National Society of Professional Engineers and Affiliates Alexandria, Virginia

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1 National Society of Professional Engineers and Affiliates Alexandria, Virginia Consolidated Financial Statements and Supplementary Information Year Ended June 30, 2017

2 Consolidated Financial Statements and Supplementary Information Year Ended June 30, 2017 Table of Contents Independent Auditor s Report... 1 Consolidated Financial Statements Consolidated Statement of Financial Position... 3 Consolidated Statement of Activities... 5 Consolidated Statement of Cash Flows... 6 Notes to Consolidated Financial Statements... 7 Supplementary Information Consolidating Statement of Financial Position Consolidating Statement of Activities... 21

3 Independent Auditor s Report Board of Directors Alexandria, Virginia Report on the Consolidated Financial Statements We have audited the accompanying consolidated financial statements of National Society of Professional Engineers and Affiliates, which comprise the consolidated statement of financial position as of June 30, 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. 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; 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 consolidated financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in 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. 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 entity 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 entity s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. 1

4 Opinion In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of as of June 30, 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. Other Matters Report on Supplementary Information Our audit was conducted for the purpose of forming an opinion on the consolidated financial statements as a whole. The consolidating statement of financial position and the consolidating statement of activities, appearing on pages 19 through 21, are presented for the purpose of additional analysis and are 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 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. In our opinion, the information is fairly stated in all material respects in relation to the consolidated financial statements as a whole. Wipfli LLP November 7, 2017 Madison, Wisconsin 2

5 Consolidated Statement of Financial Position June 30, 2017 Assets Current assets: Cash and cash equivalents $ 3,227,377 Investments 5,648,738 Accounts receivable 440,893 Due from related parties 25,387 Inventory 75,739 Prepaid expenses 285,853 Total current assets 9,703,987 Fixed assets, net 4,634,037 TOTAL ASSETS $ 14,338,024 See accompanying notes to consolidated financial statements. 3

6 Consolidated Statement of Financial Position (Continued) June 30, 2017 Liabilities and Net Assets Current liabilities: Accounts payable and accrued expenses $ 564,717 Deferred membership dues and other fees 3,578,785 Other deferred revenue 156,714 Current portion of revolving note payable 142,857 Current portion of capital lease obligation 1,684 Total current liabilities 4,444,757 Long-term liabilities: Deferred membership dues and other fees - Long-term 1,198,348 Total liabilities 5,643,105 Net assets: Unrestricted: General/undesignated funds 3,855,609 Board-designated funds 1,973,434 Total unrestricted net assets 5,829,043 Temporarily restricted 1,796,501 Permanently restricted 1,069,375 Total net assets 8,694,919 TOTAL LIABILITIES AND NET ASSETS $ 14,338,024 See accompanying notes to consolidated financial statements. 4

7 Consolidated Statement of Activities Year Ended June 30, 2017 Temporarily Permanently Unrestricted Restricted Restricted Total Revenue: License and examination fees $ 4,822,105 $ 0 $ 0 $ 4,822,105 Membership dues 2,928, ,928,016 Contributions and grants 654,142 1,640, ,294,306 Conference registrations 6, ,175 Publications, advertising, and promotional items 620, ,962 Administrative and other fees 379, ,471 Rental income 773, ,102 Investment return 144,504 6, ,559 Net assets released from restrictions 1,539,350 ( 1,539,350) 0 0 Total revenue 11,867, , ,974,696 Expenses: Program services: NICET 4,456, ,456,620 Membership benefits and services 1,288, ,288,877 Communications 729, ,107 PE conference 69, ,152 EJCDC 115, ,787 NAFE 46, ,780 Legal/Licensure 269, ,309 Interest groups 57, ,801 Advocacy 173, ,722 Engineers Week programs 1,987, ,987,846 Total program service expenses 9,195, ,195,001 Outreach/Executive 466, ,115 Governance 378, ,360 Supporting services and administration 1,757, ,757,950 Total expenses 11,797, ,797,426 Change in net assets 70, , ,270 Net assets - Beginning of year 5,758,642 1,689,763 1,069,244 8,517,649 Net assets - End of year $ 5,829,043 $ 1,796,501 $ 1,069,375 $ 8,694,919 See accompanying notes to consolidated financial statements. 5

8 Consolidated Statement of Cash Flows Year Ended June 30, 2017 Increase (decrease) cash and cash equivalents: Cash flows from operating activities Change in net assets $ 177,270 Adjustments to reconcile changes in net assets to net cash provided by operating activities: Depreciation and amortization 577,341 Net realized and unrealized gain on investments ( 117,344) Write-off of inventory 31,205 Changes in assets and liabilities: Accounts receivable ( 195,697) Receivables due from and payables due to related parties ( 5,330) Inventory ( 1,533) Prepaid expenses ( 128,717) Accounts payable and accrued expenses ( 523,146) Deferred membership dues and other fees and other deferred revenue 252,297 Net cash provided by operating activities 66,346 Cash flows from investing activities Proceeds from sales of investments 4,604,480 Purchase of investments ( 4,568,630) Purchase of fixed assets ( 496,427) Net cash used in investing activities ( 460,577) Cash flows from financing activities Principal paid on revolving notes payable ( 142,857) Principal paid on capital lease obligation ( 19,324) Net cash used in financing activities ( 162,181) Change in cash and cash equivalents ( 556,412) Cash and cash equivalents - Beginning of year 3,783,789 Cash and cash equivalents - End of year $ 3,227,377 Supplemental schedule of noncash and financing activity: Interest paid $ 5,546 Net tax refunds received 23,869 See accompanying notes to consolidated financial statements. 6

9 Notes to Consolidated Financial Statements Note 1: Summary of Significant Accounting Policies This summary of significant accounting policies of (NSPE and Affiliates) is presented to assist in understanding the consolidated financial statements. The consolidated financial statements and notes to consolidated financial statements are representations of the management of NSPE and Affiliates, which is responsible for their integrity and objectivity. These accounting policies conform to accounting principles generally accepted in the United States (GAAP). Nature of Operations These consolidated financial statements include the accounts of the following organizations: National Society of Professional Engineers (NSPE) National Engineers Week Foundation (NEWF) National Society of Professional Engineers Educational Foundation (NSPE EF) The three organizations are collectively referred to in the consolidated financial statements and notes to consolidated financial statements as NSPE and Affiliates. NSPE is organized and operated exclusively as a not-for-profit membership organization for the engineering profession. NSPE provides services to approximately 30,000 members, 51 state and territorial societies, and over 350 local chapters. The mission of NSPE is to promote the ethical and competent practice of engineering, advocate licensure, and enhance the image and well-being of its members. Revenue is received primarily through annual dues from members, and license and examination fees. The National Engineers Week program (the program ) was established in 1951 by NSPE. NSPE operated the program until 1960, when the NSPE EF was incorporated, at which time the NSPE EF operated the program until NEWF was incorporated on August 13, NEWF now operates the program and it is celebrated annually by thousands of engineers, engineering students, teachers, and leaders in government and business. In 1988, the NSPE EF consortium expanded its scope and now includes more than 100 engineering, scientific, and education societies, as well as major corporations dedicated to enhancing the public understanding of the engineering profession and promoting pre-college interest in engineering and technology. Revenue is received primarily through cash contributions from corporate sponsors. NEWF also supports programs such as Introduce a Girl to Engineering Day and the Future City Competition. Activities of these programs are set out in separate operating funds. Third-party corporate contributions to these programs in excess of incurred expenses are accounted for as temporarily restricted net assets. NSPE EF was established by NSPE in 1960 in accordance with the laws of the State of Delaware. The mission of NSPE EF is to encourage and assist students in the pursuit of careers in the field of engineering. NSPE EF's primary activity in fulfillment of this mission is the awarding of scholarships to graduating high school seniors who are enrolling in engineering programs at accredited universities. Principles of Consolidation The accompanying consolidated financial statements are presented on the accrual basis of accounting in accordance with GAAP and all significant intercompany transactions and balances have been eliminated. 7

10 Notes to Consolidated Financial Statements Note 1: Summary of Significant Accounting Policies (Continued) Cash and Cash Equivalents NSPE and Affiliates considers all demand deposits to be cash equivalents. Cash or money market accounts held by external investment managers are classified as investments as these funds are not readily available for operations. Investments Investments in debt and marketable equity securities, mutual funds, and money market accounts held for investing purposes are carried at fair value. Investments in certificates of deposit are carried at cost. Unrealized and realized gains and losses are recorded as a component of investment return in the consolidated statement of activities. Accounts Receivables Accounts receivables represent amounts due under royalty agreements, interest on certificates of deposit, unconditional promises to give, dues collected by state societies on NSPE s behalf, and amounts invoiced for services, sales and rentals. Management evaluates the collectability of receivables based on prior collection and circumstances associated with each receivable and has determined that no allowance for uncollectible accounts is necessary. Inventory Inventory consists of promotional and educational items held for sale and is valued at the lower of cost, determined on the first-in, first-out (FIFO) method, or market. Fixed Assets Fixed assets are carried at cost. NSPE and Affiliates capitalize expenditures for fixed assets that have a useful life of more than one year. Substantially all fixed assets are depreciated or amortized on the straight-line method over the following useful lives: Building Building improvements Furniture and fixtures Equipment Software and website costs 45 years Over the remaining life of the building 5 to 10 years 3 to 5 years 3 to 5 years Maintenance, repairs and renewals that neither materially add to the value of the property nor appreciably prolong its life are charged to expense as incurred. Capital Lease Obligation NSPE leases equipment that qualifies as a capital lease. The capital lease equipment and capital lease obligation are recorded at the present value of the minimum lease payments, less amounts representing interest. The capital lease equipment is amortized over its estimated useful life and is computed using the straight-line method. Amortization expense is included in depreciation and amortization expense. 8

11 Notes to Consolidated Financial Statements Note 1: Summary of Significant Accounting Policies (Continued) Classification of Net Assets Net assets and revenue, expenses, gains, and losses are classified based on the existence or absence of donorimposed restrictions. Accordingly, net assets of NSPE and Affiliates and changes therein are classified and reported as follows: Unrestricted Net Assets Net assets that are not subject to donor-imposed stipulations. Temporarily Restricted Net Assets Net assets subject to donor-imposed stipulations that may or may not be met, either by actions of NSPE and Affiliates and/or the passage of time. When a restriction is satisfied, or expires, temporarily restricted net assets are transferred to unrestricted net assets and reported on the statement of activities as net assets released from restrictions. Permanently Restricted Net Assets Net assets subject to donor-imposed stipulations that they be maintained permanently by the organization, with part or all of the income earned on any related investments to be used for general or specific purposes. Unrestricted net assets consist of the following four components: General fund (undesignated funds) Board-designated interest group (practice division) funds: Professional Engineers in Higher Education (PEHE) Professional Engineers in Private Practice (PEPP) Board-designated reserve funds: NSPE Reserve Fund NSPE Product Development Fund NICET (National Institute for Certification in Engineering Technologies) Reserve Fund The balances of interest group funds represent the cumulative net result of operations, including transfers for those funds. The NSPE and NICET Reserve Funds represent monies appropriated by the Board of Directors to be set aside for contingencies and the future financial health of NSPE and NICET. The NSPE Product Development Fund represents a special reserve fund, set aside and available for development costs for new products and services. Revenue Recognition Contributions are recognized when the donor makes a promise to give to the NSPE and Affiliates that is, in substance, unconditional. Contributions received are recorded as unrestricted, temporarily restricted, or permanently restricted support, depending on the existence and nature of any donor restrictions. It is NSPE and Affiliate s policy to record and display donor-restricted contributions as temporarily restricted net assets, and to report the contributions as net assets released from restriction and reclassify them as unrestricted net assets when a stipulated time restriction expires or when a purpose restriction is accomplished. 9

12 Notes to Consolidated Financial Statements Note 1: Summary of Significant Accounting Policies (Continued) Revenue Recognition (Continued) Conditional promises to give are recognized only when the conditions on which they depend are substantially met and the promises become unconditional. Fair Value Measurements NSPE and Affiliates measure fair value of their financial instruments using a three-tier hierarchy, which prioritizes the inputs used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are described below: Level 1 Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that NSPE and Affiliates has the ability to access. Level 2 Inputs to the valuation methodology include: Quoted prices for similar assets or liabilities in active markets. Quoted prices for identical or similar assets or liabilities in inactive markets. Inputs other than quoted prices that are observable for the asset or liability. Inputs that are derived principally from or corroborated by observable market data by correlation or other means. If the asset or liability has a specified (contractual) term, the Level 2 input must be observable for substantially the full term of the asset or liability. Level 3 Inputs to the valuation methodology are unobservable and significant to the fair value measurement. The asset's or liability's fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs. Income Taxes NSPE is exempt from federal income tax under Section 501(c)(6) of the Internal Revenue Code. NSPE does, however, engage in unrelated business activities from which it derives revenue, which are subject to income tax. NEWF and NSPE EF are both exempt from income taxes under Section 501(c)(3) of the Internal Revenue Code, whereby only unrelated business income, as defined by Section 512(a)(1), is subject to federal income tax. There was no income tax due for NEWF and NSPE EF for the year ended June 30, Management assesses whether it is more likely than not that an income tax position will be sustained upon examination on the technical merits of the position assuming the taxing authority has full knowledge of all information. If the tax position does not meet the more likely than not recognition threshold, the benefit of that tax position is not recognized in the financial statements. Management has determined there are no amounts to record as assets or liabilities related to uncertain income tax positions as of June 30,

13 Notes to Consolidated Financial Statements Note 1: Summary of Significant Accounting Policies (Continued) Use of Estimates In preparing financial statements in accordance with GAAP, management is required to make estimates and assumptions that affect certain reported amounts of assets and liabilities and disclosures. Actual results could differ from those estimates. Subsequent Events In connection with the preparation of the consolidated financial statements, NSPE and Affiliates evaluated subsequent events after the statement of financial position date through November 7, 2017, was the date the consolidated financial statements were available to be issued. Note 2: Concentration of Credit Risk Financial instruments that potentially subject NSPE and Affiliates to credit risk consist principally of cash deposits in excess of insured limits in financial institutions. NSPE and Affiliates maintains its bank accounts at various financial institutions. Accounts at these institutions are insured by the Federal Deposit Insurance Corporation (FDIC) up to $250,000. NSPE and Affiliates cash balances at times may exceed insured limits as designated by FDIC. Management has assessed the risk of potential loss due to these concentrations and feels that the risk is minimal. Note 3: Investments The following is a summary of investments held at June 30, 2017: Certificates of deposit $ 4,737,719 Money market accounts 75,094 Corporate bonds 241,952 Equity securities 593,973 Total $ 5,648,738 Investment return for the year ended June 30, 2017, is comprised of the following: Interest and dividends $ 40,649 Investment/advisor fees ( 7,434) Net realized and unrealized gain on investments 117,344 Total $ 150,559 11

14 Notes to Consolidated Financial Statements Note 4: Fair Value Measurements Fair values of all investments in equity securities held for investing purposes were determined using Level 1 inputs. Money market funds are valued at cost which approximates fair value. Quoted market prices are used to determine the fair value of money market accounts and investments in publicly traded securities. Corporate bonds are valued using recently executed transactions or market price quotations for comparable investments (where observable) and were determined using Level 2 inputs. There were no Level 3 asset or liability fair value measurements reflected in the financial statements of NSPE and Affiliates. The following table sets forth by level, within the fair value hierarchy, NSPE and Affiliates investments at fair value as of June 30, 2017: Fair Value Measurements Using Total Assets Level 1 Level 2 Level 3 at Fair Value Cash and cash equivalents Money market $ 0 $ 75,094 $ 0 $ 75,094 Certificates of Deposit 4,737, ,737,719 Equity securities U.S equities 593, ,973 Corporate bonds 0 241, ,952 Totals $ 5,331,692 $ 317,046 $ 0 $ 5,648,738 During the year ended June 30, 2017, NEWF inventory with a cost of $31,205 was written down to its market value of $0. The amount of inventory reported on the consolidated statement of financial position at June 30, 2017 after the write down was $75,739. Note 5: Accounts Receivable Accounts receivable consist of the following at June 30, 2017: Contributions $ 100,000 Rental and other revenue 340,379 Membership dues 514 Accounts receivable $ 440,893 12

15 Notes to Consolidated Financial Statements Note 6: Fixed Assets Fixed assets consist of the following at June 30, 2017: Land $ 1,548,075 Building and building improvements 8,012,044 Furniture and fixtures 179,214 Software 1,711,511 Website 413,634 Equipment 432,058 Subtotal 12,296,536 Accumulated depreciation and amortization ( 7,662,499) Total $ 4,634,037 Note 7: Deferred Membership Dues and Other Fees Membership dues and renewal fees collected in advance are accounted for as deferred revenue, and are recognized ratably over the period to which they pertain. Current deferred membership dues and other fees are as follows at June 30, 2017: National dues $ 1,615,748 NICET renewal & registry fees 2,602,055 NICET certifying exam fees 559,330 Total $ 4,777,133 NICET certifications can be renewed for a three-year period, and the renewal fees collected are recognized as revenue ratably over a three-year period. At June 30, 2017, NICET had collected $876,629 and $321,719 in certification renewal fees applicable to fiscal years 2019 and NSPE recognizes certifying exam fees at the time the exams are administered. Fees paid in advance are classified as deferred revenue. Note 8: Other Deferred Revenue Other deferred revenue consists of the following at June 30, 2017: Sponsorships and other advance receipts $ 150,214 Other 6,500 Total $ 156,714 13

16 Notes to Consolidated Financial Statements Note 9: Revolving Note Payable In June 2008, NSPE entered into a ten-year revolving note with Bank of America. NSPE borrowed $1,000,000 under this note. Commencing July 1, 2011, principal payments became payable in 84 equal monthly installments. Interest on the outstanding balance accrues at a rate equal to 1.4% above the 30-day LIBOR rate (interest rate at June 30, 2017, was 2.63%). As of June 30, 2017, the outstanding balance on this note was $142,857. The revolving note payable of NSPE is collateralized by NSPE s headquarters building. The financing agreement on the revolving note contains certain restrictive covenants pertaining to liquidity. NSPE believes it is in compliance with all covenants at June 30, The loan will mature during the year ended June 30, Note 10: Temporarily Restricted Net Assets Contributions are received from donors for use in support of various programs of NSPE and Affiliates. These contributions have either purpose restrictions as to the use of the funds for specific types of expenditures or time restrictions as to when the funds may be used. Temporarily restricted net assets are comprised of the following as of June 30, 2017: Contributions Net Assets Balance and Investment Released from Balance Nature of Restriction July 1, 2016 Income Restrictions June 30, 2017 NSPE: NSPE Legal Fund $ 42,462 $ 1,150 ($ 3,912) $ 39,700 For specific programs 84, ( 3,490) 82,396 NEWF: For specific programs 1,507,238 1,637,950 ( 1,531,948) 1,613,240 NSPE EF: Scholarship Funds 55,110 6, ,165 Totals $ 1,689,763 $ 1,646,088 ($ 1,539,350) $ 1,796,501 Note 11: Benefit Plans The NSPE Employee Savings Plan and Trust is a defined contribution plan, which is open to all regular full-time and part-time employees as of the date of their employment. For the year ended June 30, 2017, NSPE s contribution to the plan was an amount equal to 3% of each participant s annual salary. This amount vests immediately. NSPE made additional matching contributions for each employee, up to 2% of the employee s salary. This additional 2% matching contribution, vests over a five-year period at 20% per year. NSPE s contribution to the plan totaled $196,516 for the year ended June 30,

17 Notes to Consolidated Financial Statements Note 12: Operating Leases NSPE leases equipment from vendors under various operating leases with original or remaining terms of five years or less. Rent expense under operating leases was $19,798 for the year ended June 30, Minimum future lease payments are as follows: 2018 $ 19, , ,017 Total $ 43,605 Note 13: Board-Designated Funds The balances of the Board-designated funds as of June 30, 2017, are as follows: Interest Group funds: PEHE $ 18,247 PEPP 208,015 Total Interest Group funds 226,262 Reserve funds: NSPE Reserve Fund 542,299 NSPE Product Development Fund 40,800 NICET Reserve Fund 1,164,073 Total reserve funds 1,747,172 Total Board-designated funds $ 1,973,434 Note 14: Endowment Funds/Permanently Restricted Net Assets NSPE EF s endowment consists of six different funds established to benefit NSPE EF for a variety of purposes. The six funds included are the Steinman Endowment Fund, the Auxiliary Legacy Fund, the Paul H. Robbins Fund, the G. Hightower Fund, the William Kimel Fund, and the Milt Lunch Fund. Net assets associated with endowment funds are classified and reported based on the existence or absence of donor-imposed restrictions. 15

18 Notes to Consolidated Financial Statements Note 14: Endowment Funds/Permanently Restricted Net Assets (Continued) The Board of Directors of NSPE EF has interpreted the Uniform Prudent Management of Institutional Funds Act (UPMIFA), as adopted by the Virginia state legislature, as requiring NSPE EF to preserve the fair value of the donor's original gift, as of the date of the gift, absent explicit donor stipulations to the contrary. As a result of this interpretation, NSPE EF classifies as permanently restricted net assets (a) the original value of the donor's gifts to the permanent endowment, (b) the original value of a donor's subsequent gifts to the permanent restricted endowment, and (c) accumulations to the permanent endowment made in accordance with the direction of the applicable donor gift instrument at the time the accumulation is added to the fund. The remaining portion of the donor-restricted endowment fund that is not classified in permanently restricted net assets is classified as temporarily restricted net assets until those amounts are appropriated for expenditure by NSPE EF in a manner consistent with the standard of prudence prescribed by UPMIFA. NSPE EF has adopted investment and spending policies for endowment assets that attempt to provide a predictable stream of funding to programs supported by its endowment while seeking to preserve the purchasing power of the endowment assets. Endowment assets are invested in a manner to protect principal, grow the aggregate portfolio value in excess of the rate of inflation, and achieve an effective annual rate of return that is equal to or greater than the designated benchmarks for the various types of investment vehicles and to ensure that any risk assumed is commensurate with the given investment vehicle and NSPE EF s objectives. To achieve its investment goals, NSPE EF targets an asset allocation that will achieve a balanced return of current income and long-term growth of principal while exercising risk control. NSPE EF's asset allocations includes cash and certificates of deposit at June 30, Interest, dividends, and net appreciation in fair value of the donor-restricted endowment funds are classified as unrestricted, temporarily restricted or permanently restricted. Interest and dividends on donor-restricted endowment funds are appropriate for distribution at the discretion of the Board of Directors. NSPE EF has received several gifts in which the donors have stipulated that the gift amount be invested and maintained temporarily and permanently for the continued operations of NSPE EF. Endowments assets are as follows at June 30, 2017: Steinman Endowment Fund $ 673,593 Auxiliary Legacy Fund 169,488 Paul H. Robbins Fund 91,087 G. Hightower Fund 83,145 William Kimel Fund 52,124 Milt Lunch Fund 5,696 Total endowment assets $ 1,075,133 16

19 Notes to Consolidated Financial Statements Note 14: Endowment Funds/Permanently Restricted Net Assets (Continued) The change in endowment funds were as follows: Temporarily Permanently Unrestricted Restricted Restricted Total Endowment at July 1, 2016 ($ 13,995) $ 0 $ 1,069,244 $ 1,055,249 Interest and dividends 4,505 1, ,349 Net appreciation 14,687 6, ,728 Subtotal 5,197 7,885 1,069,244 1,082,326 Contributions Less: Administrative fees 5,197 2, ,324 Endowment at June 30, 2017 $ 0 $ 5,758 $ 1,069,375 $ 1,075,133 Note 15: Related Party In addition to the three organizations included in these consolidated financial statements, NSPE and Affiliates has an unconsolidated related party. MATHCOUNTS Foundation is an affiliated organization founded by NSPE. NSPE holds one position on the board of directors of MATHCOUNTS Foundation, and the MATHCOUNTS Foundation shares office space with NSPE. MATHCOUNTS Foundation sponsors a nationwide competition among junior high school students. NSPE collects contributions from its members on behalf of its related parties. NSPE provides services and incurs expenses on behalf of its related parties, some of which are reimbursed to NSPE by them. During the year ended June 30, 2017, the total expenses reimbursed by MATHCOUNTS were $154,371 and there were unreimbursed expenses of $50,000 that were related to MATHCOUNTS. At June 30, 2017, there was $25,387 due to NSPE from MATHCOUNTS and no amount due to MATHCOUNTS from NSPE. NSPE has also pledged the contribution of free rent to MATHCOUNTS for the next five years, which is conditional on MATHCOUNTS reimbursing NSPE for a portion of occupancy costs. These amounts are not recorded on the consolidated statement of financial position due to the conditional nature of the promise to give. 17

20 Notes to Consolidated Financial Statements Note 15: Related Party (Continued) The estimated fair value of the free rent, as indicated in the agreement between NSPE and MATHCOUNTS, provided during the year ended June 30, 2017 was $51,120, which is included as administrative and other fees revenue and supporting services and administration expense on the consolidated statement of activities. Amounts to be provided in future years is as follows: Year Ending June 30 Amount 2018 $ 103, , , , ,979 Total $ 488,980 Note 16: Tenant Leases NSPE leases three floors of office space, approximating 21,600 square feet, to various tenants in its headquarters building in Alexandria, Virginia. These rental activities utilize approximately 41% of the total space available in NSPE s headquarters building. Rental income for the year ended June 30, 2017, was $773,102. Minimum future rentals to be received on non-cancelable leases are as follows: Year Ending June 30 Amount 2018 $ 580, , ,530 Total future minimum rentals $ 957,005 18

21 Supplementary Information

22 Consolidating Statement of Financial Position June 30, 2017 National Engineers NSPE Week Educational Assets NSPE Foundation Foundation Subtotal Eliminations Total Current assets: Cash and cash equivalents $ 2,807,426 $ 352,477 $ 67,474 $ 3,227,377 $ 0 $ 3,227,377 Investments 3,706, ,661 1,068,975 5,648, ,648,738 Accounts receivable 340, , , ,893 Due from related parties 87, ,458 62,071 25,387 Inventory 0 75, , ,739 Prepaid expenses 249,309 36, , ,853 Total current assets 7,190,513 1,438,421 1,137,124 9,766,058 62,071 9,703,987 Fixed assets, net 4,477, , ,634, ,634,037 TOTAL ASSETS $ 11,668,255 $ 1,594,716 $ 1,137,124 $ 14,400,095 $ 62,071 $ 14,338,024 See Independent Auditor's Report. 19

23 Consolidating Statement of Financial Position (Continued) June 30, 2017 National Engineers NSPE Week Educational Liabilities and Net Assets NSPE Foundation Foundation Subtotal Eliminations Total Current liabilities: Accounts payable and accrued expenses $ 548,185 $ 16,532 $ 0 $ 564,717 $ 0 $ 564,717 Deferred membership dues and other fees 3,578, ,578, ,578,785 Other deferred revenue 156, , ,714 Due to related parties 0 43,488 18,583 62,071 62,071 0 Current portion of revolving note payable 142, , ,857 Current portion of capital lease obligation 1, , ,684 Total current liabilities 4,428,225 60,020 18,583 4,506,828 62,071 4,444,757 Long-term liabilities: Deferred membership dues and other fees - Long-term 1,198, ,198, ,198,348 Total long-term liabilities 1,198, ,198, ,198,348 Total liabilities 5,626,573 60,020 18,583 5,705,176 62,071 5,643,105 Net assets: Unrestricted: General/undesignated funds 3,946,152 ( 78,544) ( 11,999) 3,855, ,855,609 Board-designated funds 1,973, ,973, ,973,434 Total unrestricted net assets 5,919,586 ( 78,544) ( 11,999) 5,829, ,829,043 Temporarily restricted 122,096 1,613,240 61,165 1,796, ,796,501 Permanently restricted 0 0 1,069,375 1,069, ,069,375 Total net assets 6,041,682 1,534,696 1,118,541 8,694, ,694,919 TOTAL LIABILITIES AND NET ASSETS $ 11,668,255 $ 1,594,716 $ 1,137,124 $ 14,400,095 $ 62,071 $ 14,338,024 See Independent Auditor's Report. 20

24 Consolidating Statement of Activities Year Ended June 30, 2017 National NSPE Engineers Week Educational NSPE Foundation Foundation Subtotal Eliminations Total Revenue: License and examination fees $ 4,822,105 $ 0 $ 0 $ 4,822,105 $ 0 $ 4,822,105 Membership dues 2,928, ,928, ,928,016 Contributions and grants 2,658 2,284,000 7,648 2,294, ,294,306 Conference registrations 6, , ,175 Publications, advertising and promotional items 561,245 59, , ,962 Administrative and other fees 449, ,471 70, ,471 Rental income 773, , ,102 Investment return 22, ,494 20, , ,559 Total revenue 9,565,588 2,451,211 27,897 12,044,696 70,000 11,974,696 Expenses: Program services: NICET 4,456, ,456, ,456,620 Membership benefits and services 1,288, ,288, ,288,877 Communications 729, , ,107 PE conference 69, , ,152 EJCDC 115, , ,787 NAFE 46, , ,780 Legal/Licensure 269, , ,309 Interest groups 57, , ,801 Advocacy 173, , ,722 Engineers Week programs 0 1,987, ,987, ,987,846 Outreach/Executive 466, , ,115 Governance 378, , ,360 Supporting services and administration 1,459, ,492 16,188 1,827,950 70,000 1,757,950 Total expenses 9,510,900 2,340,338 16,188 11,867,426 70,000 11,797,426 Changes in net assets $ 54,688 $ 110,873 $ 11,709 $ 177,270 $ 0 $ 177,270 See Independent Auditor's Report. 21