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INDEPENDENT AUDITOR'S REPORT.

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 (the "Society") which comprise the statement of financial position as of December 31,2016, and the related statements of activities, 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.

Auditor's Responsibility

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 Society'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 Society'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.

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, 2016, 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.

Adjustments to Prior Period Financial Statements

As discussed in Note 15 to the financial statements, certain errors related to the classification of certain assets, liabilities and net assets were discovered by management of the Society during the year ended December 31, 2016. Accordingly, the Society has made an adjustment to assets, liabilities and net assets as of December 31, 2015 to correct the errors. Our opinion is not modified with respect to this matter.

Tonneson & Company PC

Wakefield, Massachusetts August 2, 2017
STATEMENT OF FINANCIAL POSITION DECEMBER 31, 2016

ASSETS
ASSETS:
Cash and cash equivalents                                $  2,685,519
Accounts receivable                                           674,960
Pledges receivable                                             90,000
Investments                                                 6,820,389
Inventories                                                   174,891
Property and equipment, net                                11,279,542
Prepaid expenses and other current assets                     588,291
TOTAL ASSETS                                            $  22,313,592

LIABILITIES AND NET ASSETS

LIABILITIES:
  Long-term debt                                          $ 4,384,722
  Accounts payable and accrued expenses                     1,123,451
  Deferred revenue                                          4,102,364
  Charitable gift annuity liability                           213,950
  Fair value of interest rate swap agreement                  160,792
  Deferred rent                                               312,664
  Commitments                                                      --
TOTAL LIABILITIES                                          10,297,943
NET ASSETS:
  Unrestricted                                              9,250,006
  Temporarily restricted                                    1,973,499
  Permanently restricted                                      792,144
TOTAL NET ASSETS                                           12,015,649
TOTAL LIABILITIES AND NET ASSETS                         $ 22,313,592

STATEMENT OF ACTIVITIES YEAR ENDED DECEMBER 31, 2016

                                               Unrestricted

SUPPORT AND REVENUE:
  Publications                                    8,748,789
  Meetings and exhibits                           3,699,438
  Membership and communication                    1,911,083
  Other educational assistance                    1,443,254
  Federal financial assistance
  Investment income                               1,236,079
  Contributions                                     559,586
  Net assets released from restrictions             293,903
  Change in fair value of interest rate swap   58,041 63,403

Total support and revenue
                                                 18,013,576
EXPENSES:
  Program services:
    Publications
    Education and policy programs                 7,591,292
    Meetings and exhibits                          4138 200
    Membership and communication                  3,182,364
  Supporting services:                            2,925,288
    Administrative and general                    1,109,951
    Interest expense                                168,032
    Total expenses                               19,115,127
INCREASE (DECREASE) IN NET ASSETS               (1,101,551)
NET ASSETS, BEGINNING OF YEAR, AS RESTATED       10,351,557
NET ASSETS, END OF YEAR                           9,250,006

                                               Temporarily
                                                Restricted

SUPPORT AND REVENUE:
  Publications
  Meetings and exhibits                                 --
  Membership and communication                          --
  Other educational assistance                          --
  Federal financial assistance                          --
  Investment income                                     --
  Contributions                                     10,873
  Net assets released from restrictions            172,651
  Change in fair value of interest rate swap      (58,041)

Total support and revenue
                                                   125,483
EXPENSES:
  Program services:
    Publications
    Education and policy programs                       --
    Meetings and exhibits                               --
    Membership and communication                        --
  Supporting services:                                  --
    Administrative and general                          --
    Interest expense                                    --
    Total expenses                                      --
INCREASE (DECREASE) IN NET ASSETS                  125,483
NET ASSETS, BEGINNING OF YEAR, AS RESTATED       1,848,016
NET ASSETS, END OF YEAR                          1,973,499

                                               Permanently
                                                Restricted
SUPPORT AND REVENUE:
  Publications                                          --
  Meetings and exhibits                                 --
  Membership and communication                          --
  Other educational assistance                          --
  Federal financial assistance                          --
  Investment income                                     --
  Contributions                                         --
  Net assets released from restrictions             52,500
  Change in fair value of interest rate swap            --

Total support and revenue
                                                    52,500
EXPENSES:
  Program services:
    Publications
    Education and policy programs                       --
    Meetings and exhibits                               --
    Membership and communication                        --
  Supporting services:                                  --
    Administrative and general                          --
    Interest expense                                    --
    Total expenses                                      --
INCREASE (DECREASE) IN NET ASSETS                   52,500
NET ASSETS, BEGINNING OF YEAR, AS RESTATED         739,644
NET ASSETS, END OF YEAR                            792,144

                                                  Total
SUPPORT AND REVENUE:
  Publications                                   8,748,789
  Meetings and exhibits                          3,699,438
  Membership and communication                   1,911,083
  Other educational assistance                   1,443,254
  Federal financial assistance
  Investment income                              1,236,079
  Contributions                                    570,459
  Net assets released from restrictions            519,054
  Change in fair value of interest rate swap        63,403

Total support and revenue
                                                18,191,559
EXPENSES:
  Program services:
    Publications
    Education and policy programs                7,591,292
    Meetings and exhibits                        4,138,200
    Membership and communication                 3,182,364
  Supporting services:                           2,925,288
    Administrative and general                   1,109,951
    Interest expense                               168,032
    Total expenses                              19,115,127
INCREASE (DECREASE) IN NET ASSETS                (923,568)
NET ASSETS, BEGINNING OF YEAR, AS RESTATED      12,939,217
NET ASSETS, END OF YEAR                         12,015,649

See Notes to Financial Statements.

STATEMENT OF CASH FLOWS YEAR ENDED DECEMBER 31, 2016

CASH FLOWS FROM OPERATING ACTIVITIES:
  Decrease in net assets                                  $ (923,568)
  Adjustments to reconcile decrease in net assets to
    net cash provided by operating activities:
      Depreciation and amortization                           658,901
      Contributions restricted for endowment                  (2,500)
      Unrealized and realized gains on investments          (452,337)
      Change in fair value of interest rate swap             (63,403)
      Changes in charitable gift annuities                      1,963
      Changes in certain assets and liabilities:
        Accounts receivable                                   117,237
        Pledges receivable                                   (70,000)
        Prepaid expenses and other current assets             240,881
        Accounts payable and accrued expenses                 561,452
        Deferred rent liability                                44,064
        Deferred income                                       186,529
          Net cash provided by operating activities           299,219

CASH FLOWS FROM INVESTING ACTIVITIES:
  Purchase of property and equipment                        (451,169)
  Proceeds from sale of investments                         4,212,165
  Purchase of investments                                 (1,774,646)
          Net cash provided by investment activities        1,986,350

CASH FLOWS FROM FINANCING ACTIVITIES:
  Payments on note payable, bank                            (500,000)
  Payments on long-term debt                                (183,333)
  Contributions restricted for endowment                        2,500
          Net cash used in financing activities             (680,833)

NET INCREASE IN CASH                                        1,604,736
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR                1,080,783
CASH AND CASH EQUIVALENTS, END OF YEAR                    $ 2,685,519


NOTES TO FINANCIAL STATEMENTS YEAR ENDED DECEMBER 31, 2016

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 hydrologie 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 (US. GAAP).

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 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 net assets
   subject to donor-imposed stipulations that the principal
   be invested in perpetuity and only the income
   is made available for general or specific purposes.


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.

Cash and Cash Equivalents--Cash and cash equivalents consist of highly liquid investments with original maturities of ninety days or less. Cash equivalents are carried at cost which approximates fair value.

Accounts Receivable--Accounts receivable are stated at the amount the Society's management expects to collect from outstanding balances. Management provides for probable uncollectible amounts through a charge to earnings and a credit to a valuation allowance based on historical collection experience, its assessment of current economic conditions, review and assessment of estimated funding sources, and the financial condition of the debtor. Balances which are still outstanding after the Society's management has used reasonable collection efforts are written off through a charge to the valuation allowance and a credit to accounts receivable. At December 31, 2016, accounts receivable were deemed fully collectible.

Pledges Receivable--Contributions, including unconditional promises to give, are recognized as revenues in the period received. Conditional promises to give are not recognized until they become unconditional; that is, when the conditions on which they depend are substantially met. Contributions of assets other than cash are recorded at their estimated fair value. Management provides for probable uncollectible amounts through a charge to earnings and a credit to a valuation allowance based on its assessment of the current status of individual accounts. Balances that are still outstanding after management has used reasonable collection efforts are written off through a charge to the valuation allowance and a credit to pledges receivable. At December 31, 2016, pledges receivable were deemed fully collectible.

Conditional promises to give are recognized only when the conditions on which they depend are substantially met and the promises become unconditional. At December 31, 2016, eight donors have made conditional pledges totaling approximately $2,620,000 to the Society. These donors have designated the Society as a contingent beneficiary of their individual retirement account or will.

Investments--The Society invests in marketable securities with readily determinable fair values and all investments in debt securities are reported at their fair values in the Statement of Financial Position. Unrealized gains and losses are included in the change in net assets in the accompanying Statement of Activities. Gains and losses on the disposition of investments are accounted for on the average cost method for mutual funds and specific identification method for other securities. Investment income and gains restricted by donors are reported as increased in unrestricted net assets if the restrictions are met (either a stipulated time period ends or a purpose restriction is accomplished) in the reporting period in which the income and gains are recognized.

The Society maintains a master investment account for its donor-restricted endowments, unless specified to be segregated by the donor. Realized and unrealized gain and losses from securities in the master account are allocated monthly to the individual endowments based on the relationship of the market value of each endowment to the total market value of the master investment account, as adjusted for additions to or deductions from those accounts.

The Society maintains an investment portfolio consisting of a combination of long-term cash and cash equivalents, fixed income and equity securities. Investment securities are exposed to various risks, such as interest rate, market and credit risks. Due to the level of risk associated with certain investments, it is at least reasonable possible that changes in the value of these investments will occur in the near term and such changes could materially affect the Society's investment account balances.

Inventories--Inventories, consisting primarily of periodicals and books, are stated at the lower of cost, using the first-in, first-out method, or market.

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 three to forty 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.

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.

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. 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.

Revenue Recognition--All revenue from publications, meetings and exhibits, membership and communication and other educational assistance are recognized in the year in which the publication is issued, the meeting or event has taken place or the services are performed. Payments received in advance are reflected as deferred revenue until the meeting or event has taken place or service has been performed.

Contributed Services--Contributed services are recognized as contributions if the services create or enhance non-financial assets or require specialized skills, are performed by people with those skills, and would otherwise be purchased by the Society. Contributed services are recognized as revenue at the estimated fair value when the service is received. In addition, many individuals volunteer their time and perform a variety of tasks that assist the Society with various programs and committee assignments, but these services do not meet the criteria for recognition as contributed services.

Functional Allocation of Expenses--The costs of providing various program and other activities have been summarized on a functional basis in the Statement of Activities. 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.

The following program and supporting services are included in the accompanying financial statements:
   Publications

   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).

   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.

   In addition, this 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.

   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.

   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.

   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.


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.

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. The Society had no unrelated business income for the year ended December 31, 2016.

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, 2016, 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.

Subsequent Events--The date to which events occurring after December 31, 2016 have been evaluated for possible adjustment to the financial statements or disclosure is the date of the Independent Auditor's Report which is the date the financial statements were available to be issued.

Concentration of credit risk--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, 2016, the Society's bank balances exceeded the FDIC limit by approximately $2,340,000.

The Society also holds various investment funds in a combination of long-term cash and cash equivalents, fixed income and equity securities. At December 31, 2016, the Society had $6,820,389 in brokerage accounts, which were not insured and subject to various risks, such as interest rate, market and credit risks.
Note 2--Pledges Receivable

At December 31, 2016, pledges receivable consist of the following:

Pledges expected to be collected in:

Less than one year                        $ 10,000
One to five years                           40,000
More than five years                        40,000

                                          $ 90,000


Note 3--Investments

The cost and fair value of investments at December 31, 2016 were as follows:
                                             Cost     Fair Value

Equities                              $ 3,060,285    $ 4,187,210
Cash and cash equivalents               1,508,885      1,509,168
Fixed income                            1,131,193      1,101,388
Common stock                                  --        22,623
                                      $ 5,700,363    $ 6,820,389


Fair value is defined under U.S. GAAP as the price that would be received to sell an asset, or paid to transfer a liability, in orderly transactions between market participants. Further, the Society is required to maximize the use of observable market inputs, minimize the use of unobservable market inputs, and disclose in the form of an outlined hierarchy the details of such fair value measurements. The hierarchy of valuation techniques is based on whether inputs to a fair value measurement are considered to be observable or unobservable in a marketplace. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Society's market assumptions.

This hierarchy requires the use of observable market data when available. These inputs have created the following fair value hierarchy:

* Level 1--quoted prices in active markets that are unadjusted and accessible at the measurement date for identical unrestricted assets or liabilities. The fair value hierarchy gives the highest priority to Level 1 inputs;

* Level 2--quoted prices for identical assets and liabilities in markets that are not active, quoted prices for similar assets and liabilities in active markets or financial instruments for which significant inputs are observable, either directly or indirectly; and

* Level 3--prices or valuations that require inputs that are both significant to the fair value measurement and unobservable. The fair value hierarchy gives the lowest priority to Level 3 inputs.

The asset or liability's fair value measurement level with 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. The guidance requires the use of observable data if such data is available without undue cost and effort.

Following is a description of the Society's valuation methodologies for assets measured at fair value.
   Cash and cash equivalents: These investments are
   valued at the daily closing price as reported by the
   investment broker. Investments in long-term cash
   and cash equivalents are classified as Level 1 of the
   valuation hierarchy.

   Equities: These investments are public investment vehicles
   valued using the Net Asset Value ("NAV") provided
   by the administrator of the fund and calculated
   at the close of business on various stock exchanges.
   The NAV is based on the value of the underlying
   asset owned by the fund, minus its liabilities, and
   then divided by the number of shares outstanding.
   Investments in equities are classified as Level 1 of the
   valuation hierarchy.

   Fixed income: These investments are valued at the
   closing price of the active market in which the individual
   securities are traded. Investments in fixed
   income securities are classified as Level 1 of the valuation
   hierarchy.

   Common stock: These investments are valued at the
   closing price reported on the active market on which
   the individual securities are traded. Investments in
   common stock are classified as Level 1 of the valuation
   hierarchy.


Although the Society believes its valuation methodologies are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date.

The following table summarizes by level, within the fair value hierarchy, the Society's financial assets measured at fair value on a recurring basis in accordance with U.S. GAAP as of December 31, 2016:
                                            Level 1         Total

Cash and cash equivalents                 $ 1,509,168    $ 1,509,168
Equities:
  Allocation--50% to 70% equity                82,737         82,737
  Diversified emerging markets                  4,891          4,891
  Foreign large blend                         281,878        281,878
  Foreign large growth                         24,679         24,679
  Inflation-protected bond                    342,190        342,190
  Intermediate government                       8,389          8,389
  Intermediate-term bond                      149,555        149,555
  Large blend                                 930,575        930,575
  Large growth                                 35,144         35,144
  Large value                                 928,289         928289
  Market neutral                               10,117         10,117
  Mid-cap blend                               472,497        472,497
  Mid-cap growth                               24,038         24,038
  Option writing                               15,364         15,364
  Real estate                                 231,833        231,833
  Short-term bond                             141,713        141,713
  Small blend                                 460,412        460,412
  World allocation                             32,846         32,846
  World stock                                  10,063         10,063
Fixed income:
  Bank loan                                    20,040         20,040
  Convertibles                                 20,748         20,748
  Emerging markets bond                        11,682         11,682
  High yield bond                              21,517         21,517
  Inflation-protected bond                    239,940        239,940
  Intermediate-term bond                      396,053        396,053
  Preferred stock                              22,326         22,326
  Short-term bond                             358,997        358,997
  World bond                                   10,085         10,085
Common stock--insurance                        22,623         22,623

                                          $ 6,820,389    $ 6,820,389


Note 4--Property and Equipment

Property and equipment consists of the following at December 31, 2016:
Buildings and improvements                        $ 8,774,295
Land and land improvements                          3,808,253
Software                                            1,573,574
Office equipment and furniture                        895,892
                                                   15,052,014
Less: accumulated depreciation                    (3,772,472)
                                                 $ 11,279,542


Note 5--Note Payable, Bank

The Society has a revolving line of credit agreement with a bank in the amount of $500,000. 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. The line of credit agreement contains financial and other covenants including a maximum leverage provision. During August 2016, the Society entered into an extension agreement to amend the termination date to July 31, 2017. In addition, the Society agreed to establish a $500,000 Debt Service Reserve Fund ("DSRF") account at the Bank and executed a Collateral Pledge Agreement in favor of the Bank covering said DSRF account. As part of this agreement, the bank suspended the Fixed Charge Coverage Ratio financial covenant for the December 31, 2016 compliance period. At December 31, 2016 there was no outstanding balance on the line of credit. In addition, management is not aware of any covenant violations as of December 31, 2016.

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 "Bank"). 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 Bank and will be reset from time to time. At December 31,2016, the interest rate was 2.04145%. The bond is secured by the land and building located at 44 Beacon Street, Boston, Massachusetts with a net book value of $7,055,447 at December 31,2016. The note is subject to the same covenants, security and cross collateralization as the line of credit. (Reference is made to Note 5.)

Maturities of long-term debt at December 31,2016 consist of the following:
Years                         Amount

2017                        $      183,333
2018                               183,333
2019                               183,333
2020                               183,333
2021                               183,333
Thereafter                       3,468,057

                            $    4,384,722


Note 7--Interest Rate Swap Agreement

The Society has an interest rate swap to mitigate the risk of changes in interest rates associated with its variable interest rate indebtedness. At December 31, 2016, the aggregate notional amount totaled $4,384,722. The Society's agreement effectively changes the interest rate exposure on its bond payable to a fixed rate of 3.7075%. The interest rate swap agreement matures in November 2020. U.S. GAAP requires the Society to recognize a gain or loss on the change in the fair market value of the swap agreement. The Society recognized a gain totaling $63,403 on the change in the fair value of the swap agreement during the year ended December 31, 2016.

The fair value of the swap agreement is estimated as the present value of expected future cash inflows, taking into account (1) the type of security, its terms, and any underlying collateral, (2) the seniority level of the debt security, and (3) quotes received from brokers and pricing services. The interest rate swap agreement is measured at fair value on a recurring basis and is classified as Level 2 of the valuation hierarchy.

Note 8--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 a temporarily restricted contribution in the period the gift annuity is established. Assets held in the various charitable gift annuities totaled approximately $252,400 at December 31,2016 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 totals approximately $214,000 at December 31, 2016 and is calculated using discount rates ranging between 4.7% and 5.4% and applicable mortality tables.

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 31,2016, the Society has an accrued liability of approximately $537,000 related to this policy, which is included in accounts payable and accrued expenses in the Statement of Financial Position.

Note 10--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 up to 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 $570,274 for the year ended December 31,2016.

Note 11--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 totaled approximately $604,000 for the year ended December 31, 2016 (including charges for operating expenses and taxes).

Note 11--Commitments (Continued)

The following is a schedule of the approximate future minimum rentals under the leases at December 31,2016:
Years                         Amount

2017                       $       390,000
2018                               310,000
2019                               320,000
2020                               330,000
2021                               340,000
Thereafter                       1,920,000

                           $     3,610,000


Note 12--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 19 individual funds established for a variety of purposes. Its endowment includes only donor-restricted endowment funds. 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 temporarily restricted until appropriated for use.

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.

Investments and spending policies: 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. 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.

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.

The Society's policy of appropriating for distributions of its endowment fund for scholarships, fellowships and other distribution of funds 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.

Funds with deficiencies: From time to time, the fair value of assets associated with individual donor-restricted endowment funds may fall below the level that the donor or UPMIFA requires the Society to retain as a fund of perpetual duration. In accordance with U.S. GAAP, deficiencies of this nature are reported in unrestricted net assets. There were no deficiencies of this nature as of December 31, 2016.

The changes in endowment net assets for year ended December 31, 2016 are as follows:
                                                         Temporarily
                                          Unrestricted    Restricted

Endowment net assets, beginning of year   $              $   135,761
Investment income                                 --        16,571
Contributions                                     --        67,500
Appropriation of cumulative gains                 --      (29,083)

Endowment net assets, end of year         $              $   190,749

                                          Permanently
                                           Restricted      Total

Endowment net assets, beginning of year   $   739,644    $  875,405
Investment income                                 --       16,571
Contributions                                   2,500        70,000
Appropriation of cumulative gains                 --     (29,083)

Endowment net assets, end of year         $   742,144    $  932,893


Note 13--Temporarily Restricted Net Assets

Temporarily restricted net assets consist of contributions presently available for use, but expended only for the purposes specified by the donor. At December 31, 2016, temporarily restricted net assets consist of the following:
Scholarship awards                                 $      1,060,232
Hydrology research                                          171,836
Remote sensing awards                                       103,288
Lecture series awards                                        50,750
Student travel awards                                        67,573
Student paper awards                                          6,705
Building repair                                              30,000
Pledges receivable                                           40,000
Cumulative gains on permanently restricted funds            190,749
Charitable gift annuities                                   252,366

                                                   $      1,973,499


Note 14--Permanently Restricted Net Assets

Permanently restricted net assets include net assets subject to donor-imposed stipulations that they be maintained permanently by the Society. Generally, the donors of these assets permit the Society to use all or part of the income earned on related investments for general or specific purposes. At December 31, 2016, permanently restricted net assets consist of the following:
Scholarship awards       $         742,144
Pledges receivable                  50,000

                         $         792,144


Note 15--Restatement

The financial statements presented for the year ended December 31, 2015 have been restated to reflect the reclassification of approximately $200,000 from unrestricted net assets to temporarily and permanently restricted net assets. In addition, the financial statements have been restated to reflect a deferred rent liability in the amount of $268,600 and accounts receivable in the amount of $296,695 as of the beginning of the year.

The restatement affected the following financial statement line items:
                                                 Temporarily
                                  Unrestricted   Restricted
                                   Net Assets     Net Assets

Balance at December 31, 2015,
As Previously Reported            $ 10,523,223   $ 1,745,196

Reclassification of net assets       (199,761)        102,820

Record deferred rent liability       (268,600)

Record accounts receivable            296,695

Balance at December 31, 2015,
As Restated                      $ 10,351,557    $ 1,848,016

                                  Permanently
                                   Restricted       Total
                                   Net Assets     Net Assets

Balance at December 31, 2015,
As Previously Reported              $ 642,703   $ 12,911,122

Reclassification of net assets         96,941         --

Record deferred rent liability                     (268,600)

Record accounts receivable                           296,695

Balance at December 31, 2015,
As Restated                         $ 739,644   $ 12,939,217
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Publication:Bulletin of the American Meteorological Society
Geographic Code:1U1MA
Date:Dec 1, 2017
Words:6291
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