out of the current year’s campaign funds and accordingly, have been included as liabilities in the accompanying statements of financial position.

Note 6. Community Impact Funds Grants Payable

During 2011, United Way NCA shifted the grant approval process from spring to fall. The change in timing now aligns the quarterly grant payments in the calendar year for which they were approved. In December 2011, the Board of Directors approved grants in the amount of $1,773,048 for payment distribution in calendar year 2012. Total community impact grants payable at June 30, 2012 and 2011, was $1,281,298 and $871,119, respectively, and the community impact funds grants expense for the years ended June 30, 2012 and 2011, was $1,964,293 and $689,367, respectively.

Note 7. Community Impact Initiatives Payable

The community impact initiatives match payable and Board approved initiative grant payable (composed of donor contributions and Board match) at June 30, 2012 and 2011, was $210,073 and $244,100, respectively. The total expense for community impact initiatives was $887,462 and $359,002 for the years ended June 30, 2012 and 2011, respectively.

Note 8. Other Revenue

Other revenue for the years ended June 30, 2012 and 2011, consists of the following:

2012 2011

Special events 80,018 $ 105,685 $ In-kind donations 415,004 189,085 Charitable bequests 1,435,831 - Other 15,201 14,448

1,946,054 $ 309,218 $

Note 9. Leases

In addition to the main operating offices of United Way NCA, the organization leases minimal office space in two regional county locations within the national capital area. Currently, the two leases are on year-to-year or month-to-month terms. Additionally, United Way NCA leases various office equipment with differing terms. During fiscal year 2012 United Way NCA entered into two new office leases with 10-year terms which commenced subsequent to June 30, 2012. Total future minimum lease payments under these leases that have initial or remaining noncancelable lease terms in excess of one year are as follows:

Years Ending June 30,

2013 394,024 $ 2014 569,766 2015 569,260 2016 583,215 2017 597,795 2018 and thereafter 3,677,710

6,391,770 $

Rent expense for the years ended June 30, 2012 and 2011, was $548,930 and $554,789, respectively.


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Note 10. Retirement and Deferred Compensation Plans

United Way NCA sponsors a defined contribution 403(b) plan. The defined contribution plan became effective on January 1, 2006, for all eligible employees. The plan allows employees to defer pre-tax contributions up to the limits established by the Internal Revenue Service (IRS). Employee contributions are matched at a rate of 200% for salary reductions up to 2%. For plan years beginning on and after January 1, 2009, United Way NCA will make a non-elective Safe Harbor contribution equal to 4% of an eligible employee’s compensation. Defined contribution plan contributions charged to the statements of activities for the years ended June 30, 2012 and 2011, were $251,857 and $180,056, respectively. United Way NCA established a deferred compensation plan under Section 457(b) in October 2006, providing certain key executives the opportunity to participate in a deferred compensation program. Under the program, participants elect to defer a portion of their salary and bonus and earn returns on these deferrals based on directed investment selections. Additionally, United Way NCA may elect to make discretionary contributions on behalf of the key executives. All deferral contributions are immediately vested without regard to additional service. Discretionary contributions charged to the statements of activities for the years ended June 30, 2012 and 2011, were $17,000 and $16,500, respectively. United Way NCA has a defined benefit pension plan that was frozen effective January 31, 2005. As of that date, no new participants will be enrolled in the plan. The defined benefit pension plan covers all employees hired before April 9, 2004, who have attained the age and length of service requirements of the plan. An employee’s pension benefit is based upon years of service, the employee’s final average salary, and any excess of the employee’s final average salary over the employee’s specified salary per the Social Security Average Annual Wage table. Plan assets, consisting of bonds, money market funds, and various other liquid investments, are held by Prudential Retirement. The funded status and amounts recognized in the accompanying statements of financial position relating to the plan as of June 30, 2012 and 2011, are as follows:

2012 2011At June 30,

Accumulated benefit obligation 9,346,182 $ 7,596,210 $ Fair value of plan assets 4,489,088 4,464,968

Minimum liability (4,857,094) $ (3,131,242) $

Projected benefit obligation 9,346,182 $ 7,596,210 $ Fair value of plan assets 4,489,088 4,464,968

Unfunded status (4,857,094) $ (3,131,242) $

Year ended June 30,United Way contributions 460,939 $ 217,075 $

Benefits paid 430,404 $ 350,331 $

Benefit costs 226,922 $ 510,222 $

Contributions: United Way NCA expects to contribute $730,000 to the plan in the fiscal year ending June 30, 2013.


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Note 10. Retirement and Deferred Compensation Plans (Continued)

Assumptions: Weighted-average assumptions used to determine net periodic pension cost and benefit obligations are as follows:

2012 2011

Discount rate 4.00% 5.50%Expected long-term rate of return on plan assets 6.25% 6.00%Rate of increase in compensation N/A N/A

United Way NCA determines the expected long-term rate of return on plan assets by taking into consideration the historical returns of various asset classes and the types of investments the plan is expected to hold. The plan’s weighted-average asset allocations at June 30, 2012 and 2011, by asset category, are as follows:

2012 2011

Equity securities 19% 0%Debt securities 81% 100%

100% 100%

Assets of the plan are invested in a pooled investment in a manner consistent with fiduciary standards of the Employees Retirement Income Security Act of 1974 (ERISA); namely, (a) the safeguards and diversity to which a prudent investor would adhere must be present; and (b) all transactions undertaken on behalf of the plan must be for the sole interest of plan participants and beneficiaries, to provide benefits in a prudent manner. Investment objectives of the plan also are to preserve the value of the plan’s assets and provide sufficient liquidity to plan benefit payment outflows and meet the plan’s requirements. The fair values of the United Way NCA’s plan assets at June 30, 2012, by asset category as defined in Note 2, are as follows: Asset Category Level I Level II Level III Total

Equity Securities (a) 870,932 $ -$ -$ 870,932 $ Debt securities (b) - 3,618,156 - 3,618,156 Total 870,932 $ 3,618,156 $ -$ 4,489,088 $

(a) The majority of this category includes domestic stocks.(b) The majority of this category includes a mix of short-term credit instruments of large cap companies.

It also includes government debt.


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Note 10. Retirement and Deferred Compensation Plans (Continued)

The fair values of the United Way NCA’s plan assets at June 30, 2011, by asset category as defined in Note 2, are as follows:

Asset Category Level I Level II Level III Total

Debt securities (a) -$ 4,464,968 $ -$ 4,464,968 $ Total -$ 4,464,968 $ -$ 4,464,968 $

(a) The majority of this category includes a mix of short-term credit instruments of large cap companies. It also includes government debt.

Estimated future benefit payments: The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid as follows: Years Ending June 30,

2013 388,763 $ 2014 411,797 2015 445,359 2016 478,756 2017 490,159 2018 – 2022 2,614,775

4,829,609 $

Note 11. Partnering Agreement

United Way NCA and the United Black Fund (UBF) have a long history of working together to improve the lives of people living in the national capital area. United Way NCA and UBF formalized their partnership with an agreement ratified on September 25, 2008. In order to support United Way NCA’s mission and community initiatives, and in exchange for UBF’s substantial support to United Way NCA and its campaigns, activities and initiatives, United Way NCA will make an annual program contribution to UBF. This is a long-term partnering agreement with a set evaluation at five-year intervals. United Way NCA’s program contribution to UBF for the years ended June 30, 2012 and 2011, was $319,152 and $289,367, respectively. Contributions to UBF are included in United Way NCA’s community impact funds (See Note 6).

Note 12. Employment Agreement

In June 2009, United Way NCA entered into an employment contract with a certain officer of the organization. In the event of termination other than for cause, the contract provides for severance payments for a period of up to 12 months.


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Note 13. Temporarily Restricted Net Assets

Temporarily restricted net assets include donor-restricted and other funds, which are only available for program activities, or general support designated for future years. Temporarily restricted net assets were released from restrictions by incurring expenses satisfying the program restriction or the expiration of the time restriction. Temporarily restricted net assets are available for the following purposes at June 30, 2012:

Balance, Balance,June 30, 2011 Additions Released June 30, 2012

Purpose restricted:Affordable Housing Initiative 134,505 $ 3,240 $ (76,223) $ 61,522 $ Child Wellness 333,800 107,345 (441,145) - Fun Fly & Fit 7,260 145,608 (142,300) 10,568 Education 110,108 96,113 (164,806) 41,415 Financial Stability 14,817 101,759 (65,088) 51,488 Health 8,928 111,939 (103,719) 17,148 Basic Needs - 64,277 (53,214) 11,063 Community Impact Fund 2,087,733 1,623,112 (2,078,001) 1,632,844 Endowment Earnings 1,228 14,008 - 15,236

2,698,379 $ 2,267,401 $ (3,124,496) $ 1,841,284 $

Temporarily restricted net assets are available for the following purposes at June 30, 2011:

Balance, Balance,June 30, 2010 Additions Released June 30, 2011

Purpose restricted:Affordable Housing Initiative 89,903 $ 44,602 $ -$ 134,505 $ Child Wellness 236,803 296,997 (200,000) 333,800 Fun Fly & Fit 129,263 7,260 (129,263) 7,260 Education - 110,108 - 110,108 Financial Stability - 14,817 - 14,817 Health - 8,928 - 8,928 Community Impact Fund - 2,087,733 - 2,087,733 Endowment Earnings - 1,228 - 1,228

455,969 $ 2,571,673 $ (329,263) $ 2,698,379 $


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Note 14. Permanently Restricted Net Assets

United Way NCA has interpreted the D.C.-enacted version of the Uniform Prudent 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, United Way NCA classifies 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. The remaining portion of the donor-restricted endowment fund that is not classified in permanently restricted net assets is classified as temporarily restricted net assets, until those amounts are appropriated for expenditure by the organization in a manner consistent with the standard of prudence prescribed by UPMIFA. In accordance with UPMIFA, United Way NCA considers the following factors in making a determination to appropriate or accumulate donor-restricted endowment funds:

The duration and preservation of the fund The purposes of United Way NCA and the donor-restricted endowment fund General economic conditions The possible effects of inflation and deflation The expected total return from income and the appreciation of investments Other resources of United Way NCA The investment policies of United Way NCA

Investment policy: The endowment fund is tracked separately, monitored by the Finance Committee, and invested in fixed income assets according to United Way NCA’s investment policy. Spending policy: The endowment fund shall annually distribute an amount equal to income and dividends earned in excess of any administrative fees to be spent in accordance with donor stipulations. The endowment investing and spending policy shall be reviewed annually by the Finance Committee. The committee may adjust the spending rate as it deems appropriate in order to fulfill the objectives outlined in the policy. All earnings for the endowment are reflected as temporarily restricted net assets, until appropriated for expenditure by the Board of Directors. The individual funds are as follows:

2012 2011

Community Impact Endowment 100,000 $ 100,000 $ Seymour Alpert Trust 75,000 75,000

175,000 $ 175,000 $


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Note 14. Permanently Restricted Net Assets (Continued)

The accumulated earnings and appropriations are as follows for the permanently restricted endowments as of June 30, 2012:

Temporarily PermanentlyRestricted Restricted Total

Endowment net assets, beginning of year 1,228 $ 175,000 $ 176,228 $ Contributions - - - Investment return, net 14,008 - 14,008 Appropriations - - -

Endowment net assets, end of year 15,236 $ 175,000 $ 190,236 $

2012

The accumulated earnings and appropriations are as follows for the permanently restricted endowments as of June 30, 2011:

Temporarily PermanentlyRestricted Restricted Total

Endowment net assets, beginning of year -$ 175,000 $ 175,000 $ Contributions - - - Investment return, net 1,228 - 1,228 Appropriations - - -

Endowment net assets, end of year 1,228 $ 175,000 $ 176,228 $

2011

United Way Of The National Capital AreaWe have audited the accompanying statements of financial position of United Way of the National Capital Area (United Way NCA) as of June 30,

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