December 31, 2017 ASSOCIATION FOR PROFESSIONALS IN INFECTION CONTROL AND EPIDEMIOLOGY, INC. AND AFFILIATES

Transcription

1 Audited Consolidated Financial Statements and Supplementary Information ASSOCIATION FOR PROFESSIONALS IN INFECTION CONTROL AND EPIDEMIOLOGY, INC. AND AFFILIATES December 31,

2 Contents Independent Auditor s Report on the Consolidated Financial Statements 1 Financial Statements Consolidated statements of financial position 2 Consolidated statement of activities Consolidated statement of activities Consolidated statements of cash flows 5 Notes to the consolidated financial statements 6 13 Supplementary Information Independent auditor s report on the supplementary information 14 Consolidating statement of financial position Consolidating statement of financial position Consolidating statement of activities Consolidating statement of activities Schedule of revenue and expense APIC only 19

3 Independent Auditor s Report on the Consolidated Financial Statements To the Board of Directors and Epidemiology, Inc. and Affiliates Report on the Financial Statements We have audited the accompanying consolidated financial statements of the Association for Professionals in Infection Control (collectively, the Organization), which comprise the consolidated statement of financial position as of December 31, 2017, and the related consolidated statements of activities and cash flows for the year then ended, and the related notes to the consolidated financial statements. The consolidated financial statements as of and for the year ended December 31, 2016, were audited by other auditors whose report thereon, dated July 12, 2017, expressed an unmodified opinion on those statements. Management s Responsibility for the Consolidated Financial Statements Management is responsible for the preparation and fair presentation of these consolidated 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 consolidated financial statements that are free from material misstatement, whether due to fraud or error. Auditor s Responsibility L S t r e e t, N W S u i t e Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and, with respect to 2017, for Association for Professionals in Infection Control and Epidemiology, Inc. and APIC Consulting Services, Inc. only, the standards applicable to audits contained in Government Auditing Standards, issued by Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement. The financial statements of one affiliate, Certification Board of Infection Control and Epidemiology, Inc., were not audited in accordance with Government Auditing Standards. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Organization s preparation and fair presentation of the consolidated 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 Organization 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 consolidated 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 2017 consolidated financial statements referred to above present fairly, in all material respects, the financial position of the and Epidemiology, Inc. and Affiliates as of December 31, 2017, and the changes in their net assets and their cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America. Washington, DC June 11,

4 Consolidated Statements of Financial Position December 31, Assets Current assets Cash and cash equivalents $ 6,989,907 $ 4,676,534 Marketable securities 6,142,915 5,439,688 Accounts receivable, net 1,999,775 2,444,961 Inventory 47,808 43,772 Prepaid expenses and other 384, ,053 Total current assets 15,565,061 13,046,008 Property and equipment Leasehold improvements 1,029,546 1,020,992 Computer equipment 1,411,728 1,369,388 Office equipment and furniture 628, ,272 3,069,483 3,011,652 Less: accumulated depreciation and amortization (1,649,146) (1,373,234) Other assets 1,420,337 1,638,418 Deposits 98,034 98,034 Total assets $ 17,083,432 $ 14,782,460 Liabilities and Net Assets Liabilities Current liabilities Accounts payable and accrued expenses $ 1,504,597 $ 1,328,097 Deferred revenue 3,209,461 3,104,399 Total current liabilities 4,714,058 4,432,496 Deferred rent 1,672,515 1,196,261 Total liabilities 6,386,573 5,628,757 Net assets Unrestricted 10,183,031 8,702,614 Temporarily restricted 483, ,089 Permanently restricted 30,000 30,000 Total net assets 10,696,859 9,153,703 Total liabilities and net assets $ 17,083,432 $ 14,782,460 See notes to the consolidated financial statements. 2

5 Consolidated Statement of Activities Year Ended December 31, 2017 Unrestricted Temporarily Restricted Permanently Restricted Total Revenue and support Conferences, educational courses and services $ 5,604,941 $ - $ - $ 5,604,941 Examination and certification fees 607, ,740 Publications and educational products 4,033,712 4,033,712 Membership dues and fees 2,725,052 2,725,052 Grants 2,135,344 2,135,344 Miscellaneous income 86,858 86,858 Consulting income 788, ,725 Contributions 6,370 6,370 Net assets released from restrictions 14,320 (14,320) - Total revenue and support 15,996,692 (7,950) - 15,988,742 Expenses Program services Conferences, educational courses and services 4,516,060 4,516,060 Publications and educational products 2,606,386 2,606,386 Grant programs 2,135,344 2,135,344 Professional practice 1,053,949 1,053,949 Membership expenses 774, ,257 Examination and certification expenses 501, ,558 Assessments and training 333, ,526 APIC research 14,320 14,320 Total program services 11,935, ,935,400 Supporting services General and administrative 3,230,180 3,230,180 Total expenses 15,165, ,165,580 Change in net assets from operations 831,112 (7,950) - 823,162 Non-operating item Net investment return 649,305 70, ,994 Change in net assets 1,480,417 62,739-1,543,156 Net assets, beginning of year 8,702, ,089 30,000 9,153,703 Net assets, end of year $ 10,183,031 $ 483,828 $ 30,000 $ 10,696,859 See notes to the consolidated financial statements. 3

6 Consolidated Statement of Activities Year Ended December 31, 2016 Unrestricted Temporarily Restricted Permanently Restricted Total Revenue and support Conferences, educational courses and services $ 5,472,276 $ - $ - $ 5,472,276 Examination and certification fees 605, ,164 Publications and educational products 3,576,612 3,576,612 Membership dues and fees 2,613,206 2,613,206 Grants 1,414,145 1,414,145 Miscellaneous income 17,907 17,907 Consulting income 1,488,673 1,488,673 Contributions - 6,179 6,179 Net assets released from restrictions 17,236 (17,236) - Total revenue and support 15,205,219 (11,057) - 15,194,162 Expenses Program services Conferences, educational courses and services 4,158,115 4,158,115 Publications and educational products 2,227,838 2,227,838 Grant programs 1,414,145 1,414,145 Professional practice 916, ,682 Membership expenses 809, ,793 Examination and certification expenses 583, ,287 Assessments and training 1,081,034 1,081,034 APIC research 17,228 17,228 Total program services 11,208, ,208,122 Supporting services General and administrative 2,951,824 2,951,824 Total expenses 14,159, ,159,946 Change in net assets from operations 1,045,273 (11,057) - 1,034,216 Non-operating item: Net investment return 347,530 34, ,720 Change in net assets 1,392,803 23,133-1,415,936 Net assets, beginning of year 7,309, ,956 30,000 7,737,767 Net assets, end of year $ 8,702,614 $ 421,089 $ 30,000 $ 9,153,703 See notes to the consolidated financial statements. 4

7 Consolidated Statements of Cash Flows Year Ended December 31, Cash flows from operating activities Change in net assets $ 1,543,156 $ 1,415,936 Adjustments to reconcile change in net assets to net cash provided by operating activities: Realized and unrealized gains on marketable securities (536,512) (259,960) Allowance for bad debts (600) (63,000) Depreciation and amortization 274, ,075 Changes in operating assets and liabilities Accounts receivable 445,786 (1,101,730) Inventory (4,036) 34,151 Prepaid expenses and other 56,397 (5,698) Deposits - (52,175) Accounts payable and accrued expenses 176,500 (408,796) Deferred revenue 105,062 59,817 Deferred rent 476,254 1,155,887 Total adjustments 993,013 (479,429) Net cash provided by operating activities 2,536, ,507 Cash flows from investing activities Purchases of property and equipment (56,081) (1,553,736) Purchases of marketable securities (247,637) (321,150) Proceeds from sales of marketable securities 80, ,626 Net cash used in investing activities (222,796) (1,655,260) Net increase (decrease) in cash and cash equivalents 2,313,373 (718,753) Cash and cash equivalents, beginning of year 4,676,534 5,395,287 Cash and cash equivalents, end of year $ 6,989,907 $ 4,676,534 Supplemental disclosure of cash flow information Cash payments for federal and state income taxes $ 68,604 $ 7,825 5

8 Notes to the Consolidated Financial Statements A. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Organization: The and Epidemiology, Inc. ("APIC") has been in existence since 1972 and is a tax-exempt corporation governed by a Board of Directors elected by its over 15,000 members. APIC members include nurses, physicians, medical technologists, consultants, educators, and researchers in the field of infection control and epidemiology. APIC has chartered 117 Chapters to provide local resources for members. The chapters are not required to be consolidated or combined and their activity is not reflected in these consolidated financial statements as APIC neither controls nor derives beneficial economic interest from these organizations. APIC also created two affiliate organizations - the Certification Board of Infection Control and Epidemiology, Inc. ("CBIC") in 1981, and APIC Consulting Services, Inc. ("ACSI") in The financial statements of APIC have been consolidated with CBIC and ACSI as APIC has the ability to nominate CBIC's Board of Directors after consultation with CBIC leadership and ACSI is a wholly owned subsidiary of APIC. APIC's purpose is to influence, support, and improve the quality of health care through the practice and management of infection control and the application of epidemiology in all health settings. APIC is committed to improving patient care, preventing adverse outcomes, and to minimizing occupational hazards associated with the delivery of health care. APIC research funds grants for infection control research and is committed to improve the quality, value and cost effectiveness of health care and evaluating the efficiency of infection control practices. ACSI is an organization designed to help healthcare facilities solve their biggest and most urgent infection-related issues. ACSI is able to quickly mobilize the nation's leading infection control experts and tackle larger projects that individual healthcare facilities or small consulting firms cannot. ACSI is a wholly-owned for-profit subsidiary of APIC. CBIC's purpose is to protect the public through the development, administration, and promotion of an accredited certification in infection prevention and control. CBIC's major sources of revenue are examination and recertification fees. CBIC primarily conducts its management, testing and administrative operations at the executive office in Milwaukee, Wisconsin. The examinations are primarily computer based tests administered nationally and internationally. Principles of consolidation: The consolidated financial statements include the accounts and transactions of APIC and its affiliates, CBIC and ACSI (collectively, the "Organization"). All material intra-entity transactions and balances have been eliminated in consolidation. Income taxes: APIC is exempt from federal income tax under IRC section 501(c)(3). CBIC is recognized as exempt from federal income taxes under IRC section 501(c)(6). Both entities are subject to tax on net income unrelated to their respective exempt purposes, unless otherwise excluded by the Code. APIC has processes presently in place to ensure the maintenance of its tax-exempt status; to identify and report unrelated income; to determine its filing and tax obligations in jurisdictions for which it has nexus; and to identify and evaluate other matters that may be considered tax positions. ACSI is subject to federal and state income taxes on its net taxable income. ACSI accounts for federal and state income taxes using the liability method, under which deferred tax assets or liabilities are recognized based on temporary differences between the financial statement and tax basis of assets and liabilities using the currently enacted tax rates. 6

9 Notes to the Consolidated Financial Statements A. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED Income taxes (continued): Differences between the effective tax rate and the federal statutory rate are primarily attributable to state income taxes and the recognition of a valuation allowance on net operating loss carryforwards and other deferred tax assets. The deferred tax asset attributable to temporary differences as of December 31, 2017 and 2016 is offset by a valuation allowance in a corresponding amount. No benefit has been recorded for the amount of these operating loss carryforwards. ACSI s provision for federal and state income taxes totaled $33,327 and $7,825 for the years ended December 31, 2017 and 2016, respectively. Basis of accounting: The Organization reports its transactions on the accrual basis of accounting. Under this method of accounting, revenue, other than contributions, are recognized when earned and expenses are recognized when the obligation is incurred. Use of estimates: The preparation of consolidated financial statements in conformity with U.S. Generally Accepted Accounting Principles (GAAP) requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from estimates. Cash and cash equivalents: All highly liquid investments with initial maturities of three months or less when purchased are considered cash equivalents. Marketable securities: The Organization carries investments in marketable securities at their fair value in the accompanying consolidated statements of financial position. The Organization considers investments in mutual funds and exchange traded and closed-end funds to be sufficiently diversified to minimize individual investment and industry concentration risks. Unrealized and realized gains and losses are included in the accompanying consolidated statements of activities. Purchases and sales of securities are reflected on a trade-date basis. Gains and losses on sales of securities are based on average cost and are recorded in the consolidated statements of activities in the period in which the securities are sold. Dividends are accrued based on the ex-dividend date. Interest is recognized as earned. Accounts receivable: Accounts receivable consist primarily of amounts due from the sale of publications, advertising, exhibit space, convention registrations, certification exam registrations, contracts for consulting and unreimbursed grants expenses from federal grants. The allowance method is used to determine the uncollectible amounts. The allowance is based upon prior years' experience and management's analysis of subsequent collections. The allowance for bad debts totaled $69,400 and $70,000, respectively, at December 31, 2017 and Inventory: Inventory consist of publications and custom lapel pins and are stated at the lower of replacement cost, estimated net realizable value, or market value, using the first-in first-out method. 7

10 Notes to the Consolidated Financial Statements A. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED Property and equipment: Property and equipment are stated at cost. The Organization capitalizes all expenditures for property and equipment over $1,000. Depreciation and amortization are provided utilizing the straight-line method over the estimated useful lives of the assets (3-7 years) or over the remaining life of the lease for leasehold improvements, whichever is shorter. When assets are sold or otherwise disposed of, the asset and related accumulated depreciation and amortization are removed from the accounts, and any remaining gain or loss is recorded as a non-operating item in the consolidated statements of activities. Repairs and maintenance are charged to expense when incurred. For the years ended December 31, 2017 and 2016, consolidated depreciation and amortization expense amounted to $274,162 and $162,075, respectively. Deferred revenue and revenue recognition: Deferred revenue consists of educational and conference course registrations, grants, membership dues and fees for examinations received in advance. The Organization recognizes grant revenues associated with cost reimbursement grants when the related expenditures are incurred. All unexpected grants at year-end are deferred and recognized when the related expenditures occur. Performance based grants are recognized upon the attainment of specific performance goals; therefore, revenue is recognized to the extent of performance achieved. Membership dues are recognized on a pro-rata basis over the annual membership period. Examination fees are not recognized until the examination is administered. The Organization recognizes the examination application processing fee as revenue immediately upon submission of application instead of upon completion of examination. The processing fee represents a portion of the total examination fee and is non-refundable. Education and conference course registrations are not recognized as revenues until the completion of the event The Organization recognizes revenues from publications and educational products at the time the products are shipped to the customer. Revenues from consulting services are recognized when services are completed and billed. Deferred rent: A deferred rent liability has been recorded to reflect the benefit of lease incentives included in the office space lease. The benefits of these incentives, including abated rent and a tenant improvement allowance, will be recognized on a straight-line basis over the term of the lease. Net assets: The classification of the Organization's net assets is based on the existence or absence of donor-imposed restrictions. Amounts for each of the three classes of net assets (unrestricted, temporarily restricted and permanently restricted) are presented in the accompanying consolidated statements of financial position, and changes in each of those classes of net assets are presented in the accompanying consolidated statements of activities as applicable. These net asset classes are defined as follows: Unrestricted net assets: Net assets that are not subject to donor-imposed restrictions and may be expended for any purpose in performing the primary objectives of the Organization are considered unrestricted. 8

11 Notes to the Consolidated Financial Statements A. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CONTINUED Temporarily restricted net assets: Net assets which include resources that have been limited by donor-imposed stipulations that either expire with the passage of time or can be fulfilled and removed by the actions of the Organization pursuant to those stipulations are considered temporarily restricted. When a donor restriction expires, that is, when a stipulated time restriction ends or purpose restriction is accomplished, temporarily restricted net assets are reclassified to unrestricted net assets and reported in the consolidated statements of activities as net assets released from restrictions. Temporarily restricted net assets consist of amounts restricted for infection control research and practices, along with investment earnings from donor restricted endowment funds and totaled $483,828 and $421,089 as of December 31, 2017 and 2016, respectively. Permanently restricted net assets: Net assets which include funds whereby the donors have stipulated that the principal contributed be invested and maintained in perpetuity are considered permanently restricted. Income earned from these investments is available for expenditures according to restrictions, if any, imposed by donors. In previous years, the Organization received $30,000 from Clorox Corporation to partially fund the costs of the William A. Rutala Research Award. Contributions: Gifts received are recognized as unrestricted unless the donor has specifically limited the use of the donation, or unless a multi-year pledge is received. The Organization reports gifts of cash and other assets as restricted support if they are received with donor stipulations that limit the use of the donated assets. When a donor restriction expires, that is, when a stipulated time restriction ends or purpose restriction is accomplished, temporarily restricted net assets are reclassified to unrestricted net assets and are reported in the consolidated statements of activities as net assets released from restrictions. However, if a restriction is fulfilled in the same time period in which the contribution is received, the Organization reports the support as unrestricted. Donated services: Donated services are recognized if the services (a) create or enhance nonfinancial assets or (b) require specialized skills, are performed by people with those skills, and would otherwise be purchased by the Organization. Volunteers provide content expertise, lead workshops, conceive, write and edit educational materials and provide other invaluable services to the Organization throughout the year that are not recognized as contributions in the consolidated financial statements since the recognition criteria are not met. No amounts have been reflected in the consolidated financial statements for donated services. Measure of operations: The Organization has defined the change in net assets from operations to include all support, revenue, expenses, except for net investment return. Functional allocation of expenses: The costs of providing the various programs and services have been summarized on a functional basis in the accompanying consolidated statements of activities. Accordingly, certain costs have been allocated to the program and supporting services benefited based on labor distribution and the level of effort expended to the respective program. 9

12 Notes to the Consolidated Financial Statements A. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED Reclassification: Certain items have been reclassified within the consolidated statements of activities for the period ended December 31, 2016, with no effect on change in net assets, in order to conform with the current year s presentation (as previously reported) (as reclassified) Prepaid expenses and other $ 272,626 $ 441,053 Accounts payable (526,195) (1,328,097) Accrued expenses (633,475) - Conferences, educational courses and service 4,880,816 4,158,115 Publications and educational products 2,002,013 2,227,838 Professional practice 1,134, ,682 Membership expenses - 809,793 General and administrative 3,065,352 2,951,824 Net investment return (399,705) (381,720) Subsequent events: Subsequent events were evaluated through June 11, 2018, which is the date the consolidated financial statements were available to be issued. The Organization is not aware of any subsequent events that would warrant recognition or disclosure in the consolidated financial statements. B. CONCENTRATIONS Credit risk: The Organization maintains demand deposits at commercial banks and money market funds at financial institutions. At times, certain balances held within these accounts may not be fully guaranteed or insured by the U.S. Government. The uninsured portions of cash and money market accounts are backed solely by the assets of the underlying institution. Therefore, the failure of an underlying institution could result in financial loss to the Organization. However, the Organization has not experienced losses on these accounts in the past, and management believes the risk of loss, if any, to be minimal. Market risk: The Organization invests funds in professionally managed money market, mutual funds, and exchange-traded and closed-end funds. Such investments are exposed to market and credit risks, such as fluctuations in fair value. As a result, the investment balances reported in the accompanying consolidated financial statements may not be reflective of the portfolio's value during subsequent periods. 10

13 Notes to the Consolidated Financial Statements C. MARKETABLE SECURITIES In accordance with generally accepted accounting principles, the Organization uses the following prioritized input levels to measure fair value. The input levels used for valuing marketable securities are not necessarily an indication of risk. Level 1 Observable inputs that reflect quoted prices for identical assets or liabilities in active markets such as stock quotes; Level 2 Includes inputs other than Level 1 inputs that are directly or indirectly observable in the marketplace such as yield curves or other market data; Level 3 Unobservable inputs which reflect the reporting entity s assessment of the assumptions that market participants would use in pricing the asset or liability including assumptions about risk such as bid/ask spreads and liquidity discounts. As of December 31, the Organization did not have any assets or liabilities that were classified as Level 2 or 3 within the fair value hierarchy. Marketable securities are measured at fair value using the following input levels at December 31,: 2017 Total Level 1 Level 2 Level 3 Marketable securities, at fair value Mutual funds $ 3,112,477 $ 3,112,477 $ - $ - Exchange traded and closed-end funds 2,922,350 2,922, ,034,827 $ 6,034,827 $ - $ - Marketable securities, at cost Money market funds 108,088 $ 6,142, Total Level 1 Level 2 Level 3 Marketable securities, at fair value Mutual funds $ 2,802,192 $ 2,802,192 $ - $ - Exchange traded and closed-end funds 2,534,010 2,534, ,336,202 $ 5,336,202 $ - $ - Marketable securities, at cost Money market funds 103,486 $ 5,439,688 11

14 Notes to the Consolidated Financial Statements C. MARKETABLE SECURITIES - CONTINUED The following schedule summarizes the net investment return for the years ended December 31,: Investment income $ 235,357 $ 169,886 Realized and unrealized gains 536, ,960 Investment fees (51,875) (48,126) Total investment return $ 719,994 $ 381,720 D. CONTRACT SERVICES The Organization, through CBIC, contracted with Prometric to provide examination services during 2017 and CBIC also entered into a contract with Executive Director, Inc. (EDI) to provide management services. Management services include administrative and executive office management, monthly financial services, recertification processing, candidate database services, publication development, examination marketing, and meeting support, planning, and management. Management fees for the years ended December 31, 2017 and 2016 totaled $336,876 and $322,369, respectively, and have been allocated between examination and certification expenses and general and administrative expenses in the consolidated statements of activities. Examination services include examination and Self-Assessment Recertification Exam (SARE) development and computer-based administration, scoring, analysis, and reporting of examinations. The examination agreement expires on December 31, Examination fees for the years ended December 31, 2017 and 2016 totaled $98,130 and $98,767, respectively, and are included in examination and certification expenses in the accompanying consolidated statements of activities. E. DEFERRED COMPENSATION PLANS The Organization has a qualified employee benefit plan under Section 401(k) of the Internal Revenue Code covering all eligible employees. Eligibility for participation requires employees to have at least 1 year of service and be at least 18 years of age. Employees can make contributions of their compensation, subject to Internal Revenue Code limitations. The Organization matches 100% of the first 4% of each employee's contribution. The Organization may also make discretionary contributions to the plan for the benefit of the participants at the end of the plan year based upon achieved versus budgeted results of operations. No discretionary contributions were made in 2017 and Total contributions to the plan by the Organization for the years ended December 31, 2017 and 2016 totaled $252,159 and $271,378, respectively. The Organization has a non-qualified Section 457(b) retirement plan for certain senior management employees. The Plan assets are subject to the reach of the Organization s creditors in the event of insolvency. The Plan s related liability to the participant was $218,537 and $168,427 at December 31, 2017 and 2016, respectively, and is recorded in accounts payable and accrued expenses in the Organization s consolidated statements of financial position. Total expense relating to this plan for the years ended December 31, 2017 and 2016 totaled $10,000 and $10,039, respectively. 12

15 Notes to the Consolidated Financial Statements F. COMMITMENTS AND CONTINGENCIES Office space lease: On March 2, 2016, the Organization entered into a new operating lease for office space in Arlington, Virginia, commencing September 1, 2016 through August 31, As part of this new operating lease, the first 24 months of rent was abated and has been included in the deferred rent liability in the consolidated statements of financial position. Also included in the new operating lease agreement is a tenant allowance of $1,037,510 that is being amortized on a straight-line basis over the lease term. As of December 31, 2017, future minimum lease payments under the operating lease are as follows: Year ending December 31: 2018 $ 200, , , , ,477 Thereafter 4,027,965 $ 6,752,552 Rent expense for all operating leases totaled $476,254 and $620,600 for the years ended December 31, 2017 and 2016, respectively. Hotel contracts: The Organization has contracts with various hotels and conference centers related to the annual conferences it plans to hold over the next five years. These contracts have various cancellation clauses. Accordingly, as the conference dates approach, the Organization's liability under these contracts increases, subject to the other party's ability to fulfill the commitments made by the Organization. Federal awards: APIC and ACSI participate in federally assisted grant programs which are subject to financial and compliance audits by the federal agency or its representatives. Therefore, a contingent liability may exist for potential questioned costs that would result from such an audit. However, management does not anticipate any significant adjustments in the event of such an audit. 13

16 Independent Auditor s Report on the Supplementary Information To the Board of Directors and Epidemiology, Inc. and Affiliates L S t r e e t, N W S u i t e We have audited the consolidated financial statements of Association for Professionals in Infection Control (the Organization) as of and for the year ended December 31, 2017, and our report thereon dated June 11, 2018 which expressed an unmodified opinion on those consolidated financial statements, appears on page one. Our audit was performed for the purpose of forming an opinion on the consolidated financial statements as a whole. The 2017 consolidating information on the following pages is presented for the purposes of additional analysis of the consolidated financial statements, rather than to present the financial position and results of operations of the individual entities, and it is not a required part of the consolidated 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 consolidated financial statements. The schedule of revenue and expense APIC only, is presented for the purposes of additional analysis and is 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 consolidated financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the consolidated financial statements or to the consolidated 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 basic consolidated financial statements as a whole. The 2016 consolidating statement of financial position and the 2016 consolidating statement of activities on pages 16 and 18 was subjected to the auditing procedures applied in the 2016 audit of the basic consolidated financial statements by other auditors, whose report on such information stated that it was fairly stated in all material respects in relation to the 2016 consolidated financial statements as a whole. Washington, DC June 11,

17 Consolidating Statement of Financial Position December 31, 2017 APIC CBIC ACSI Eliminations Total Assets Current assets Cash and cash equivalents $ 6,753,330 $ 41,479 $ 195,098 $ - $ 6,989,907 Marketable securities 4,627,377 1,515,538 6,142,915 Accounts receivable, net 1,096,198 4, ,078 1,999,775 Inventory 42,937 4,871 47,808 Due from affiliate 992,703 (992,703) - Prepaid expenses and other 346,875 9,764 28, ,656 Total current assets 13,859,420 1,576,151 1,122,193 (992,703) 15,565,061 Property and equipment Leasehold improvements 1,029,546 1,029,546 Computer equipment 1,408,413 3,315 1,411,728 Office equipment and furniture 628, ,209 3,066,168 3,315 3,069,483 Less: accumulated depreciation and amortization (1,646,291) (2,855) (1,649,146) 1,419, ,420,337 Other assets Investment in affiliate 5,000 (5,000) - Deposits 98,034 98,034 Total assets $ 15,382,331 $ 1,576,611 $ 1,122,193 $ (997,703) $ 17,083,432 Liabilities, Net Assets, and Stockholder's Equity Liabilities Current liabilities Accounts payable and accrued expenses $ 1,356,658 $ 30,483 $ 117,456 $ - $ 1,504,597 Due to affiliate 992,703 (992,703) - Deferred revenue 3,106, ,322 3,209,461 Total current liabilities 4,462, ,805 1,110,159 (992,703) 4,714,058 Deferred rent 1,672,515 1,672,515 Total liabilities 6,135, ,805 1,110,159 (992,703) 6,386,573 Net assets and stockholder's equity Net assets Unrestricted 8,733,191 1,442,806 7,034 10,183,031 Temporarily restricted 483, ,828 Permanently restricted 30,000 30,000 Stockholder's equity Common stock 5,000 (5,000) - Retained earnings 7,034 (7,034) - Total stockholder's equity ,034 (12,034) - Total net assets and stockholder's equity 9,247,019 1,442,806 12,034 (5,000) 10,696,859 Total liabilities, net assets, and stockholder's equity $ 15,382,331 $ 1,576,611 $ 1,122,193 $ (997,703) $ 17,083,432 15

18 Consolidating Statement of Financial Position December 31, 2016 APIC CBIC ACSI Eliminations Total Assets Current assets Cash and cash equivalents $ 4,536,147 $ 46,102 $ 94,285 $ - $ 4,676,534 Marketable securities 4,089,189 1,350,499 5,439,688 Accounts receivable, net 1,276,462 2,569 1,165,930 2,444,961 Inventory 35,927 7,845 43,772 Due from affiliate 928,175 (928,175) - Prepaid expenses and other 419,554 12,991 8, ,053 Total current assets 11,285,454 1,420,006 1,268,723 (928,175) 13,046,008 Property and equipment Leasehold improvements 1,020,992 1,020,992 Computer equipment 1,369,388 1,369,388 Office equipment and furniture 621, ,272 3,011,652 3,011,652 Less: accumulated depreciation and amortization (1,373,234) (1,373,234) 1,638, ,638,418 Other assets Investment in affiliate 5,000 (5,000) - Deposits 98,034 98,034 Total assets $ 13,026,906 $ 1,420,006 $ 1,268,723 $ (933,175) $ 14,782,460 Liabilities, Net Assets, and Stockholder's Equity Liabilities Current liabilities Accounts payable and accrued expenses $ 1,088,282 $ 30,031 $ 209,784 $ 1,328,097 Due to affiliate 928,175 (928,175) - Deferred revenue 3,034,704 69,695 3,104,399 Total current liabilities 4,122,986 99,726 1,137,959 (928,175) 4,432,496 Deferred rent 1,196, ,196,261 Total liabilities 5,319,247 99,726 1,137,959 (928,175) 5,628,757 Net assets and stockholders' equity Net assets Unrestricted 7,256,570 1,320, ,764 8,702,614 Temporarily restricted 421, ,089 Permanently restricted 30, ,000 Stockholder's equity Common stock - - 5,000 (5,000) - Retained earnings ,764 (125,764) - Total stockholder's equity ,764 (130,764) - Total net assets and stockholder's equity 7,707,659 1,320, ,764 (5,000) 9,153,703 Total liabilities, net assets, and stockholder's equity $ 13,026,906 $ 1,420,006 $ 1,268,723 $ (933,175) $ 14,782,460 16

19 Consolidating Statement of Activities Year Ended December 31, 2017 APIC CBIC ACSI Eliminations Total Revenue and support Conferences, educational courses and services $ 5,604,941 $ - $ - $ - $ 5,604,941 Examination and certification fees 607, ,740 Publications and educational products 3,985,281 48,431 4,033,712 Membership dues and fees 2,725,052 2,725,052 Grants 638,800 1,684,594 (188,050) 2,135,344 Miscellaneous income 86,858 86,858 Consulting income 788, ,725 Contributions 6,370 6,370 Total revenue and support 13,047, ,171 2,473,319 (188,050) 15,988,742 Expenses Program services Conferences, educational courses and services 4,516,060 4,516,060 Publications and educational products 2,606,386 2,606,386 Grant programs 638,800 1,684,594 (188,050) 2,135,344 Professional practice 1,053,949 1,053,949 Membership expenses 774, ,257 Examination and certification expenses 501, ,558 Assessments and training 333, ,526 APIC research 14,320 14,320 Total program services 9,603, ,558 2,018,120 (188,050) 11,935,400 Supporting services General and administrative 2,489, , ,929 (30,249) 3,230,180 Total expenses 12,092, ,861 2,592,049 (218,299) 15,165,580 Change in net assets from operations 954,333 (42,690) (118,730) 30, ,162 Non-operating item Net investment return 585, ,216 (30,249) 719,994 Change in net assets 1,539, ,526 (118,730) - 1,543,156 Net assets, beginning of year 7,707,659 1,320, ,764 (5,000) 9,153,703 Net assets, end of year $ 9,247,019 $ 1,442,806 $ 12,034 $ (5,000) $ 10,696,859 17

20 Consolidating Statement of Activities Year Ended December 31, 2016 APIC CBIC ACSI Eliminations Total Revenue and support Conferences, educational courses and services $ 5,472,276 $ - $ - $ - $ 5,472,276 Examination and certification fees 605, ,164 Publications and educational products 3,538,134 38,478 3,576,612 Membership dues and fees 2,613,206 2,613,206 Grants 367,256 1,046,889 1,414,145 Miscellaneous income 17,907 17,907 Consulting income 1,488,673 1,488,673 Contributions 6,179 6,179 Total revenue and support 12,014, ,642 2,535,562-15,194,162 Expenses Program services Conferences, educational courses and services 4,158,115 4,158,115 Publications and educational products 2,227,838 2,227,838 Grant programs 367,256 1,046,889 1,414,145 Professional practice 916, ,682 Membership expenses 809, ,793 Examination and certification expenses 583, ,287 Assessments and training 1,081,034 1,081,034 APIC research 17,228 17,228 Total program services 8,496, ,287 2,127,923-11,208,122 Supporting services General and administrative 2,563, , ,427 (17,985) 2,951,824 Total expenses 11,060, ,729 2,433,350 (17,985) 14,159,946 Change in net assets from operations 954,106 (40,087) 102,212 17,985 1,034,216 Non-operating item: Net investment return 299,918 99,787 (17,985) 381,720 Change in net assets 1,254,024 59, ,212-1,415,936 Net assets, beginning of year 6,453,635 1,260,580 28,552 (5,000) 7,737,767 Net assets, end of year $ 7,707,659 $ 1,320,280 $ 130,764 $ (5,000) $ 9,153,703 18

21 Schedule of Revenue and Expense - APIC-only Year Ended December 31, Revenue Membership dues and fees $ 2,725,052 $ 2,613,206 Registration fees 3,163,857 2,994,531 Advertising 35,756 4,911 Sponsorship 1,660,695 1,482,621 Exhibitor fees 1,830,025 1,643,300 Products 768, ,490 Royalties 936, ,811 Editorial stipend 164, ,100 Grants 978, ,256 Subscriptions 591, ,126 Other revenue 192, ,606 Total revenue 13,047,302 12,014,958 Operating expenses Event expenses 2,323,410 2,281,218 Travel and transportation 891, ,654 Printing, production, delivery 764, ,699 Marketing 196, ,654 Professional fees 859, ,375 Technology and communications support 818, ,547 Office administration 284, ,097 Financial related administration 1,236,233 1,150,439 Compensation 4,845,105 4,913,911 Allocated general and administrative expenses (127,371) (122,742) Total expenses 12,092,969 11,060,852 Change in net assets from operations 954, ,106 Net investment return 585, ,918 Change in net assets $ 1,539,360 $ 1,254,024 19

22 Reports Required by Government Auditing Standards and the Uniform Guidance ASSOCIATION FOR PROFESSIONALS IN INFECTION CONTROL AND EPIDEMIOLOGY, INC. AND AFFILIATES December 31, 2017

23 Contents Reports Required by Government Auditing Standards and the Uniform Guidance Independent auditor s report on internal control over financial reporting and on compliance and other matters based on an audit of financial statements performed in accordance with Government Auditing Standards 1-2 Independent auditor s report on compliance for the major federal program and on internal control over compliance and report on schedule of expenditures of federal awards required by the Uniform Guidance 3-5 Schedule of expenditures of federal awards 6 Notes to the schedule of expenditures of federal awards 7 Schedule of findings and questioned costs 8-12

24 Independent Auditor s Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards To the Board of Directors We have audited, in accordance with the 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, the financial statements of the and Epidemiology, Inc. (APIC) and Affiliates (APIC Consulting Services, Inc. (ACSI) and Certification Board of Infection Control and Epidemiology, Inc. (CBIC)), which comprise the consolidated statement of financial position as of December 31, 2017, and the related consolidated statements of activities, and cash flows for the year then ended, and the related notes to the consolidated financial statements, and have issued our report thereon dated June 11, The financial statements of the Certification Board of Infection Control and Epidemiology, Inc. were not audited in accordance with Government Auditing Standards and accordingly this report does not include reporting on internal control over financial reporting or instances of reportable noncompliance associated with the Certification Board of Infection Control and Epidemiology, Inc. Internal Control Over Financial Reporting L S t r e e t, N W S u i t e In planning and performing our audit of the financial statements, we considered the and Epidemiology, Inc. and APIC Consulting Services, Inc. s (collectively referred to as the Organization) internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinion on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the Organization s internal control. Accordingly, we do not express an opinion on the effectiveness of the Organization s internal control. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control such that there is a reasonable possibility that a material misstatement of the entity s financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. Our consideration of the internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies and therefore, material weaknesses or significant deficiencies may exist that have not been identified. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. We did identify a deficiency in internal control, described in the accompanying schedule of findings and questioned costs that we consider to be a significant deficiency. We consider the deficiency identified in the accompanying schedule of findings and questioned costs as item to be a significant deficiency. 1

25 To the Board of Directors June 11, 2018 Page 2 of 2 Compliance and Other Matters As part of obtaining reasonable assurance about whether the Organization s financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed an instance of noncompliance or other matters that is required to be reported under Government Auditing Standards and which is described in the accompanying schedule of findings and questioned costs as item The Organization s Response to Findings The Organization s response to the findings identified in our audit is described in the accompanying schedule of findings and questioned costs. The Organization s response was not subjected to the auditing procedures applied to the audit of the financial statements and, accordingly, we express no opinion on it. Purpose of this Report The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the Organization s internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the Organization s internal control and compliance. Accordingly, this communication is not suitable for any other purpose. Washington, DC June 11,

26 Independent Auditor s Report on Compliance for the Major Federal Program and on Internal Control over Compliance and Report on Schedule of Expenditures of Federal Awards Required by the Uniform Guidance To the Board of Directors Report on Compliance for the Major Federal Program We have audited the compliance of the and Epidemiology, Inc. and APIC Consulting Services, Inc. (collectively the Organization ) with the types of compliance requirements described in the OMB Compliance Supplement that could have a direct and material effect on the Organization s major federal program for the year ended December 31, The Organization s major federal program is identified in the summary of auditor s results section of the accompanying schedule of findings and questioned costs. Management s Responsibility Management is responsible for compliance with federal statutes, regulations, and the terms and conditions of its federal awards applicable to the federal program. Auditor s Responsibility L S t r e e t, N W S u i t e Our responsibility is to express an opinion on compliance for the Organization s major federal program based on our audit of the types of compliance requirements referred to above. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; the audit requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Those standards and the Uniform Guidance require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major federal program occurred. An audit includes examining, on a test basis, evidence about the Organization s compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion on compliance for the major federal program. However, our audit does not provide a legal determination of the Organization s compliance. Opinion on the Major Federal Program In our opinion, the Organization complied, in all material respects, with the types of compliance requirements referred to above that could have a direct and material effect on its major federal program for the year ended December 31, Other Matters The results of our auditing procedures disclosed four instances of noncompliance, which are required to be reported in accordance with the Uniform Guidance and which are described in the accompanying schedule of findings and questioned costs as items , , and Our opinion on the major federal program is not modified with respect to these matters. The Organization s responses to the noncompliance findings identified in our audit is described in the accompanying schedule of findings and questioned costs. 3