Audited financial statements and supplementary information.
TO THE EXECUTIVE COMMITTEE AMERICAN METEOROLOGICAL SOCIETY Boston, Massachusetts
Report on the Financial Statements
We have audited the accompanying financial statements of American Meteorological Society which comprise the statement of financial position as of December 31, 2015, and the related statements of activities, changes in net assets, and cash flows for the year then ended, and the related notes to the financial statements.
Management's Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.
Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of American Meteorological Society as of December 31, 2015, and the changes in its net assets and its cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America.
Our audit was conducted for the purpose of forming an opinion on the financial statements as a whole. The accompanying schedule of expenditures of federal awards, as required by Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, is presented for the purposes of additional analysis and is not a required part of the financial statements. The accompanying schedule of net assets by restriction is presented for purposes of supplementary analysis and is also not a required part of the financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the financial statements. The information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated in all material respects in relation to the financial statements as a whole.
Other Reporting Required by Government Auditing Standards
In accordance with Government Auditing Standards, we have also issued our report dated August 1, 2016, on our consideration of American Meteorological Society's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering American Meteorological Society's internal control over financial reporting and compliance.
August 1, 2016
STATEMENT OF FINANCIAL POSITION Assets Current Assets: Cash $ 1,080,783 Accounts receivable from members, subscribers and 10,459 others Short-term investments 8,196,593 Prepaid expenses and other current assets 1,334,215 Inventory 174,891 Total Current Assets 10,796,941 Property and Equipment 11,487,274 Other Assets: Long-term investments 549,642 Total Assets $ 22,833,857 Liabilities and Net Assets Current Liabilities: Bank line of credit $ 500,000 Current portion of long-term debt 183,333 Accounts payable and accrued expenses 561,999 Deferred income 3,915,835 Total Current Liabilities 5,161,167 Long-Term Liabilities: Charitable gift annuity liability 152,651 Fair value of interest rate swap agreement 224,195 Long-term debt, net of current portion 4,384,722 Commitments -- Total Long-Term Liabilities 4,761,568 Total Liabilities 9,922,735 Net Assets Unrestricted 10,523,223 Temporarily restricted 1,745,196 Permanently restricted 642,703 12,911,122 Total Liabilities and Net Assets $ 22,833,857 The accompanying notes are an integral part of the financial statements. STATEMENT OF FINANCIAL POSITION Assets Current Assets: Cash $ 1,080,783 Accounts receivable from members, subscribers and 10,459 others Short-term investments 8,196,593 Prepaid expenses and other current assets 1,334,215 Inventory 174,891 Total Current Assets 10,796,941 Property and Equipment 11,487,274 Other Assets: Long-term investments 549,642 Total Assets $ 22,833,857 Liabilities and Net Assets Current Liabilities: Bank line of credit $ 500,000 Current portion of long-term debt 183,333 Accounts payable and accrued expenses 561,999 Deferred income 3,915,835 Total Current Liabilities 5,161,167 Long-Term Liabilities: Charitable gift annuity liability 152,651 Fair value of interest rate swap agreement 224,195 Long-term debt, net of current portion 4,384,722 Commitments -- Total Long-Term Liabilities 4,761,568 Total Liabilities 9,922,735 Net Assets Unrestricted 10,523,223 Temporarily restricted 1,745,196 Permanently restricted 642,703 12,911,122 Total Liabilities and Net Assets $ 22,833,857 The accompanying notes are an integral part of the financial statements. STATEMENT OF ACTIVITIES YEAR ENDED DECEMBER 31, 2015 Unrestricted Net Assets: Revenues, Gains and Other Support: Publications $ 7,995,664 Meetings and exhibits 3,313,821 Membership and communication 2,049,159 Other educational assistance 1,702,345 Federal financial assistance 1,233,707 Investment income 152,157 Other contributions 79,750 Net assets released from restrictions 70,932 Realized and unrealized (losses) on investments (198,628) Unrealized gain on interest rate swap agreement 16,507 16,415,414 Expenses: Program services: Publications 7,392,473 Education and policy programs 4,013,590 Meetings and exhibits 3,212,042 Membership and communication 2,546,324 Supporting services: Administrative and general 471,824 Interest expense 176,734 17,812,987 (Decrease) in Unrestricted Net Assets (1,397,573) Temporarily Restricted Net Assets: Contributions 63,489 Investment income 19,923 Net assests released from restrictions (70,932) Realized and unrealized (losses) on investments (10,268) Increase in Temporarily Restricted Net Assets 2,212 Permanently Restricted Net Assets: Investment income 1 Increase in Permanently Restricted Net Assets 1 (Decrease) in Net Assets (1,395,360) Net assets at beginning of year 14,306,482 Net Assets at End of Year $ 12,911,122 The accompanying notes are an integral part of the financial statements. STATEMENT OF CHANGES IN NET ASSETS YEAR ENDED DECEMBER 31, 2015 Temporarily Unrestricted Restricted Net Assets Net Assets Balance at January 1, 2015 $ 11,920,796 $ 1,742,984 $ Unrestricted Net Assets: Total unrestricted support, 16,415,414 -- including net assets released from restrictions Expenses 17,812,987 -- (Decrease) in Unrestricted Net Assets (1,397,573) Temporarily Restricted Net Assets: Contributions -- 63,489 Investment income -- 19,923 Net assets released from -- (70,932) restrictions Realized and unrealized (losses) on -- (10,268) investments Increase in Temporarily Restricted -- 2,212 Net Assets Permanently Restricted Net Assets: Investment income -- -- Increase in Permanently Restricted Net Assets Changes in Net Assets (1,397,573) 2,212 Balance at December 31, 2015 $ 10,523,223 $ 1,745,196 $ Permanently Restricted Total Net Net Assets Assets Balance at January 1, 2015 642,702 $ 14,306,482 Unrestricted Net Assets: Total unrestricted support, -- 16,415,414 including net assets released from restrictions Expenses -- 17,812,987 (Decrease) in Unrestricted Net Assets (1,397,573) Temporarily Restricted Net Assets: Contributions -- 63,489 Investment income -- 19,923 Net assets released from -- (70,932) restrictions Realized and unrealized (losses) on -- (10,268) investments Increase in Temporarily Restricted -- 2,212 Net Assets Permanently Restricted Net Assets: Investment income 1 1 Increase in Permanently Restricted 1 1 Net Assets Changes in Net Assets 1 (1,395,360) Balance at December 31, 2015 642,703 $ 12,911,122 STATEMENT OF CASH FLOWS YEAR ENDED DECEMBER 31, 2015 Cash Flows from Operating Activities: (Decrease) in net assets $ (1,395,360) Adjustments to reconcile change in net assets to net cash provided by operating activities: Depreciation 271,073 Unrealized and realized losses on investments 208,896 Unrealized gain on interest rate swap agreement (16,507) (Increase) decrease in: Accounts receivable (8,502) Prepaid expenses and other current assets 184,665 Inventory (12,972) (Decrease) increase in: Accounts payable and accrued expenses (97,260) Deferred income (298,891) Net Cash (Used in) Operating Activities (1,164,858) Cash Flows from Investing Activities: Acquisition of property and equipment (420,952) Proceeds from sale of investments 841,575 Purchase of investments (851,461) Net Cash (Used in) Investing Activities (430,838) Cash Flow from Financing Activities: Charitable gift annuity liability (7,825) Proceeds from bank line of credit 500,000 Payments on long-term debt (183,334) Net Cash Provided by Financing Activities 308,841 Net (Decrease) in Cash (1,286,855) Cash at beginning of year 2,367,638 Cash at End of Year $ 1,080,783 Supplemental Disclosure for Cash Flows Information Cash Paid During the Year for: Interest $ 176,734 Income taxes $--
Note 1. Summary of Significant Accounting Policies:
Nature of activities: American Meteorological Society was formed in 1919. Interdisciplinary in scope, the Society actively promotes the development and dissemination of information on the atmospheric and related oceanic and hydrologic sciences.
Basis of accounting: The financial statements of American Meteorological Society have been prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP) and, accordingly, reflect all significant receivables, payables and other liabilities.
Basis of presentation: Under U.S. GAAP, the Society 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.
Net asset categories are described as follows:
Unrestricted net assets include net assets that are not subject to donor-imposed stipulations.
Temporarily restricted net assets include net assets subject to donor-imposed stipulations that may or will be met by actions of the Society and/or the passage of time.
Permanently restricted net assets include contributions which require, by donor restrictions, that the principal be invested in perpetuity and only the income be made available for operations.
Deferred revenue: Revenues from membership dues and subscription fees are recognized over the periods to which the dues and fees relate. Revenues from page charges are recognized in the periods in which the page charges are earned.
Concentrations of credit risk: Financial instruments that potentially subject the Society to concentrations of credit risk consist primarily of cash (see Note 2) and temporary cash investments. By their nature, all such financial instruments involve risk, including the credit risk of nonperformance by counter parties and the maximum potential loss may exceed the amount recognized in the statement of financial position. At December 31, 2015, in management's opinion, there was no significant risk of loss from nonperformance of the counter parties to these financial instruments.
Donated services: No amounts have been reflected in the financial statements for donated services. The Society generally pays for services requiring specific expertise. However, many individuals volunteer their time and perform a variety of tasks that assist the Society with various programs and committee assignments.
Expense allocation: Expenses are charged to program and supporting services on the basis of periodic time and expense studies. Administrative and general expenses include those expenses that are not directly identifiable with any other specific function but provide for the overall support and direction of the Society.
Income tax status: The Society is exempt from federal income tax under Section 501(c)(3) of the Internal Revenue Code. However, income from certain activities not directly related to the Society's tax-exempt purpose is subject to taxation as unrelated business income.
In determining the recognition of uncertain tax positions, the Society applies a more-likely-than-not recognition threshold and determines the measurement of uncertain tax positions considering the amounts and probabilities of the outcomes that could be realized upon ultimate settlement with taxing authorities. As of December 31,2015, the Society has no uncertain tax positions that qualify for either recognition or disclosure in the financial statements. The Society is not currently under examination by any taxing jurisdiction. The Society's federal and state tax returns are generally open for examination for three years following the date filed.
Inventory: Inventory, consisting of periodicals and books, is stated at the lower of cost, using the first-in, first-out method, or market.
Investments: The Society carries investments in marketable securities with readily determinable fair values and all investments in debt securities at their fair values in the Statement of Financial Position. Unrealized gains and losses are reflected in the accompanying Statement of Activities.
Promises to give: Unconditional promises to give are recognized as revenues in the period received. Unconditional promises to give that are expected to be collected within one year are recorded at net realizable value. Unconditional promises to give that are expected to be collected in future years are recorded at the present value of their future cash flows. The discounts on those amounts are computed using risk-adjusted interest rates applicable to the years in which the promises are received. Amortization of the discounts is included in contribution revenue. Conditional promises to give are recognized when the conditions on which they depend are substantially met. Uncollectible promises to give are expected to be insignificant and an allowance for uncollectible promises to give is not considered necessary.
There were no unconditional promises to give owed to the Society at December 31, 2015.
Property and equipment: Property and equipment are carried at cost or, if donated, at the approximate fair value at the date of donation. Depreciation is computed using primarily the straight-line method over the estimated useful lives of the assets which range from five to thirty-nine years. Additions and betterments of $2,000 or more are capitalized, while maintenance and repairs that do not improve or extend the useful lives of the respective assets are expensed currently.
The Society's land and buildings are located in a historical district and its original building is classified as a historical structure. The original property is considered to be a historical treasure that is worth preserving perpetually. The Society has the capacity to protect and preserve essentially the service potential of the land and building, and is doing so.
Restricted and unrestricted revenue and support: Contributions received are recorded as unrestricted, temporarily restricted or permanently restricted support, depending on the existence or nature of any donor restrictions.
Contributions that are restricted by the donor are reported as an increase in unrestricted net assets if the restriction expires in the reporting period in which the revenue is recognized. All other donor-restricted contributions are reported as an increase in temporarily or permanently restricted net assets, depending on the nature of the restrictions. When a restriction expires, temporarily restricted net assets are released to unrestricted net assets.
Use of estimates: The preparation of financial statements in conformity with U.S. GAAP 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 amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Derivative financial instruments: The Society makes use of derivative financial instruments for the purpose of managing interest rate risk. Derivative financial instruments are recorded at fair value.
Fair Values of Financial Instruments: U.S. GAAP defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. U.S. GAAP also establishes a framework for the measurement of fair value, and enhances disclosures about fair value measurements.
Interest rate swap agreements are valued at the net present value of future cash flows attributable to the difference between the contractual variable and fixed rates in those agreements adjusted for nonperformance risk of both the counterparty and the Society. The carrying value of all other financial instruments approximates fair value.
Advertising: The Society uses advertising to promote its programs, bulletins, journals, books and education materials among the audiences it serves. The production costs of advertising are expensed as incurred.
Date of Management's Review: The Society has evaluated subsequent events through August 1, 2016 which is the date the financial statements were available to be issued.
Note 2. Cash:
The Society places its cash in institutions which are insured by the Federal Deposit Insurance Corporation (FDIC). At times during the year, the bank balances may be in excess of the FDIC insurance limit of $250,000 per institution. At December 31,2015, the Society's bank balances exceeded the FDIC limit by approximately $484,900.
Note 3. Investments:
The Society's investments at December 31, 2015, which are held and managed by outside custodians, consist of stocks, mutual funds and invested cash, including money market funds.
U.S. GAAP establishes a fair value hierarchy that prioritizes inputs to valuation techniques used to measure fair value. The three levels of the fair value hierarchy are as follows:
* Level 1 inputs are quoted prices (unadjusted) for identical investments in active markets.
* Level 2 inputs are quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets.
* Level 3 inputs are model derived valuations in which one or more significant inputs or significant value drivers are unobservable.
In certain cases, the inputs to measure fair value may result in an asset or liability falling into more than one level of the fair value hierarchy. In such cases, the determination of the classification of an asset or liability within the fair value hierarchy is based on the least determinate input that is significant to the fair value measurement. The Select Investment Program's assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability.
The following table summarizes the Society's financial assets measured at fair value on a recurring basis in accordance with U.S. GAAP as of December 31, 2015:
Level 1 Level 2 Level 3 U.S. corporate stock and $ 6,725,093 $ $ mutual funds Certificates of deposit 1,069,264 -- -- Money market funds 487,274 -- -- Planned giving assets 464,604 -- -- $ 8,746,235 $ $ Unrealized Cost Gains Fair Value Invested cash $ 487,274 $ $ 487,274 Mutual funds 4,862,803 1,844,090 6,706,893 Stocks 1 18,199 18,200 Gift annuities 487,742 (23,138) 464,604 Certificates of deposit 1,069,264 -- 1,069,264 $ 6,907,084 $ 1,839,151 $ 8,746,235 Included in the accompanying statement of financial position as follows: Unrealized Cost Gains Fair Value Short-term investments $ 6,352,503 $ 1,844,090 $ 8,196,593 Long-term investments 554,581 (4,939) 549,642 $ 6,907,084 $ 1,839,151 $ 8,746,235 The following schedule summarizes the investment returns and their classification in the statement of activities for the year ended December 31, 2015: Permanently Temporarily Restricted Restricted Unrestricted Investment income $ 1 $ 19,923 $ 152,157 Realized gains on -- 24,174 95,067 investments Unrealized gains (losses) -- (34,442) (293,695) on investments $ 1 $ 9,655 $ (46,471)
Note 4. Property and Equipment:
Property and equipment consists of the following: Land $ 3,651,675 Building and improvements 8,769,745 Office equipment and furniture 2,179,425 14,600,845 Less accumulated depreciation 3,113,571 $ 11,487,274
Note 5. Line of Credit:
The Society entered into a revolving line of credit agreement with Webster Bank National Association (the "Bank") in the amount of $500,000. As of December 31, 2015, there was $500,000 outstanding on the line of credit. The line of credit agreement contains financial and other covenants including a maximum leverage provision. At December 31, 2015, the Society was not in compliance with these covenants. However, the Society received a waiver from the bank of these covenants for the year ended December 31, 2015. The line of credit is secured and cross collateralized with the tax exempt bond financing and by a first security interest in all assets of the Society.
Note 6. Long-Term Debt:
The Society entered into a loan agreement with the Massachusetts Development Finance Agency, (the "Issuer"), a public instrumentality of the Commonwealth of Massachusetts in November 2010. The note was issued with bonds, by and among the Issuer, the Society, Webster Massachusetts Security Corporation, (the "Bondholder"), and Webster Bank National Association (the "Paying Agent"). The note is payable in monthly installments of $15,278 plus interest through November 2040. The interest rate on the note is set by the Paying Agent and will be reset from time to time. At December 31,2015, the interest rate was 3.7075%. The bond is secured by the land and building located at 44 Beacon Street, Boston, Massachusetts with a net book value of $7,169,634 at December 31, 2015.
The note is subject to the same covenants, security and cross collateralization as the line of credit (See Note 5).
Note 6. Long-Term Debt (Continued):
Maturities of long-term debt at December 31, 2015 consist of the following:
Year Ending December 31: 2016 $ 183,333 2017 183,333 2018 183,333 2019 183,333 2020 183,333 Thereafter 3,651,390 $ 4,568,055
Note 7. Split Interest Agreements:
The Society administers various charitable gift annuities. A charitable gift annuity provides for the payment of distributions to the grantor or other designated beneficiaries over the trust term (usually the designated beneficiary's lifetime). The portion of the gift annuity attributable to the present value of the future benefits to be received by the Society is recorded in the Statement of Activities as an unrestricted contribution in the period the gift annuity is established. Assets held in the various charitable gift annuities totaled approximately $464,600 at December 31, 2015 and are recorded at fair value in the Society's Statement of Financial Position.
On an annual basis, the Society revalues the liability to make distributions to the designated beneficiaries based on actuarial assumptions. The present value of the estimated future payments (approximately $152,600 at December 31, 2015) is calculated using a discount rate of 4.5% and applicable mortality tables.
Note 8. Interest Rate Swap Agreement:
U.S. GAAP requires certain derivative financial instruments to be recorded at fair value. An interest rate swap agreement is used by the Society to mitigate the risk of changes in interest rates associated with variable interest rate indebtedness. Under such arrangement, a portion of variable rate indebtedness is converted to fixed rates based on a notional principal amount.
The interest rate swap agreement is a derivative instrument that is required to be marked to market and recorded at fair value on the statement of financial position. At December 31,2015, the aggregate notional principal amount under the interest rate swap agreement, with a maturity of November 1, 2040, totaled $4,568,055. At December 31, 2015, the estimated fair value of the interest rate swap agreement was a liability of $224,195, and is classified on the statement of financial position as an interest rate swap agreement liability as of December 31, 2015.
As described in Note 3, U.S. GAAP establishes a fair value hierarchy that prioritizes inputs to valuation techniques used to measure fair value.
Level 1 Level 2 Level 3 Interest rate swap $-- $ 224,195 $--
The change in fair value on this interest rate swap agreement was a gain of $16,507 for the year ended December 31, 2015, which is reflected as an unrealized gain on interest rate swap agreement in the accompanying statement of activities.
Note 9. Compensated Absences:
It is the Society's policy to reasonably estimate each year the amount of accrued vacation compensation that it anticipates to pay in the future. As of December 31,2015, the Society has an accrued liability of approximately $526,000 related to this policy, which is reflected in the statement of financial position.
Note 10. Program and Supporting Services:
The following program and supporting services are included in the accompanying financial statements:
Membership and Communication
Includes all primary member services, including, among others, the maintenance of the membership database, the certification programs and the publication of the Bulletin.
Includes the publication of the Society's primary journals [Journal of the Atmospheric Sciences, Journal of Applied Meteorology and Climatology, Monthly Weather Review, Journal of Physical Oceanography, Journal of Atmospheric and Oceanic Technology, Journal of Climate, Weather and Forecasting, Weather, Climate and Society, Journal of Hydrometeorology, and Earth Interactions electronic journal).
Meetings and Exhibits
Includes presenting various meetings throughout the year including the annual meeting and the related exhibits. It also includes short courses offered at the various meetings.
Books and Educational Materials
Includes the production and sale of books published by the Society, distribution throughout North America of WMO publications and sale of educational material for pre-college teachers.
Education and Policy Programs
Includes federal funding and Society support of nationally recognized programs using the study of the atmosphere and ocean to enhance or create an interest in pre-college students in science and engineering. Programs include, among others, AMS/NOAA Cooperative Program for Earth System Education, AMS Summer Policy Colloquium 2015-2018, AMS Climate Studies and Research Opportunities in Space and Earth Sciences. Policy programs work to strengthen the connection between public policy and Earth system science and services by building policy research and by creating opportunities for policymakers and scientists to engage and exchange perspectives to foster better-informed policy decisions.
Administrative and General
Includes the functions necessary to maintain a portion of an equitable employment program; ensure an adequate working environment; provide coordination and articulation of the Society's program strategy through the Office of the Executive Director; secure proper administrative functioning of the Council; maintain competent legal services for the program administration of the Society; and manage the financial and budgetary responsibilities of the Society.
Note 11. Retirement Plan:
The Society has a contributory retirement plan covering substantially all full-time employees. This is a tax deferred annuity plan under Section 403(b) of the U.S. Internal Revenue Code. The plan allows eligible employees to contribute 5% of their compensation through a salary reduction agreement.
The Society contributes 10% of compensation for participating employees. The expense for this plan amounted to $526,386 for the year ended December 31, 2015.
Note 12. Commitments:
The Society leases office space and equipment under various operating leases through March 2027. Under the terms of the office space lease, the Society is obligated to pay escalation rental for certain operating expenses and real estate taxes. Rental expense under the leases amounted to $561,000 for the year ended December 31, 2015 (including charges for operating expenses and taxes). The following is a schedule of future minimum rentals under the leases at December 31, 2015:
Year Ending December 31: 2016 558,957 2017 571,241 2018 583,833 2019 596,739 2020 545,693 Thereafter 3,709,499 $ 6,565,962
Note 13. Endowment Funds:
In accordance with the Uniform Prudent Management of Institutional Funds Act (UPMIFA), the Society is required to act prudently when making decisions to spend or accumulate donor restricted endowment assets and in doing so to consider a number of factors including the duration and preservation of its donor restricted endowment funds. The Society classifies as permanently restricted net assets the original value of gifts donated to the permanent endowment. The remaining portion of the 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 Society in a manner consistent with the standard of prudence prescribed by UPMIFA.
The Society's endowment consists of approximately 65 individual funds established for a variety of purposes. Its endowment includes both donor-restricted endowment funds and funds designated by the Executive Committee to function as endowments. As required by generally accepted accounting principles, net assets associated with endowment funds including funds designated by the Executive Committee to function as endowments, are classified and reported based on the existence or absence of donor-imposed restrictions. When the donor's interest is not expressed in relation to the endowment fund, it is the policy of the Organization to record the income, interest, and dividends and accumulated appreciation/ depreciation in each endowment fund and appropriate expenditures from each fund in a prudent manner for the uses, benefits, purpose, and duration for which the endowment fund was established. As a result, the income earned each year for each endowment fund is reflected as either unrestricted, temporarily restricted or permanently restricted depending on the intent of the donor when the original gift was made.
Interpretation of Relevant Law: The Executive Committee of the Society has interpreted 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 on the donor-restricted endowment funds absent explicit donor stipulations to the contrary. As a result, the Society 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 is classified as temporarily restricted net assets until those amounts are appropriated for expenditure by the Society in a manner consistent with the standards of prudence prescribed by UPMIFA. In accordance with UPMIFA, the Society considers the following factors in making a determination to appropriate or accumulate donor-restricted endowment funds:
(1) The duration and preservation of the various funds.
(2) The purposes of the donor-restricted endowment funds.
(3) General economic conditions.
(4) The possible effect of inflation and deflation.
(5) The expected total return from income and the appreciation of investments.
(6) Other resources of the Society.
(7) The investment policies of the Society.
Return Objectives and Risk Parameters: The Society has adopted investment and spending policies approved by the Executive Committee for endowment assets that attempt to provide a predictable stream of funding to programs supported by its endowment funds while also maintaining the purchasing power of those endowment assets over the long-term.
Endowment assets include those assets of donor-restricted funds that the Society must hold in perpetuity or for a donor-specified period(s) as well as board-designated funds. Under this policy, as approved by the Executive Committee, the endowment assets are invested in a manner that is intended to contribute to the Society's total return objectives and preserve principal while maintaining a competitive yield as market conditions dictate.
Strategies Employed for Achieving Objectives: To satisfy its long-term rate-of-return objectives, the Society 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 Society targets a diversified conservative asset allocation including equity and marketable debt securities to achieve its long-term return objectives within prudent risk constraints.
Spending Policy and How the Investment Objectives Relate to Spending Policy: The Society's policy of appropriating for distributions of its endowment fund for scholarships, fellowships and other distribution of funds of approximately 3% to 5% is determined based on the donor's intentions and investment returns as well as taking into consideration the long-term expected return on its endowment, the nature and duration of the individual endowment funds, and the possible effects of inflation. Accordingly, over the long-term, the Society expects the current spending policy to allow its endowment to grow at a normal inflationary rate on an annual basis. This is consistent with the Society's objective to maintain the purchasing power of the endowment assets held in perpetuity or for a specific term as well as to provide additional growth through new gifts and investment return.
Endowment net assets composition by type of fund as of December 31, 2015: Board Temporarily Designated Restricted Donor-restricted endowment funds $ $ 1,638,805 Board-designated endowment funds 779,881 -- $ 779,881 $ 1,638,805 Permanently Restricted Total Donor-restricted endowment funds $ 642,703 $ 2,387,899 Board-designated endowment funds -- 779,881 $ 642,703 $ 3,167,780 Changes in endowment net assets for year ended December 31, 2015: Board Temporarily Designated Restricted Endowment net assets, beginning of year $ 1,422,902 $ 1,689,996 Investment return: Investment income 31,439 19,923 Net appreciation (depreciation) (16,511) (10,268) (realized and unrealized) Total investment return 1,437,830 1,699,651 Contributions 534,082 10,086 Appropriation of endowment assets for (1,192,031) (70,932) expenditure Endowment net assets, end of year $ 779,881 $ 1,638,805 Permanently Restricted Total Endowment net assets, beginning of year $ 642,702 $ 3,808,588 Investment return: Investment income 1 51,363 Net appreciation (depreciation) -- (26,779) (realized and unrealized) Total investment return 642,703 3,833,172 Contributions -- 597,571 Appropriation of endowment assets for -- (1,262,963) expenditure Endowment net assets, end of year $ 642,703 $ 3,167,780
Note 14. Restrictions on Net Assets:
Temporarily restricted net assets consists of contributions presently available for use, but expended only for the purposes specified by the donor. At December 31, 2015, temporarily restricted net assets consist of the following: Scholarship awards $ 1,210,930 Hydrology research 170,437 Charitable gift annuities 144,028 Remote sensing awards 99,407 Lecture series awards 50,000 Student travel awards 62,991 Student paper awards 7,403 $ 1,745,196
Note 14. Restrictions on Net Assets (Continued:
Permanently restricted net assets consist of endowment fund assets to be held indefinitely.
SUPPLEMENTARY INFORMATION SCHEDULE OF NET ASSETS BY RESTRICTION YEAR ENDED DECEMBER 31, 2015 Balances Receipts Expenditures January 1, and Other and Other 2015 Additions Deductions Unrestricted Net Assets: General $ 10,497,894 $-- $ 477,369 Board designated funds Education 907,622 -- 690,322 Rosen Gift Annuity 124,813 22,118 -- Development 94,328 209,237 210,609 Saltzman 84,124 1,005 5,145 Cooper 62,814 533 1,581 Scholarship 31,250 79,750 62,000 75th Endowment 41,472 287 -- Student Travel Fund 40,456 993 1,798 Kalnay Gift Annuity 20,755 5,375 3,030 Glahn 15,476 -- -- Witte Gift Annuity 7,987 6,463 1,541 Atlas 1,720 2,276 -- Fellowship (15,685) 324,335 305,170 Reeves 1,071 4,532 3,000 Roberts 2,154 -- -- Ooyama 1,518 527 -- Friday 684 255 -- Digiquartz 321 1 -- Hobbs 22 1 -- Total Unrestricted Net Assets $ 11,920,796 $ 657,688 $ 1,761,565 Appreciation (Depreciation) in Balances Fair Market December Total Value 31, 2015 Unrestricted Net Assets: General $ 10,020,525 $ (277,183) $ 9,743,342 Board designated funds Education 217,300 -- 217,300 Rosen Gift Annuity 146,931 (11,606) 135,325 Development 92,956 -- 92,956 Saltzman 79,984 (966) 79,018 Cooper 61,766 (129) 61,637 Scholarship 49,000 -- 49,000 75th Endowment 41,759 (173) 41,586 Student Travel Fund 39,651 (232) 39,419 Kalnay Gift Annuity 23,100 (2,271) 20,829 Glahn 15,476 -- 15,476 Witte Gift Annuity 12,909 11,773 Atlas 3,996 (1,136) 3,996 Fellowship 3,480 -- 3,480 Reeves 2,603 -- 2,603 Roberts 2,154 -- 2,154 Ooyama 2,045 -- 2,045 Friday 939 -- 939 Digiquartz 322 -- 322 Hobbs 23 -- 23 Total Unrestricted Net Assets $ 10,816,919 $ (293,696) $ 10,523,223 Balances Receipts Expenditures January and Other and Other 1, 2015 Additions Deductions Temporarily Restricted Net Assets: Scholarship awards: Orville $ 392,578 $ 2,662 5,000 Hagemeyer Unitrust 147,111 2,492 3,145 NWSA 133,045 263 10,000 Baum 82,975 480 5,000 Ooyama 70,438 200 2,000 David Johnson 64,284 797 3,145 Houghton 58,265 620 -- L. Johnson 56,240 2,433 2,000 Vonnegut-Schaefer 57,874 1,044 5,145 Roberts 49,440 6 2,000 Glahn 47,946 1,668 2,500 Friday 36,117 -- 2,500 Grau 34,861 6 5,000 Reed 18,442 97 -- Merewether 7,648 1 -- Milham 3,239 -- -- Hanks Scholarship 2,939 53 -- Wark 7,438 3,056 5,145 Namias 2,347 647 145 Hope 1,710 385 -- Digiquartz 500 -- -- Kreitzberg (792) 227 2,000 Murphy (2,181) 364 2,000 Schroeder (3,679) 688 5,000 Hydrology research: Horton 169,434 1,525 -- Charitable gift annuities: Gift Annuities 138,181 27,679 3,545 Remote sensing awards: Atlas 103,371 2,350 5,000 Lecture series awards: A. Gajdecki -- 50,000 -- Student travel awards: Wesley 34,859 1,588 408 K. Spengler 8,209 3,949 -- Moyer 8,341 2,201 -- Spengler 4,506 -- 254 Student paper awards: Geotis 4,268 102 -- Leviton 1,930 3 -- Hobbs 600 -- -- Eaton 500 -- -- Total Temporarily Restricted Net Assets $ 1,742,984 $ 107,586 $ 70,932 Permanently Restricted Net Assets: Scholarship awards: Wark $ 250,000 $-- $-- Schroeder 100,000 -- -- Hope 50,000 -- -- Namias 50,000 -- -- Murphy 43,650 -- -- Kreitzberg 40,740 -- - Houghton 25,000 -- -- Vonnegut-Schaefer 24,072 -- -- Jardine 15,401 -- -- Meisinger 12,295 -- -- Hanks Scholarship 5,000 -- -- Milham 5,000 -- -- Student paper awards and other Reed 12,112 -- -- Leviton 5,000 -- -- Geotis 3,620 -- -- Sverdrup 812 1 -- Total Permanently Restricted Net Assets $ 642,702 $ 1 $-- Appreciation (Depreciation) in Balances Fair Market December Total Value 31, 2015 Temporarily Restricted Net Assets: Scholarship awards: Orville $ 390,240 $ (1,042) $ 389,198 Hagemeyer Unitrust 146,458 (5,686) 140,772 NWSA 123,308 -- 123,308 Baum 78,455 (349) 78,106 Ooyama 68,638 (292) 68,346 David Johnson 61,936 (738) 61,198 Houghton 58,885 (199) 58,686 L. Johnson 56,673 (173) 56,500 Vonnegut-Schaefer 53,773 (930) 52,843 Roberts 47,446 -- 47,446 Glahn 47,114 (370) 46,744 Friday 33,617 (173) 33,444 Grau 29,867 -- 29,867 Reed 18,539 -- 18,539 Merewether 7,649 -- 7,649 Milham 3,239 -- 3,239 Hanks Scholarship 2,992 -- 2,992 Wark 5,349 (2,953) 2,396 Namias 2,849 (600) 2,249 Hope 2,095 (232) 1,863 Digiquartz 500 -- 500 Kreitzberg (2,565) -- (2,565) Murphy (3,817) (232) (4,049) Schroeder (7,991) (350) (8,341) Hydrology research: Horton 170,959 (522) 170,437 Charitable gift annuities: Gift Annuities 162,315 (18,287) 144,028 Remote sensing awards: Atlas 100,721 (1,314) 99,407 Lecture series awards: A. Gajdecki 50,000 -- 50,000 Student travel awards: Wesley 36,039 -- 36,039 K. Spengler 12,158 -- 12,158 Moyer 10,542 -- 10,542 Spengler 4,252 -- 4,252 Student paper awards: Geotis 4,370 -- 4,370 Leviton 1,933 -- 1,933 Hobbs 600 -- 600 Eaton 500 -- 500 Total Temporarily Restricted Net Assets $ 1,779,638 $ (34,442) $ 1,745,196 Permanently Restricted Net Assets: Scholarship awards: Wark $ 250,000 $-- $ 250,000 Schroeder 100,000 -- 100,000 Hope 50,000 -- 50,000 Namias 50,000 -- 50,000 Murphy 43,650 -- 43,650 Kreitzberg 40,740 -- 40,740 Houghton 25,000 -- 25,000 Vonnegut-Schaefer 24,072 -- 24,072 Jardine 15,401 -- 15,401 Meisinger 12,295 -- 12,295 Hanks Scholarship 5,000 -- 5,000 Milham 5,000 -- 5,000 Student paper awards and other Reed 12,112 -- 12,112 Leviton 5,000 -- 5,000 Geotis 3,620 -- 3,620 Sverdrup 813 -- 813 Total Permanently Restricted Net Assets $ 642,703 $-- $ 642,703