NATIONAL UNDERGROUND RAILROAD FREEDOM CENTER

Significant Project / Organizational Issues for Discussion

June 5, 2007

ƒ Project funding model demonstrates that the project is not full-funded:

o Investment income used to reach full funding was supposed to be a
temporary solution while fundraising was completed - without the investment
income, NURFC has a $7.75M shortfall;
o Shortfall in capital campaign partly due to $3.8M in “Federal TBD” never
received (was supposed to be received in 2005) – it is still being used in their
funding model.

ƒ Operating revenue projections vary significantly from the plan:

o Earned Revenue was initially projected to be as high as 70% of the revenue
model – actuals are way off that target;
o City has recently reduced its $1M annual contribution to $800K;
o Other government support (projected at $3.7M annually) sources unconfirmed
NOTE: State funding included for operations – inconsistent with assertions
at the beginning of the project;
o Investment earnings that were projected as an income are an expense.

ƒ Financial statements and projections show an organization with sustainability issues:

o Some progress appears to have been made, however, the small
operating surplus is really a deficit after depreciation;
o When you deduct the one-time Bridge to the Future, 2006 would have
been a significant loss ($8M+);
o Projections call for cutting expenses by $3 – 4M (25-33%) without a clear
opportunity for that much to be cut;
o Government funding continues to be a year-to-year negotiation, and cannot
be confirmed in advance;
o Projecting post-“Bridge to the Future” annual private support at $2.8M based
on “similar institutions” – unknown assumptions.
o We do not see an operating endowment (NURFC referenced having one in a
recent phone conference, but the financial reports do not identify a source);
o Projections show a contracting organization – deficit as a percentage of
revenue and as a percentage of assets is increasing.

ƒ Income is not adequate to fund future capital expenditures:

o Based on useful life projections used by their accountant, capital
renewal/replacement/large maintenance anticipated beginning in year 3 of
operations (this year) and growing through the years – deferral is not a long-
term strategy;
o Pro forma projecting only $100K for capital improvements per year (only 2%
of depreciation expense, which is not shown on the pro forma);
o Caution: depreciation calculated on historical value, renewal/replacement
likely to be more expensive.

I:\nurfc request pdfs\NURFC Highlights for 5 June 2007 Meeting.doc

3/15/2011
ƒ Capital campaign should be completed:
o Complete it now, before it gets too late to raise interest in the facility and
before it runs into the capital renewal campaign that may be necessary in the
next few years;
o Use the ____________ in investment income toward operations;
o NOTE: Funds can be raised via written pledges, confirmed grants and
corporate donations, written guarantees from creditworthy sources (personal,
corporate, or local government), or a combination of these sources.

ƒ IMPORTANT: Contractual reporting obligations are being met intermittently – must

produce the following:
o Monthly fundraising pledge/receipts report;
o Quarterly investment account recap;
o Annual audited financial statements and updated financial projections;
o Annual tax certification, insurance certificates, etc.

I:\nurfc request pdfs\NURFC Highlights for 5 June 2007 Meeting.doc

3/15/2011