CAFR. Comprehensive Annual Financial Report

Transcription

1 CAFR Comprehensive Annual Financial Report FISCAL YEAR ENDED JUNE 2016

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3 National Association of State Auditors, Comptrollers and Treasurers Comprehensive Annual Financial Report For the Fiscal Year Ended June 30, 2016 INTRODUCTORY SECTION... 1 Letter of Transmittal... 3 List of Officers and Members of the Executive Committee... 7 List of Staff Members... 8 FINANCIAL SECTION... 9 Independent Auditor s Report on Basic Financial Statements Management s Discussion and Analysis Basic Financial Statements: Statement of Net Position Statement of Revenues, Expenses and Changes in Fund Net Position Statement of Cash Flows Notes to the Financial Statements OTHER INFORMATION Budgetary Comparison Schedule Statistical Information Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of the Financial Statements Performed in Accordance with Government Auditing Standards i

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5 1 Introductory Section

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7 September 26, 2016 To the Executive Committee and Members of the National Association of State Auditors, Comptrollers and Treasurers: I am pleased to submit the Comprehensive Annual Financial Report of the National Association of State Auditors, Comptrollers and Treasurers for the fiscal year ended June 30, Responsibility for both the accuracy of the data and the completeness and fairness of the presentation, including all disclosures, rests with the Association. To the best of our knowledge, the enclosed data are accurate in all material respects and are reported in a manner designed to present fairly the financial position and results of operations of the Association. All disclosures necessary to enable the reader to gain an understanding of the Association s financial activities have been included. Management of the Association is responsible for establishing and maintaining internal control designed to provide reasonable, but not absolute, assurance regarding the safeguarding of assets against loss from unauthorized use or disposition and the reliability of financial records for preparing financial statements and maintaining accountability for assets. The concept of reasonable assurance recognizes that the cost of a control should not exceed the benefits likely to be derived, and that the evaluation of costs and benefits requires estimates and judgments by management. Article VI of the Association s Constitution and Bylaws requires that an annual audit be conducted of the Association s financial statements. NASACT s Audit Committee appointed a team of three auditors who conducted the audit of the FY 2016 financial statements in September The independent auditor s report is at the beginning of the financial section of this report. The Comprehensive Annual Financial Report is presented in three sections: the introductory section, the financial section and the statistical section. The introductory section includes this transmittal letter, a list of the Association s officers and Executive Committee for and a list of staff in the Lexington and Washington offices at September 26, The financial section includes the independent auditor s report, management s discussion and analysis, the basic financial statements and notes to the financial statements. Other information includes the budgetary comparison schedule and the statistical section. The statistical section contains trend information about NASACT s financial position, revenues and debt, as well as demographic and operating information. Overall, NASACT s total net position decreased in FY 2016 by $149,775. This decrease is strategic as the Executive Committee lowers the unrestricted net assets to a target level, primarily through the travel assistance program. The Executive Committee is monitoring the association s financial position closely, and will make the necessary changes to ensure financial stability as the target reserve level is met. Profile of NASACT NASACT was founded in 1915 to allow principal state officials concerned with state financial management to gather annually to discuss issues of mutual interest. Over the years, as state financial management became increasingly complex, NASACT expanded its services and offerings to members. With the establishment of the Governmental Accounting Standards Board in

8 came the need for technical services as members became involved in the process of setting accounting and financial reporting standards. Now, the Association engages in a wide variety of activities to enhance the professionalism of its members and to foster accountability, efficiency and effectiveness in state government. Among these activities are the following: Organize conferences and webinars. Offer training seminars on a variety of finance and audit-related topics. Provide weekly updates to members. Communicate regularly with standards-setting bodies regarding matters related to governmental accounting, financial reporting and auditing. Serve as an advocate for states interests in Washington, DC. Conduct research on a variety of topics of interest to members. Work cooperatively with peer organizations of state government officials on topics and projects of mutual interest. Major Projects and Initiatives Fiscal year 2016 has been an active year for NASACT and its members. Listed below are some of the activities focused on during the year: NASACT - NAST Workgroup developed best practices for the management of stable net asset value (NAV) local government investment pools (LGIPs). NASACT partnered with the National Association of State Treasurers to develop voluntary guidelines to assist state leaders with guidance for managing investment pools in a manner that provides both state and local government participants with investment options that, when prudently managed, provide safety of principal and liquidity. NASACT continues to aid states as they implement OMB s Uniform Guidance and GASB s pension standards. NASACT provided input to the U.S. Office of Management and Budget on an implementation issue pertaining to section (g)(3) of the Uniform Guidance issued by OMB on December 26, This issue, as contained in the current guidance, will create uncertainty and volatility pertaining to the allowability of pension costs in cost allocation plans. NASACT s Pension Standards Implementation Group held its last call in December The group continues to circulate questions states may have as they implement pension standards from the Governmental Accounting Standards Board. NASACT continued to promote transparency and monitor DATA Act Progress. NASACT continues to monitor the progress of the Section 5 Grants Pilot related to the implementation of the Digital Accountability and Transparency (DATA) Act. NASACT continues to aid states on new information reporting requirements related to the Affordable Care Act. NASACT provides a forum for members to share information on the reporting provisions required by the Affordable Care Act and has provided input to the commissioner of the Internal Revenue Service on implementation concerns. NASACT continues to join other state and local government organizations in educating members of Congress on the importance of the tax exemption for municipal bonds. Over the past several years there have been proposals both in Congress and the Administration which would limit or eliminate the tax exemption for municipal bonds. If such proposals were enacted, state and 4

9 local governments would face a decrease in the demand for municipal bonds which would ultimately result in higher costs to build and maintain infrastructure. NASACT continues to support the treatment of certain municipal securities as high-quality liquid assets. Through the Public Finance Network, NASACT has urged Congress to support the passage of H.R. 2209, which would require appropriate federal banking agencies to treat certain municipal obligations as level 2A liquid assets. NASACT worked with The Big 7 and other groups to educate those on Capitol Hill about misinformation related to public pension systems and government bankruptcies. NASACT participated with The Big 7 and other national peer associations to update a fact sheet to help allay attacks on public pensions and to help educate members of Congress. NASACT testified at the following GASB hearings: Fiduciary Activities on April 1. Leases on June 29. NASACT responded to the following due process documents from GASB: ED on Leases ED on Fiduciary Activities ED on Certain Asset Retirement Obligations ED on Pension Issues ED on Implementation Guide No. 20XX-X ED on Pensions Provided through Certain Multiple-Employer Defined Benefit Pension Plans ED on Blending Requirements for Certain Component Units ED on Irrevocable Split-Interest Agreements ED on Certain External Investment Pools NASACT provided multiple training opportunities and technical resources for members NASACT Annual Conference August NSAA IT Workshop and Conference September NASC Annual Conference March Middle Management Conference April NSAA Annual Conference June 2016 Webinars featuring the following topics: - GASB Review (July 2015) - NSAA Excellence Award Winners (October 2015) - Data Act Implications (November 2015) - Digital Trends in Government Finance (January 2015) - The War for Talent (February 2016) - Benford s Law and Fraud Detection (March 2016) - Uniform Guidelines/Implementation Issues (May 2016) Technical response networks for state auditors and state comptrollers (ongoing) NASACT continues to offer travel assistance to members to attend the annual conferences. In FY 2016, NASACT offered up to $2,000 for all members or new officials to attend the NASACT annual conference and up to $1,000 for comptrollers and auditors to attend their annual conferences. 5

10 Past financial reports about the Association can be found online at Questions about this report may be directed to NASACT s headquarters office. Respectfully submitted, R. Kinney Poynter Executive Director 6

11 NATIONAL ASSOCIATION OF STATE AUDITORS, COMPTROLLERS AND TREASURERS EXECUTIVE COMMITTEE OFFICERS President Calvin McKelvogue Chief Operating Officer Iowa Second Vice President Debbie Davenport Auditor General Arizona First Vice President David H. Lillard, Jr. State Treasurer Tennessee Secretary D. Clark Partridge State Comptroller Arizona Treasurer Beth Pearce State Treasurer Vermont OTHER MEMBERS Immediate Past President Ronald L. Jones Chief Examiner Alabama Manju Ganeriwala State Treasurer Virginia Anna Maria Kiehl State Comptroller/ Chief Accounting Officer Pennsylvania Stephen M. Eells State Auditor New Jersey Mike Frerichs State Treasurer Illinois Dianne E. Ray State Auditor Colorado Stacey Pickering State Auditor Mississippi John C. Reidhead Director Division of Finance Utah Thomas L. White, Jr. State Comptroller Alabama Steve McCoy State Treasurer Georgia 7

12 NATIONAL ASSOCIATION OF STATE AUDITORS, COMPTROLLERS AND TREASURERS STAFF (September 26, 2016) In Lexington R. Kinney Poynter, CPA, Executive Director Patsy Hackney, Administrative Assistant Glenda Johnson, Communications Manager Donna Maloy, Conference Manager Kimberly O Ryan, CPA, NASC Association Director Rebecca Parmley, Bookkeeper Anna Peniston, Professional Education Coordinator Sherri Rowland, CPA, NSAA Association Director Lori Slagle, Finance Manager Kathleen Young, Peer Review Coordinator In Washington Cornelia Chebinou, J.D., Washington Director Tanya Grayson, Administrative Assistant Neal Hutchko, Policy Analyst 8

13 9 Financial Section

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17 MANAGEMENT S DISCUSSION AND ANALYSIS The following discussion about the financial performance of NASACT provides a narrative overview and analysis of the financial activities for the fiscal year ended June 30, Readers are encouraged to consider this narrative in conjunction with the information that is furnished in the letter of transmittal, which can be found preceding this analysis, and with the basic financial statements that follow. Activities that are normally intended to recover all or a significant portion of their costs through user fees and charges to external users of goods and services are required to report as business-type activities. Since NASACT s activities are expected to recover their costs, the Association reports as a business-type activity. HIGHLIGHTS Net Position The assets of NASACT exceeded liabilities at fiscal year-end by $2,277,536 (presented as Total net position ). Of this amount $1,707,411 was reported as Unrestricted. In FY 2015, net position exceeded liabilities by $2,427,311 and unrestricted net position was $1,850,381. The unrestricted net position represents the amount available to meet ongoing obligations. Change in Net Position In FY 2016, NASACT s total net position decreased by $149,775. OVERVIEW OF THE FINANCIAL STATEMENTS This overview and analysis is intended to serve as an introduction to the Association s basic financial statements, which include two components: (1) the financial statements and (2) notes to the financial statements. This report also contains other information, such as the budgetary and statistical sections. These components are described below. Financial Statements Because NASACT reports as a business-type activity, it presents the statements required for that type of entity. The statements provide both short-term and long-term information about the Association s financial position. These statements are prepared using the flow of economic resources measurement focus and the accrual basis of accounting, the same measurement focus and basis of accounting that is used in the private sector. These financial statements take into account all revenues and expenses related to the fiscal year regardless of whether the cash involved has been received or disbursed. The financial statements include three statements: 1. The Statement of Net Position (page 18) presents the Association s assets and liabilities, with the difference between the two reported as Total net position. Over time, increases or decreases in the Association s net position serve as an indicator of whether the financial position of NASACT is improving or deteriorating. 2. The Statement of Revenues, Expenses and Changes in Fund Net Position (page 19) presents information regarding how net position changed during the fiscal year. All changes in net position are reported when the underlying event occurs, regardless of the timing of the related cash flow. Thus, revenues and expenses are reported in this statement for items that will not result in cash transactions until future fiscal periods (such as uncollected contract revenues and earned, but not used, personal leave). 3. The Statement of Cash Flows (page 20) presents the cash receipts and cash payments occurring during the fiscal year. In this statement, changes in net cash are reported when the cash transaction occurs, regardless of the timing of the underlying events. This report provides users 13

18 with the information needed to assess the Association s ability to generate future cash flows and meet obligations as they come due and to assess operating versus investing activities. Notes to the Financial Statements The Notes to the Financial Statements provide additional information that is essential to a full understanding of the data provided in the financial statements. The notes to the financial statements may be found immediately following the financial statements, pages 21 through 25. Other Information Following the Basic Financial Statements is other information which further explains and supports the information in the financial statements. FINANCIAL ANALYSIS OF NASACT The condensed information below was derived from NASACT s Statement of Net Position at June 30, 2016, and June 30, The net position at June 30, 2016, is $2,277,536 a decrease of $149,775 from fiscal year 2015 s net position of $2,427,311. Net Position as of Amount June 30, 2016 June 30, 2015 Change % Change Current assets $ 1,173,322 $ 1,175,931 $ (2,609) 0% Capital assets 570, ,930 (6,805) -1% Other assets 2,475,000 2,475,000-0% Total assets 4,218,447 4,227,861 (9,414) 0% Current liabilities 1,780,872 1,662, ,198 7% Noncurrent liabilities 160, ,876 22,163 16% Total liabilities 1,940,911 1,800, ,361 8% Investment in capital assets 570, ,930 (6,805) -1% Unrestricted net position 1,707,411 1,850,381 (142,970) -8% Total net position $ 2,277,536 $ 2,427,311 (149,775) -6% Current assets include cash, investments, deposits, accounts receivable, accrued interest receivable, employee cafeteria plan receivable, prepaid expenses and restricted cash. As shown above, current assets decreased slightly from June 30, Capital assets decreased about one percent due to depreciation. Other assets, which are investments, remained unchanged. Current liabilities include accounts payable, capital lease payable, salaries payable, unearned income and the current portion of compensated absences. Current liabilities increased seven percent mainly due to an increase in payables owed to vendors. Noncurrent liabilities consist of the long-term portion of compensated absences. Total liabilities increased eight percent compared to FY The larger component of NASACT s net position (75 percent) is the unrestricted portion, which is resources that may be used at the Association s discretion to meet ongoing obligations. Unrestricted net position was 76 percent at June 30, The remaining portion of net position represents NASACT s investment in capital assets, such as an office building, office equipment, furniture and software applications. The Association uses these assets to provide services to members; these assets are not available for future spending. After netting capital asset acquisitions, net investment in capital assets decreased by approximately one percent. The decrease is due to depreciation. 14

19 The following condensed financial information was derived from NASACT s Statement of Revenues, Expenses and Changes in Net Position for the years ended June 30, 2016, and June 30, Statement of Changes in Net Position for the Fiscal Year Ended June 30, Amount Change % Change Revenues State dues $ 632,700 $ 602,264 $ 30,436 5% Technical service fees 236, ,000-0% Corporate associates 452, ,500 53,000 13% Sponsor fees 140, ,500 16,000 13% Registration fees 581, ,537 25,009 4% Contract revenue 263, ,585 38,134 17% Admin service reimbursements 409, ,115 (36,405) -8% Admin service fees 73,340 60,833 12,507 21% Interest revenue 57,081 48,135 8,946 19% Miscellaneous revenue 13,538 24,777 (11,239) -45% Total revenues 2,860,634 2,724, ,388 5% Expenses Salaries and employee benefits 1,364,260 1,307,011 57,249 4% Meeting expense 601, , ,409 34% Admin service expense 409, ,545 (36,258) -8% Travel reimbursements 189, ,110 33,134 21% Consultant services 80,025 89,477 (9,452) -11% Rent expense 67,440 63,858 3,582 6% Travel expense 45,670 48,486 (2,816) -6% Supplies expense 38,749 37,285 1,464 4% Consultant expense 29,557 37,350 (7,793) -21% Other expenses 184, ,492 1,138 1% Total expenses 3,010,409 2,817, ,657 7% Increase (decrease) in net position (149,775) (93,506) (56,269) 60% Net position - beginning 2,427,311 2,520,817 (93,506) -4% Net position - ending $ 2,277,536 $ 2,427,311 $ (149,775) -6% State dues are payments from states in support of NASACT. State dues increased by $30,000, or five percent, compared to FY The NASACT Executive Committee previously voted to increase members annual dues by 3.5 percent each year. Technical service fees are funds received from states in support of NASC and NSAA. The amount of fees received remained the same for FY 2016 and Corporate associates are receipts from NASACT s private sector partners in support of the NASACT annual conference. The FY 2016 and FY 2015 conferences were held in Chicago, IL, and Santa Fe, NM, respectively. The amount of funds collected from corporate associates increased by $53,000 in 2016 compared to 2015 mainly due to an increase in the number of associates contributing at the silver and bronze levels. Corporate associate levels are shown on page 37 in the supplemental information of this report. Sponsor fees are payments from NASACT s private sector partners in support of the NASC and NSAA annual conferences. Total sponsor fees increased by $16,000 from 2015 attributable to the NASC conference. Registration fees for the organization increased by four percent, or $25,000, compared to FY Registrations for all conferences increased by $56,000; however, fees collected for webinars and training seminars decreased by $31,

20 Contract revenue is a combination of payments on contracts for state training seminars and for association management services provided to the Association of Local Government Auditors, the National Association of State Retirement Administrators and the National Association of State Treasurers. Contracts with these associations increased revenue by $58,000. Most of the increase came from a change in the contract with NAST. Revenue from state training seminars decreased by $20,000 in 2016 due to less activity. The administrative services program is comprised of two activities, NSAA s peer review program and the benchmarking program. It has two sources of revenue, administrative fees and reimbursements, the latter of which is offset by administrative service expense. Both the revenues and expenses for these activities vary based on program participation during the fiscal year. Administrative service reimbursements for peer review and benchmarking totaled $409,000 for FY 2016 compared to $446,000 for FY The organization scheduled 19 peer reviews in FY 2016 and collected $66,500 in administrative fees. In 2015, team members performed 15 peer reviews. The service fees for benchmarking amounted to $6,800 in 2016 compared to $8,000 in FY Interest revenue is generated on the Association s investments in savings and certificates of deposit. Interest revenue increased $9,000 from FY 2015 due to laddering of certificates of deposit for longer terms with higher interest rates. The majority of miscellaneous revenue comes from the recognition of unearned income used to cover the costs of NASACT representatives attending meetings in support of GASB-related activities. The amount of the funds used each year varies. Miscellaneous revenue decreased by $11,000 from FY Salaries and employee benefits expenses include salaries, insurance, retirement, etc. These amounts increased by $57,000 from FY The majority of the increase stems from additional salaries expense and changes in cost of insurance. Meeting expenses are associated with the annual conferences held throughout the year. This cost increased in 2016 by $152,000 from FY The majority of the increase is attributed to the location of the NASACT annual conference held in Chicago, IL. This annual conference coincided with NASACT s 100 th year in existence. Meeting expense for this conference increased by $117,000. Expenses for the NASC and NSAA annual conferences increased by $13,000 and $17,000, respectively. Meeting expense for these conferences is also driven by location. As discussed above, administrative service expense is a combination of expense relating to peer review and the benchmarking program. These expenses are reimbursed by states for participation in these programs. Travel reimbursements are funds returned to attendees of the NASACT, NASC and NSAA annual conferences. The expense increased by $33,000 from FY The increase came from the NASACT annual conference in Chicago. As part of the 100-year celebration, NASACT reimbursed up to $1,500 in travel for each past president to attend. The combination of reimbursement for the past presidents and an increase in attendees created the additional $33,000. The number of attendees requesting reimbursement for the NASC and NSAA conferences remained the same in both 2016 and Consultant services are fees charged by professionals to perform specific services for NASACT. The fees for these services decreased by about $9,000 from FY During FY 2015, NASACT had contracted services for the coordination of educational activities and replacement of the IT manager. These expenses were not necessary in FY Rent expense is for the staff offices at NASACT s Washington, D.C. location. This expense increased slightly per the contract with the lessor. Travel expense is derived from staff travel to conferences. This expense decreased slightly from FY Supplies remained relatively the same from FY Supplies include paper, toner, cables, folders, etc., and numerous other items that aid in the everyday functions of both offices and for conferences. The purchase of new computers below the capitalization threshold are also included in this line item. 16

21 Consultant expenses decreased by $8,000 from FY 2015 mainly due to a drop in the number of state training seminars. Other expenses include office condo association fees, postage, telephone, printing, bank fees, copier rental, etc. These expenses remained about the same between the two years. BUDGETARY HIGHLIGHTS NASACT s Executive Committee approves the Association s annual budget prior to the beginning of the fiscal year. NASACT s actual financial performance for FY 2016 finished above the approved budget as shown in the other information on page 29. Corporate associates were $52,000 above budget due to additional funds contributed for the NASACT annual conference. Contract revenue came in $65,000 above budget due to changes in contract amounts for NAST and NASRA. Administrative service reimbursements were $72,000 higher than anticipated; the corresponding expense was also higher. This is due to additional benchmarking activity. Supplies and meeting expense were higher than budgeted due to the NASACT annual conference. NASACT s management is aware of the importance of reducing expenses and pursuing cost-saving techniques. During the past years, staff have aggressively pursued these initiatives. Recently, staff either initiated or continued the following cost-saving and revenue generating techniques: Invested excess reserves in financial instruments yielding higher returns than the operating account. Utilized to distribute information (including electronic publication of the NASACT News), resulting in postage savings. Utilized frequent flyer miles to the extent possible, reducing travel expenses. Utilized hotel point programs to the extent possible, reducing hotel expenses. Produced and printed conference-related materials in-house, resulting in significant savings in printing costs. ECONOMIC CONDITION AND OUTLOOK Despite the current economic conditions, the Association experienced a positive financial year due to continued support from members. For FY 2016, NASACT s budget projected a decrease in net position of $274,000; however, total revenues were somewhat higher than anticipated which allowed the Association to finish the year with a deficit of $150,000. NASACT expects to meet budget in FY REQUESTS FOR INFORMATION This financial report is designed to provide a general overview of the finances of the National Association of State Auditors, Comptrollers and Treasurers to interested individuals. Questions concerning any of the information provided in this report or requests for additional information should be addressed to NASACT, 449 Lewis Hargett Circle, Suite 290, Lexington, KY 40503, (859)

22 National Association of State Auditors, Comptrollers and Treasurers Statement of Net Position June 30, 2016 ASSETS Current assets: Cash and cash equivalents $ 338,804 Investments 500,000 Deposits held in custody by others 4,700 Accounts receivable 144,931 Accrued interest receivable 20,372 Employee cafeteria plan 1,083 Prepaid expenses 32,025 Restricted cash 131,407 Total current assets 1,173,322 Noncurrent assets: Investments 1,725,000 Restricted investments 750,000 Capital assets - building, net of accumulated depreciation 545,519 Capital assets - equipment, net of accumulated depreciation 24,606 Total noncurrent assets 3,045,125 Total assets $ 4,218,447 LIABILITIES Current liabilities: Accounts payable $ 182,257 Salaries payable 42,421 Capital lease payable 9,648 Unearned income 1,520,666 Compensated absences 25,880 Total current liabilities 1,780,872 Noncurrent liabilities: Compensated absences 160,039 Total noncurrent liabilities 160,039 Total liabilities 1,940,911 NET POSITION Investment in capital assets 570,125 Unrestricted 1,707,411 Total net position 2,277,536 Total liabilities and net position $ 4,218,447 The notes to the financial statements are an integral part of this statement. 18

23 National Association of State Auditors, Comptrollers and Treasurers Statement of Revenues, Expenses and Changes in Fund Net Position For the Period Ended June 30, 2016 OPERATING REVENUES: State dues $ 632,700 Technical service fees 236,000 Corporate associates 452,500 Sponsor fees 140,500 Registration fees 581,546 Contract revenue 263,719 Administrative service reimbursements 409,710 Administrative service fees 73,340 Miscellaneous revenue 13,538 Total operating revenues 2,803,553 OPERATING EXPENSES: Salaries 1,078,940 Employee benefits 285,320 Supplies 38,749 Postage and handling 6,795 Communication services 17,760 Copying 3,391 Repairs and maintenance 753 Continuing education 1,238 Consultant services 80,025 Consultant expenses 29,557 Staff travel 45,670 Executive committee/president expense 15,750 Meeting expense 601,547 Travel reimbursement 189,742 Administrative service expense 409,287 Printing 31,796 Books and periodicals 694 Credit card fees 26,807 Miscellaneous 1,881 Professional membership dues 2,432 Banking service fees 872 Rent 67,440 Office condo association fees 10,600 Utilities 5,328 Janitorial services 2,556 Copier rental 5,361 Software support 17,115 Insurance 4,530 Auditing 3,693 Depreciation - building 19,197 Depreciation - equipment 5,583 Total operating expenses 3,010,409 Operating income (loss) (206,856) Nonoperating revenues (expenses) Interest and investment revenue 57,081 Interest expense Total nonoperating revenues (expenses) 57,081 Change in net position (149,775) Total net position - beginning 2,427,311 Total net position - ending $ 2,277,536 The notes to the financial statements are an integral part of this statement. 19

24 National Association of State Auditors, Comptrollers and Treasurers Statement of Cash Flows For the Year Ended June 30, 2016 Other Cash GASB Cash Total Cash CASH FLOWS FROM OPERATING ACTIVITIES Receipts from members $ 919,800 $ $ 919,800 Receipts from corporate associates 454, ,000 Receipts from sponsors 140, ,500 Receipts from participants 561, ,312 Receipts from contractors 293, ,141 Receipts from administrative service reimbursements 431, ,630 Receipts from administrative service fees 73,340 73,340 Receipts for cafeteria plan 8,688-8,688 Other receipts 14,358-14,358 Payments to vendors (1,504,008) (12,839) (1,516,847) Payments to employees (1,341,291) - (1,341,291) Payments to cafeteria plan participants (10,279) - (10,279) Net cash provided by operating activities 41,191 (12,839) 28,352 CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Principal paid on capital lease (8,330) - (8,330) Net cash used by capital and related financing activities (8,330) - (8,330) CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from the sale and maturity of investments 500, ,000 Purchase of investments and securities (500,000) - (500,000) Interest and dividends 51,526 51,526 Net cash provided by investing activities 51,526-51,526 Net increase (decrease) in cash and cash equivalents 84,387 (12,839) 71,548 Balances - beginning of the year 254, , ,663 Balances - end of the year $ 338,804 $ 131,407 $ 470,211 Reconciliation of operating income to net cash provided by operating activities: Operating income $ (206,856) Adjustments to reconcile operating income to net cash provided by operating activities: Depreciation 24,780 Change in assets and liabilities: Decrease in accounts receivable 46,508 Decrease in prepaid expenses 34,290 Increase in employee café plan receivable (1,083) Increase in accounts payable 83,071 Decrease in employee café plan payable (508) Decrease in salaries payable (958) Increase in unearned income 25,181 Increase in compensated absences 23,927 Net cash provided by operating activities $ 28,352 The notes to the financial statements are an integral part of this statement. 20

25 National Association of State Auditors, Comptrollers and Treasurers Notes to the Financial Statements June 30, 2016 Note 1 Summary of Significant Accounting Policies The accompanying financial statements have been prepared in conformity with generally accepted accounting principles as prescribed by the Governmental Accounting Standards Board. The Association has prepared required supplementary information titled Management s Discussion and Analysis, which precedes the basic financial statements, and other information, which includes the Budgetary Comparison Schedule, which follows these footnotes. a. Reporting Entity The National Association of State Auditors, Comptrollers and Treasurers, an unincorporated association, is an instrumentality of the states. Its mission, as set forth in its constitution, is to assist state leaders to enhance and promote effective and efficient management of government resources. Because of the Association s standing as an instrumentality of the states, its financial statements have been prepared in accordance with generally accepted accounting principles as prescribed by the GASB. b. Measurement Focus, Basis of Accounting and Basis of Presentation The Association is considered a special purpose government and reports as a business-type activity, using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Operating revenues and expenses are distinguished from non-operating items. Operating revenues and expenses result from providing services in connection with ongoing operations. Items not meeting the criteria of operating transactions are recorded as non-operating. c. Budgetary Data The annual budget for FY 2016 was prepared using the full accrual basis of accounting. The Association s budget and any subsequent revisions are approved by the Executive Committee. d. Capital Assets Capital assets, which include an office building, office equipment, furniture and software, are reported on the Statement of Net Position. The Association defines capital assets as assets that have a cost of $2,000 or more at the date of acquisition and have an expected useful life of more than one year. Capital assets are depreciated using the straight-line method over the assets estimated useful lives. Estimated useful lives generally are assigned as follows: building, 39 years; equipment, 2-10 years; furniture, 5-10 years; software, 2-10 years. e. Business-Type Activity Accounting and Financial Reporting The Association applies all applicable GASB pronouncements including GASB Statement No. 62, Codification of Accounting and Financial Reporting Guidance contained in Pre-November 30, 1989 FASB and AICPA Pronouncements. 21

26 National Association of State Auditors, Comptrollers and Treasurers Notes to the Financial Statements June 30, 2016 f. Basis for Cash Restriction NASACT classifies cash into two categories, restricted and unrestricted. Restricted cash balances are cash amounts administered by NASACT, but imposed by law through enabling legislation, which in NASACT s case is the Executive Committee. Restricted cash balances reported in the financial statements include the balance of the past collections from the states for GASB funding and the employee cafeteria plan. As stated in Note 6, the Financial Accounting Foundation changed the funding mechanism for the GASB in FY 2012 and the NASACT Executive Committee determined that any remaining GASB funds collected by NASACT should be retained by the Association for GASB-related activities. The Executive Committee established a policy in August 2012 specifying the appropriate uses of these funds. All other cash held by the Association is considered unrestricted for reporting purposes. Note 2 Cash and Cash Equivalents, Restricted Cash and Investments As of June 30, 2016, the Association had the following investments and securities: Deposit Type Fair Value Cash: Demand $ 495,551 Investments: Certificates of deposit 2,975,000 Total 3,470,551 Net withdrawals and deposits in transit (25,353) Total cash and investments in bank $ 3,445,198 Custodial Credit Risk. Custodial credit risk is the risk that in the event of a bank failure, the Association s deposits may not be returned to it. The Association s policy requires bank institutions to provide collateralization in excess of the FDIC limit. As of June 30, 2016, none of the Association s total bank deposits were exposed to custodial credit risk. Interest Rate Risk. Managing interest rate risk limits NASACT s exposure to fair value losses arising from changes in interest rates. According to the Association s investment policy, at least one third of the net financial assets of the Association may be invested in instruments with a maturity of no more than 13 months. The remainder of the assets may be invested in financial instruments with a maturity of no more than five years with adequate laddering to ensure that the average life shall be no greater than two and a half years. As of June 30, 2016, the Association had ten investments with a maturity greater than one year. 22

27 National Association of State Auditors, Comptrollers and Treasurers Notes to the Financial Statements June 30, 2016 Note 3 Accounts Receivable Accounts receivable have been aggregated and presented in the financial statements. Detailed information is presented below: Benchmarking $ 67,980 Contracts 61,754 Other 6,239 Registrations 5,380 Peer Review 3,578 Accounts receivable, June 30, 2016 $ 144,931 Note 4 Capital Assets The Association s investment in capital assets as of June 30, 2016, totals $570,125 (net of accumulated depreciation). This investment in capital assets includes the headquarters office, furniture, equipment and software. Capital asset activity for the year ended June 30, 2016, is summarized below: Beginning Ending Balance Increases Decreases Balance Capital assets Building $ 748,689 $ - $ - $ 748,689 Furniture 27,051 12,806 14,245 Equipment 44,582 17,978 17,264 45,296 Software 25,171 5,899 19,272 Total capital assets 845,493 17,978 35, ,502 Less accumulated depreciation Building 183,973 19, ,170 Furniture 22, ,806 11,072 Equipment 36,472 4,654 17,263 23,863 Software 25,172 5,900 19,272 Total accumulated depreciation 268,564 24,782 35, ,377 Capital assets, net $ 576,929 $ (6,804) $ - $ 570,125 Note 5 Accounts Payable Accounts payable have been aggregated and presented in the financial statements. Detailed information is presented below: Vendors $ 102,463 Benchmarking 66,000 Payroll Taxes 7,579 Retirement 6,215 Accounts payable, June 30, 2015 $ 182,257 23

28 National Association of State Auditors, Comptrollers and Treasurers Notes to the Financial Statements June 30, 2016 Note 6 Unearned Income As stated in Note 1, amounts collected by NASACT for the GASB are considered restricted cash. During FY 2012, the Financial Accounting Foundation changed the method of collecting funds in support of the GASB. At June 30, 2012, the remaining funds were set aside to be used for GASB-related activities such as travel by members to GASB hearings. The balance of the account at June 30, 2015, was $894,000. During FY 2016, the association used approximately $13,000. The balance at June 30, 2016 is $881,000. The remaining $639,000 in unearned income consists of dues, technical assessments, registrations and corporate associates relating to FY Note 7 Compensated Absences Compensated absences activity for the year ended June 30, 2016, is summarized below. Of this amount, $25,880 is considered a current liability. Compensated absences, July 1, 2016 $ 161,992 Additions 24,971 Deletions 1,044 Compensated absences, June 30, 2016 $ 185,919 Note 8 Leases The following is a schedule of future minimum rental payments required under operating leases that have initial or remaining non-cancelable lease terms in excess of one year as of June 30, 2016: Year Ending June 30 Office Space Copier Total ,665 5,196 61, ,916 5,196 62, ,131 5,196 62, and thereafter 33,380 5,196 38,576 Total future minimum lease payments $ 204,092 $ 20,784 $ 224,876 The following schedule shows the composition of total rental expenditures for all operating leases: For the Year Ended June 30, 2016 Minimum rentals: Office space $ 67,440 Copier 5,361 Total $ 72,801 24

29 National Association of State Auditors, Comptrollers and Treasurers Notes to the Financial Statements June 30, 2016 Note 9 Retirement Plan Generally, all employees are eligible to participate in the Teachers Insurance and Annuity Association/College Retirement Equities Fund, a privately administered, defined contribution retirement plan. Participant eligibility and contributory requirements are established in the Retirement Resolution. Employees contribute five percent of gross wages and the Association contributes ten percent of gross wages. The Association will match additional employee contributions up to five percent. After an employee completes 25 years of service and reaches age 60, or after completing 30 years of service and reaching age 55, the Association contributes an additional ten percent of gross wages, for a total employer contribution of 20 percent. The Association assumes no liability other than its contributions. The plan administrator s annual report may be obtained by writing to: TIAA-CREF, 730 Third Avenue, New York, NY For the year ended June 30, 2016, the Association had a total payroll of $1,078,940 of which $1,063,197 was covered by the plan. Employee contributions for the plan years ending June 30, 2016, 2015, and 2014, were $118,079, $114,952, and $109,929, respectively. Employer contributions for the plan years ending June 30, 2016, 2015, and 2014 were $153,771, $149,924, and $138,973, respectively. Note 10 Risk Management and Insurance Coverage Association employee benefits for health, dental, long-term disability and life insurance coverage are fully insured through commercial carriers. A commercial insurance carrier provides coverage for property exposure. There were no reductions in commercial insurance coverage during the fiscal year ended June 30, The Association does not participate in any risk pools. Note 11 Disposition of NSAA Portion of Unrestricted Net Position In fiscal year 2001, the National State Auditors Association eliminated support for the training packages component of the State Auditor Training Program and designated the remaining balance of $139,547 at June 30, 2001, until further study and analysis could be performed regarding the appropriate distribution of the training packages balance. After applying the provisions of GASB 34, the designated balance was reduced to $134,884 and is reflected as a component of Unrestricted Net Position. On March 24, 2003, the NSAA Executive Committee approved a scholarship program to assist members/speakers in attending NSAA conferences. The scholarships are funded by the interest earned on the training fund; the principal will remain intact. 25

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33 National Association of State Auditors, Comptrollers and Treasurers Budgetary Comparison Schedule For the Period Ended June 30, 2016 Variance Budgeted Amounts Favorable Original Final Actual (Unfavorable) Operating Revenues: State dues $ 617,000 $ 617,000 $ 632,700 $ 15,700 Technical Assessments 236, , ,000 Corporate associates 400, , ,500 52,500 Sponsor fees 129, , ,500 11,000 Registration fees 548, , ,546 33,346 Contract revenue 198, , ,719 65,469 State Reimbursement 338, , ,710 71,710 Administrative Fees 67,740 67,740 73,340 5,600 Sale of publications Miscellaneous revenue 17,300 17,300 13,538 (3,762) Total operating revenues 2,551,990 2,551,990 2,803, ,563 Operating Expenses: Salaries 1,079,078 1,079,078 1,078, Fringe Benefits 274, , ,320 (10,811) Supplies 23,225 23,225 38,749 (15,524) Postage and Handling 6,700 6,700 6,795 (95) Communication services 20,270 20,270 17,760 2,510 Copying 10,300 10,300 3,391 6,909 Equipment Repairs/Maintenance (253) Continuing Education 1,500 1,500 1, Consultant Services 77,600 77,600 80,025 (2,425) Consultant Expenses 38,400 38,400 29,557 8,843 Staff Travel 45,300 45,300 45,670 (370) President/Executive Ctte Expense 12,300 12,300 15,750 (3,450) Meeting expense 559, , ,547 (41,977) Travel reimbursement 197, , ,742 7,758 Administrative service expense 338, , ,287 (71,287) Printing 24,100 24,100 31,796 (7,696) Books and periodicals 2,450 2, ,756 Credit card fees 24,050 24,050 26,807 (2,757) Miscellaneous 2,300 2,300 1, Professional membership dues ,432 (2,232) Banking service fees 4,000 4, ,128 Rent 65,600 65,600 67,440 (1,840) Condominium association fees 12,500 12,500 10,600 1,900 Utilities 3,900 3,900 5,328 (1,428) Janitorial services 2,500 2,500 2,556 (56) Copier rental 5,200 5,200 5,361 (161) Software support 15,600 15,600 17,115 (1,515) Insurance 4,000 4,000 4,530 (530) Auditing 4,000 4,000 3, Depreciation - Building 19,197 19,197 19,197 Depreciation - Equipment 8,500 8,500 5,583 2,917 Total operating expenses 2,882,849 2,882,849 3,010,409 (127,560) Operating income (loss) $ (330,859) $ (330,859) $ (206,856) $ 124,003 Nonoperating revenues (expenses) Interest and investment revenue 57,300 57,300 57,081 (219) Interest expense Total nonoperating revenues (expenses) 57,300 57,300 57,081 (219) Change in net assets (273,559) (273,559) (149,775) 123,784 Total net assets - beginning 2,427,311 2,427,311 2,427,311 Total net assets - ending $ 2,153,752 $ 2,153,752 $ 2,277,536 $ 123,784 29

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35 National Association of State Auditors, Comptrollers and Treasurers Statistical Section For the Fiscal Year Ended June 30, 2016 This part of NASACT s Comprehensive Annual Financial Report presents detailed information in the areas listed below to provide a context for understanding what the information in the financial statements and notes says about the Association s overall financial health. CONTENT Financial Trend Information 32 These schedules contain trend information to help the reader understand how the Association s financial performance and fiscal well-being have changed over time. Revenue Information. 34 These schedules present information to help the reader evaluate NASACT s most significant revenue sources: membership dues, registration fees, contract revenue and the corporate associates program. Debt Information. 38 These schedules present information to help the reader appraise the Association s current levels of outstanding debt and the ability to incur debt in the future. Demographic Information 39 These schedules offer demographic and economic indicators to help the reader understand the environment within which the Association s financial activities take place. Operating Information These schedules contain operating data to help the reader understand how the information in the Association s financial report relates to the services it provides and activities it performs. SOURCES Financial information is derived from the financial statements presented in the comprehensive annual financial reports for the relevant years. Non-financial information is derived from various internal sources including, but not limited to, conference databases, source documents, and historical membership files. NOTE Due to the reporting format and definition changes prescribed by GASB Statement No. 34, information for fiscal years is provided. 31

36 National Association of State Auditors, Comptrollers and Treasurers Statistical Section For the Fiscal Year Ended June 30, 2016 Financial Trend Information - Net Position Last Ten Fiscal Years Investment in capital assets $ 570,125 $ 576,930 $ 602,376 $ 622,920 $ 641,048 $ 656,481 $ 685,173 $ 557,510 $ 587,342 $ 598,231 Unrestricted 1,707,411 1,850,381 1,918,441 1,794,055 1,744,553 1,589,040 1,390,734 1,381,001 1,338,762 1,072,087 Total net position $ 2,277,536 $ 2,427,311 $ 2,520,817 $ 2,416,975 $ 2,385,601 $ 2,245,521 $ 2,075,907 $ 1,938,511 $ 1,926,104 $ 1,670,318 32

37 National Association of State Auditors, Comptrollers and Treasurers Statistical Section For the Fiscal Year Ended June 30, 2016 Financial Trend Information - Changes in Net Position Last Ten Fiscal Years Operating Revenues NASACT operating $ 645,788 $ 618,699 $ 613,056 $ 592,655 $ 571,698 $ 558,051 $ 538,925 $ 543,925 $ 551,825 $ 540,151 Conferences 965, , , , , , , , , ,900 Training seminars 172, , , , , , , , , ,435 Technical services 236, , , , , , , , , ,600 Administrative services 483, , , ,409 1,173, , , ,407 1,630,812 1,313,699 Cooperative efforts 66, ,556 99,479 73,371 46,569 73,621 78,038 52,174 55,723 70,430 Contracts 233, , , ,913 90,940 86,695 73,160 69, , ,322 Miscellaneous 250 8,342 79, ,428 11,596 12,027 11,848 12,332 12,589 Total operating revenues 2,803,553 2,676,111 2,959,854 2,759,671 3,032,563 2,537,519 1,965,994 2,319,230 3,590,068 3,135,126 Operating Expenses NASACT operating 1,103,178 1,130, , , , , , , , ,023 Conferences 805, , , , , , , , , ,869 Training seminars 149, , , , , , , , , ,667 Technical services 233, , , , , , , , , ,627 Administrative services 482, , , ,623 1,174, , , ,627 1,612,061 1,291,079 Cooperative efforts 19,820 19,463 21,915 14,680 10,555 29,097 32,109 25,673 19,626 12,150 Contracts 216, , , , , , ,672 88, , ,875 Total operating expenses 3,010,409 2,817,752 2,897,007 2,770,242 2,924,329 2,421,052 1,889,880 2,386,074 3,432,004 2,855,290 Operating income (loss) (206,856) (141,641) 62,847 (10,571) 108, ,467 76,114 (66,844) 158, ,836 Nonoperating Revenues (Expenses) Interest and investment revenue 57,081 48,135 40,995 41,945 31,846 53,147 62,989 88, ,648 90,733 Interest expense (1,707) (8,902) (8,926) (8,901) Loss on disposal of assets Nonoperating income (loss) 57,081 48,135 40,995 41,945 31,846 53,147 61,282 79,251 97,722 81,832 Change in net position $ (149,775) $ (93,506) $ 103,842 $ 31,374 $ 140,080 $ 169,614 $ 137,396 $ 12,407 $ 255,786 $ 361,668 33