New Hampshire Municipal Association, Inc. Audited Financial Statements with Supplementary Information

Transcription

1 Audited Financial Statements with Supplementary Information Years ended December 31, 2016 and 2015 with Report of Independent Auditors

2 Audited Financial Statements with Supplementary Information Years ended December 31, 2016 and 2015 Contents Report of Independent Auditors Management Discussion and Analysis (Unaudited) Audited Financial Statements Statements of Net Position...13 Statements of Revenues, Expenses and Changes in Net Position...14 Statements of Cash Flows...15 Notes to the Financial Statements Required Supplementary Schedules Ten-Year Schedule of Employer Pension Information (unaudited)...34 Other Information Statement of Revenues, Expenses and Changes in Net Position - Budgetary Basis (Unaudited)...36 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

3 Report of Independent Auditors Board of Directors New Hampshire Municipal Association, Inc. Report on Financial Statements We have audited the accompanying financial statements of New Hampshire Municipal Association, Inc. (NHMA), which comprise the statements of net position as of December 31, 2016 and 2015 and the related statements of revenues, expenses and changes in net position and cash flows for the years then ended and the related notes to the financial statements. Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor's Responsibility Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States of America. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions.

4 Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of NHMA as of December 31, 2016 and 2015, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the Management Discussion and Analysis on pages 4-12 and the Ten-Year Schedule of Employer Pension Information on page 34 be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management s responses to our inquiries, the basic financial statements and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Information Our audits were conducted for the purpose of forming an opinion on NHMA's basic audited financial statements. The other information on pages 36 is presented for purposes of additional analysis and is not a required part of the basic financial statements. The other information has not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we do not express an opinion or provide any assurance on it. Reporting on Other Legal and Regulatory Requirements In accordance with Government Auditing Standards, we have also issued our report dated June 2, 2017 on our consideration of NHMA s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal controls over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit. Burlington, Vermont June 2, 2017 Vermont Firm Registration:

5 Management Discussion and Analysis (Unaudited) Years Ended December 31, 2016 and 2015 Introduction As management of New Hampshire Municipal Association, Inc. (NHMA), we offer readers of the financial statements this narrative overview and analysis of the financial activities of NHMA for the reporting periods ending December 31, 2016 and This section, the management discussion and analysis, is intended to provide an overview of NHMA s financial condition, results of operations, and other key information. Overview New Hampshire Municipal Association, Inc. is a nonprofit, non-partisan membership organization with the mission to provide legislative policy development and advocacy, legal advice on municipal problems and issues, and training and education on municipal duties and legal principles. The services are provided to and on behalf of municipal members of NHMA. As of December 31, 2016, 232 of the 234 towns and cities in New Hampshire were members of NHMA. In addition, 34 other political subdivisions (village districts and counties) and 9 regional planning commissions were associate members of NHMA during NHMA was originally created in 1941 to provide advocacy and other support services to New Hampshire municipalities. NHMA operated in this manner until a decision by the former Boards of NHMA, Local Government Center Property-Liability Trust, Inc., and Local Government Center HealthTrust, Inc., resulted in a restructuring effective July 1, The name New Hampshire Municipal Association, Inc. was changed to Local Government Center, Inc. (LGC), and New Hampshire Municipal Association, LLC (NHMA, LLC) was formed. NHMA, LLC remained a wholly owned subsidiary of Local Government Center, Inc., housing all traditional league services, until organizational changes approved by the NHMA, LLC governing board, effective September 1, 2013, resulted in the Local Government Center, Inc. assuming all NHMA, LLC obligations and operations, and the renaming of Local Government Center, Inc. back to New Hampshire Municipal Association, Inc. As a subsidiary of LGC, NHMA, LLC was exempt from federal income taxes under Section 501(c)(4) and 115 of the Internal Revenue Code. As a standalone nonprofit corporation, NHMA remains exempt from federal income taxes under Section 501(c)(4) and 115 of the Internal Revenue Code. NHMA's bylaws provide that dues are established by the NHMA Board of Directors. Dues are based on the budget adopted by the Board, and each municipal member s dues are calculated in accordance with the Board-approved formula, which is based on population and equalized valuation, with a minimum and maximum level. Associate member dues are set separately by the NHMA Board of Directors at a flat amount. 4

6 Management Discussion and Analysis (Unaudited) (Continued) Overview (Continued) As part of the September 1, 2013 reorganization, the New Hampshire Local Government Center Defined Benefit Pension Plan became a multiple-employer cost-sharing plan and changed its name to the HealthTrust/PLT/NHMA Pension Plan. This change had no impact on the assets or liabilities of the plan, nor were there any changes to the plan design in terms of benefits provided or eligibility criteria. Based upon the December 31, 2015 actuarial valuation of the HealthTrust/PLT/NHMA Pension Plan, the actuarial value of plan assets is $10,613,765, the actuarial accrued liability is $12,447,263 and the unfunded actuarial accrued liability is $1,833,498, resulting in a funded ratio of 85.27%. As of December 31, 2014, the actuarial value of plan assets was $10,618,848, the actuarial accrued liability was $11,621,460 and the unfunded actuarial accrued liability was $1,002,612, resulting in a funded ratio of 91.37%. The HealthTrust/PLT/NHMA Pension Plan did not issue a standalone financial report for the periods ending December 31, 2015 and Discussion of the Basic Financial Statements Following the pronouncements of the Governmental Accounting Standards Board (GASB), NHMA s financial information is presented in four basic components. Statements of Net Position: These statements provide information about NHMA s assets, liabilities, deferred outflows and inflows of resources, and net position as of December 31, 2016 and Total current assets represent cash, accounts receivable, and expenses prepaid for a subsequent period. Current liabilities reflect amounts to be paid to staff for wages or vacation time earned during the respective calendar year but not paid until a later period, other accounts payable, and dues received that are applicable to the following year. Non-current liabilities as of December 31, 2016 consist of NHMA's proportionate share of the HealthTrust/PLT/NHMA Pension Plan net pension liability as a result of the adoption of the GASB Statement No. 68, "Accounting and Financial Reporting for Pensions" (GASB 68) in The deferred inflows and outflows of resources as of December 31, 2016 also consist of pension-related balances that were recorded as a result of the adoption of GASB 68. 5

7 Management Discussion and Analysis (Unaudited) (Continued) Discussion of the Basic Financial Statements (Continued) The following table summarizes the Statements of Net Position: December 31, 2016 December 31, 2015 Percentage Change December 31, 2014 Percentage Change Assets Current assets $ 1,296,227 $ 1,323,020 (2.0)% $ 1,137, % Non-current assets 80,056 92,112 (13.1)% 96,777 (4.8)% Total assets 1,376,283 1,415,132 (2.7)% 1,234, % Deferred Outflows of Resources Deferred pension amounts 213,865 96, % - - % Liabilities Current liabilities 464, ,545 (8.2)% 368, % Non-current liabilities 230, , % - - % Total liabilities 694, , % 368, % Deferred Inflows of Resources Deferred pension expenses 56,372 20, % - - % Net Position, End of Year $ 839,359 $ 867,738 (3.3)% $ 866, % Net position at December 31, 2016 reflects unrestricted net position of $759,303 and NHMA s 1.2% investment in Center at Triangle Park, Inc. (CTP) of $80,056, for a total of $839,359. The investment in CTP decreased $11,828 from $91,884 at December 31, 2015 to $80,056 at December 31, 2016 due to NHMA's proportionate share (1.2%) of: the annual gain or loss in the operation of CTP, the sale of a subdivided parcel of land that was sold in 2016, and an impairment loss on the remaining land as determined by an independent land appraiser. Unrestricted net position at December 31, 2016 represents amounts available for future member services and equates to approximately six months or 52.3% of 2016 budgeted operating expenses. As of December 31, 2015, net position included $775,626 of unrestricted net position, net investment in capital assets of $228, and NHMA s 1.2% investment in Center at Triangle Park, Inc. of $91,884, for a total of $867,738. 6

8 Management Discussion and Analysis (Unaudited) (Continued) Discussion of the Basic Financial Statements (Continued) Statements of Revenues, Expenses and Changes in Net Position: The results of NHMA s operations for 2016 and 2015 are shown on these statements. The statements provide information about income from member dues, operating expenses, and other income. Additionally, these statements set forth NHMA s change in net position for the year. The following table summarizes operations shown in the Statements of Revenues, Expenses and Changes in Net Position: Operating Revenues December 31, 2016 December 31, 2015 Percentage Change December 31, 2014 Percentage Change Member dues $ 1,062,007 $ 1,029, % $ 1,031,817 (0.2)% Annual meeting 181, , % 195,437 (10.9)% Exclusivity arrangements 48,000 48,000 - % 86,500 (44.5)% Advertising and publications 96,098 96,096 - % 81, % Workshops and training 60,333 55, % 42, % Services and other revenue 26,854 39,636 (32.2)% 45,217 (12.3)% Total operating revenues 1,475,018 1,443, % 1,483,034 (2.7)% Operating Expenses Salaries and related benefits 1,024, , % 915, % Annual meeting 139, , % 109, % Service fees 84,487 86,797 (2.7)% 77, % Printing and publications 66,974 59, % 60,278 (1.3)% Meetings and training 35,640 27, % 30,184 (8.8)% General and administrative 146, , % 123, % Total operating expenses 1,497,935 1,401, % 1,315, % Operating (loss) income (22,917) 41, % 167, % Non-Operating (Expenses) Revenues (9,336) (100.0)% Change in net position before distributions (22,917) 41,188 (155.6)% 157,855 (73.9)% Decrease in investment in CTP (5,462) (2,830) (93.0)% (1,870) (51.3)% Change in net position (28,379) 38,358 (174.0)% 155, % Net position, beginning of year 867, , % 710, % Cumulative effect of change in accounting principle - (37,194) (100.0)% - - % Net position, end of year $ 839,359 $ 867,738 (3.3)% $ 866, % 7

9 Management Discussion and Analysis (Unaudited) (Continued) Discussion of the Basic Financial Statements (Continued) For 2016, the NHMA Board of Directors budgeted municipal member dues revenue of $1,040,377, a three percent increase over 2015, with minimum dues set at $980 and maximum dues of $25,750. Associate member dues were also increased by three percent from $500 to $515. These increases, along with dues from four additional associate members, account for the 3.2% or $32,681 increase in dues revenue over The increase in annual meeting revenue of $7,506 or 4.3% over 2015 was primarily from additional exhibitors and increased sponsorships. The associated increase in the annual meeting expense reflects the additional costs associated with NHMA s 75 th anniversary celebration. The decrease of $12,782 or 32.2% from services and other revenues is primarily due to the return of surplus from HealthTrust in 2015 which did not occur in Revenues from workshops and training sessions was up $4,550 or 8.2% over Meeting and training expenses was also higher than 2015 by $8,114 due primarily to costs associated with a new all-day law lecture workshop and additional Board of Director subcommittee meetings throughout the year. General and administrative expenses were $15,701 or 12% higher than 2015 due to costs associated with mileage reimbursements for 49 members of the Legislative Policy Committee which only meets during even numbered years, and increased rental costs due to NHMA s unanticipated relocation within the building at 25 Triangle Park Drive. The investment in CTP decreased a net amount of $5,462 which reflects NHMA s proportionate share (1.2%) of the CTP operating loss as of June 30, 2016 along with an impairment loss, determined by an independent land appraiser, following the sale of a subdivided parcel of land. The net position at December 31, 2016 is $839,359, a decrease of $28,379 or 3.3% from the prior year. Statements of Cash Flows: These statements review how NHMA s cash balance changed during the calendar years 2016 and It is divided into three sections explaining where NHMA provided or used cash during the year. These areas relate to NHMA s operations, investing activities, and financing activities (acquisition of furniture and equipment). It provides the reasons for the increase or decrease in NHMA s cash position. In 2016, NHMA received $6,366 as its proportionate share (1.2%) from CTP s sale of a subdivided parcel of land. There were no cash flows from financing activities during 2016 and The Statements of Cash Flows indicate a net decrease in cash and cash equivalents of $33,248 from January 1, 2016 to December 31,

10 Management Discussion and Analysis (Unaudited) (Continued) Discussion of the Basic Financial Statements (Continued) Notes to the Financial Statements: This report also contains notes to the financial statements and other supplementary information in addition to the basic financial statements. The notes provide additional information that is essential to a full understanding of the data provided in the financial statements. Other Information: In addition to the basic financial statements and accompanying notes, this report also presents a Statement of Revenues, Expenses and Changes in Net Position - Budgetary Basis (Unaudited) for the year ended December 31, The following table summarizes this statement: Percentage Budget Actual Variance Operating Revenues Member dues $ 1,060,459 $ 1,062, % Annual meeting 170, , % Exclusivity arrangements 48,000 48,000 - % Advertising and publications 91,300 96, % Workshops and training 47,000 60, % Services and other revenue 37,200 26,854 (28)% Total operating revenues 1,453,959 1,475, % Non-Operating Revenues (100.0)% Total revenues 1,454,159 1,475, % Operating Expenses Salaries and related benefits 989,636 1,024, % Annual meeting 117, , % Service fees 90,100 84,487 (6.2)% Printing and publications 64,755 66, % Meetings and training 33,750 35, % General and administrative 156, ,634 (6.3)% Total expenses 1,452,293 1,497, % Change in net position before distributions 1,866 (22,917) (1,328.1)% Decrease in investment in CTP - (5,462) (100.0)% Change in net position $ 1,866 $ (28,379) (1,620.8)% 9

11 Management Discussion and Analysis (Unaudited) (Continued) Discussion of the Basic Financial Statements (Continued) Operating revenues were $21,059 or 1.4% higher than budgeted, while operating expenses for the year were $45,642 or 3.1% higher than budgeted. Member dues were higher than budgeted due to the addition of three new associate members in Revenue from the annual meeting was higher than budgeted due to more exhibitors and higher sponsorship than budgeted. Revenues from workshops and training sessions was $13,333 higher than budgeted due to additional Hard Road to Travel workshops and higher than expected attendance at other workshops. Services and other revenues was lower than budgeted due primarily to one less affiliate management service contract than budgeted. Salaries and related benefits were $34,810 over budget due primarily to the GASB 68 adjustment of $30,751 for pension expense and accrued salaries and related benefits of $10,501 at December 31, Annual meeting expenses were higher than budgeted due to higher than anticipated attendance and additional costs associated with NHMA s 75 th anniversary. Service fees were higher than budgeted from costs for computer consultants to migrate NHMA to its own network, a need that arose after adoption of the 2016 budget. General and Administrative expenses were lower than budgeted due primarily to insurance, legal and postage costs being less than budgeted. Adjusting for the effect of nonoperating revenues and expenses, this resulted in a change in net position of ($28,379), which was $30,245 lower than the budgeted amount of $1,866. Operating Results NHMA s operating results for 2016 are found on the Statement of Revenues, Expenses and Changes in Net Position. Operating loss amounted to $(22,917) during the year ended December 31, 2016, with total assets of $1,376,283 and deferred outflows of resources related to pensions of $213,865. Current liabilities were $464,323 with net pension liabilities of $230,094 and deferred pension expense of $56,372. Net position at year end was $839,359. In 2016, the NHMA Board of Directors adopted an Unrestricted Year-End Net Position policy which establishes a guideline concerning the appropriate level of year-end net position which is 45% to 75% of the Board approved operating expenses. At December 31, 2016, NHMA s unrestricted net position of $759,303 represents 52.3% of the 2016 budgeted expenses approved by the Board. This level of net position would provide approximately six and a quarter months of operating expenses. Operating results include revenue from member dues, the annual meeting, exclusivity agreements, advertising, publications, and workshops. NHMA earned membership dues in the amount of $1,062,007 in These funds are used to provide legislative advocacy services on 10

12 Management Discussion and Analysis (Unaudited) (Continued) Operating Results (Continued) behalf of NHMA s town and city members, to support legal advisory services, training, and publications for members. Operating expenses include amounts for salaries and related benefits, expenses related to legislative policy activities, and expenses for general activities. Significant Accounting Policies The financial statements are prepared under the accrual method of accounting. Thus, expenses are recognized in the period in which they are incurred and revenues in the period in which they are earned. At December 31, 2016 and 2015, calculations for prepaid expenses, accrued salaries, and related expenses were recognized to ensure expenses and revenues were recognized in the appropriate period(s). Risks & Uncertainties In times of tight budgets, local governing bodies carefully review all expenditures. NHMA occasionally loses a member for local budgeting or political reasons. While one associate member chose not to renew membership in 2017, we believe all other municipal and associate members will continue membership in Outlook Based on member feedback through the NHMA Board of Directors and on workshop/annual meeting evaluations, and the continued high-volume use of its services, NHMA sees an ongoing demand for its government affairs activities, legal and financial advisory services, training programs and publications for the foreseeable future. Services that our members continue to rely upon to fulfill their statutory and fiduciary responsibilities as elected and appointed municipal officials include: Publications: In 2016, NHMA published an updated and revised version of the Guidebook for New Hampshire City and Town Councilors, Mayors, and Aldermen, along with the Municipal Officials Directory; Town and School Meeting Handbook; Knowing the Territory: A Survey of Municipal Law for New Hampshire Local Officials; The Art of Welfare Administration; State Aid to Municipalities: History and Trends, and three Municipal Law Lectures (authored by various municipal attorneys). Town & City magazine was published six times and mailed to over 2,400 people. NHMA NewsLink, a biweekly newsletter, was distributed electronically to 3,300 interested individuals. Finally, the Legislative Bulletin was ed weekly during the 2016 legislative session, keeping members informed of action at the State House impacting municipal operations. 11

13 Management Discussion and Analysis (Unaudited) (Continued) Outlook (Continued) Workshops and Educational Programming: Monthly webinars covering a variety of topics drew attendance of 641 local officials from more than 138 different entities. Four regional Right-to-Know Law workshops and two full-day budget workshops were attended by 84 and 235 local officials, respectively. Ninety-six officials attended the Moderators workshop, while 295 participated in the Municipal Law Lectures series offered in five locations throughout the state. Five Local Officials Workshops, geared primarily to newly elected or appointed municipal officials, were attended by 190 people. The Hard Road to Travel Workshops were attended by 128 officials. Sixteen NHMA OnDemand programs (a fee-for-service training opportunity) were provided at the request of municipal members and UNH Technology Transfer Center. Finally, the 2016 NHMA Annual Conference saw the highest level of attendees in the past six years, with 535 registrants. Advocacy and Legal Advice: NHMA attorneys handled 3,316 legal inquiries from municipal members during the year and published on the NHMA website a series of Frequently Asked Questions (FAQs) on emerging legal issues. Nearly 300 out of over 1,000 bills introduced into the 2016 legislative session had some type of a municipal impact and were closely followed by NHMA advocacy staff. 12

14 Statements of Net Position At December 31, Assets Current assets Cash and cash equivalents $ 1,264,600 $ 1,291,482 Accounts receivable 20,072 18,342 Prepaid expenses 10,118 12,142 Other assets 1,437 1,054 Total current assets 1,296,227 1,323,020 Non-current assets Investment in Center at Triangle Park, Inc. 80,056 91,884 Capital assets, net of accumulated depreciation Total non-current assets 80,056 92,112 Total Assets 1,376,283 1,415,132 Deferred Outflows of Resources Deferred gain on pension assets 154,686 43,084 Deferred changes in proportion and differences between employer contributions and share of contributions 5,299 - Deferred pension contributions 53,880 53,701 Total Deferred Outflows of Resources 213,865 96,785 Liabilities Current liabilities Accounts payable and accrued expenses 7,747 96,811 Accrued payroll and related liabilities 115, ,495 Unearned revenue 340, ,239 Total current liabilities 464, ,545 Non-current liabilities Net pension liability 230, ,236 Total non-current liabilities 230, ,236 Total Liabilities 694, ,781 Deferred Inflows of Resources Deferred pension expenses 56,372 20,398 Total Deferred Inflows of Resources 56,372 20,398 Net Position Unrestricted 759, ,626 Investment in Center at Triangle Park, Inc. 80,056 91,884 Net investment in capital assets Total Net Position $ 839,359 $ 867,738 See accompanying notes to the financial statements. 13

15 Statements of Revenues, Expenses and Changes in Net Position Years ended December 31, Operating Revenues Member dues $ 1,062,007 $ 1,029,326 Annual meeting 181, ,220 Exclusivity arrangements 48,000 48,000 Advertising and publications 96,098 96,096 Workshops and training 60,333 55,783 Services 22,916 20,631 Other revenue 3,938 19,005 Total operating revenues 1,475,018 1,443,061 Operating Expenses Salaries and related benefits 1,024, ,123 Annual meeting 139, ,982 Rent 35,629 34,030 Professional fees 23,819 19,785 Printing and publications 66,974 59,512 Meetings and training 35,640 27,526 Support services 60,668 67,012 Insurance 25,507 26,760 Postage 14,925 15,263 Dues and memberships 15,131 8,985 Equipment and software 11,527 7,763 Depreciation 228 1,835 Staff expenses 22,247 17,837 Telephone 7,261 5,468 Bank fees 3,854 3,974 Office supplies 3,804 4,381 Other expenses 6,521 4,637 Total operating expenses 1,497,935 1,401,873 Operating (loss) income (22,917) 41,188 Non-Operating Revenues (Expenses) Change in net position before distributions (22,917) 41,188 Decrease in investment in Center at Triangle Park, Inc. (5,462) (2,830) Change in net position (28,379) 38,358 Net position, beginning of year 867, ,574 Cumulative effect of change in accounting principle (Note B) - (37,194) Net position, end of year $ 839,359 $ 867,738 See accompanying notes to the financial statements. 14

16 Statements of Cash Flows Years ended December 31, Cash Flows from Operating Activities Receipts from member dues $ 1,125,417 $ 1,055,654 Receipts from other revenues 386, ,098 Payments for salaries and related benefits (983,193) (957,581) Payments to CTP (35,629) (34,030) Payments to vendors (526,220) (308,161) Net cash (used in) provided by operating activities (33,248) 189,980 Cash Flows from Capital and Financing Activities Shareholder distribution from CTP 6,366 - Net cash provided by capital and financing activities 6,366 - Net change in cash and cash equivalents (26,882) 189,980 Cash and cash equivalents, beginning of year 1,291,482 1,101,502 Cash and cash equivalents, end of year $ 1,264,600 $ 1,291,482 Reconciliation of Operating Income to Net Cash Provided by Operating Activities Operating income $ (22,917) $ 41,188 Add (deduct) items not affecting cash: Depreciation 228 1,835 Changes in statement of net position accounts: Accounts receivable (182) (7,655) Prepaid expenses 2,024 11,574 Other assets (383) 884 Deferred gain on pension assets (111,602) (43,084) Deferred changes in proportion and differences between employer contributions and share of contributions (5,299) Deferred pension contributions (179) 794 Accounts payable and accrued expenses (90,612) 69,150 Accrued payroll and related liabilities 10,501 14,887 Unearned revenue 37,341 53,462 Net pension liability 111,858 26,547 Deferred pension expenses 35,974 20,398 Net cash (used in) provided by operating activities $ (33,248) $ 189,980 See accompanying notes to the financial statements. 15

17 Notes to the Financial Statements Years ended December 31, 2016 and 2015 Note A - Nature of Operations New Hampshire Municipal Association, Inc. (NHMA) is a nonprofit, non-partisan membership organization of municipalities with the mission to provide legislative advocacy and legal services through policy development, advice on municipal problems and issues, training, and education on municipal duties and legal principles. The services are provided to and on behalf of municipal members of NHMA. As of December 31, 2016, 232 towns and cities in New Hampshire are members of NHMA. In addition, 43 and 39 other political subdivisions and regional planning commissions are associate members of NHMA at December 31, 2016 and 2015, respectively. The Board of Directors is comprised of only elected and appointed municipal officials elected by NHMA members. Membership dues are assessed annually based on criteria set forth in NHMA's bylaws. Founded in 1941 for the purpose of exchanging information to facilitate more efficient and effective local government, NHMA was reorganized in July 2003 as the Local Government Center, Inc. (LGC). New Hampshire Municipal Association, Limited Liability Company (NHMA, LLC), a separate subsidiary of LGC, was also created. Effective September 1, 2013, NHMA, LLC was dissolved and absorbed by its parent, LGC, and LGC changed its name to New Hampshire Municipal Association, Inc. Note B - Summary of Significant Accounting Policies Basis of Presentation The accompanying financial statements have been prepared in accordance with U.S. generally accepted accounting principles (GAAP) as applied to proprietary funds of governmental units. The Governmental Accounting Standards Board (GASB) is the authoritative standard-setting body for the establishment of governmental accounting and financial reporting principles. NHMA's financial statements are presented using the economic resources measurement focus and the accrual basis of accounting. Accounting Standards NHMA has adopted GASB Statement No. 62, Codification of Accounting and Financial Reporting Guidance Contained in Pre-November 30, 1989 FASB and AICPA Pronouncements. Change in Accounting Principle On January 1, 2015, NHMA adopted GASB Statement No. 68, "Accounting and Financial Reporting for Pensions" (GASB 68). The adoption of this standard resulted in a reduction of net position as of January 1, 2015 of $37,194. Note I of the financial statements includes additional details on accounting and reporting under GASB

18 Notes to the Financial Statements (Continued) Note B - Summary of Significant Accounting Policies (Continued) Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and the accompanying notes. Actual results could differ from those estimates. For the years ending December 31, 2016 and 2015, significant estimates included in these financial statements primarily relate to the net pension liability and the related deferred inflows and outflows of resources, as more fully described in Note I. Subsequent Events NHMA has evaluated subsequent events for disclosure and recognition through June 2, 2017, the date on which these financial statements were available to be issued. Cash Equivalents Cash equivalents consist of highly liquid investments with an original maturity of three months or less. Accounts Receivable Accounts receivable are stated at net realizable value. NHMA uses the allowance method to determine the uncollectible accounts receivable, which are based on management's judgment, experience and review of the current status of existing receivables. All receivables are deemed collectible by management at December 31, 2016 and Prepaid Expenses NHMA has made payments to vendors which reflect costs that are applicable to future accounting periods. These amounts are recorded as prepaid expenses. Prepaid expenses are reduced as the related services are provided. Investment in Center at Triangle Park, Inc. Local Government Center Real Estate, Inc. (LGC RE) was organized February 5, 1988 as a voluntary corporation and a 501(c)(25) entity for the purpose of acquiring and holding title to real estate. On December 23, 2013, LGC RE changed its name to Center at Triangle Park, Inc. (CTP). CTP leases real estate to NHMA, a former LGC subsidiary HealthTrust, Inc. (HealthTrust), and other third parties. As of December 31, 2016 and 2015, NHMA owns 1.2% of outstanding CTP shares and HealthTrust owns the remaining 98.8%. 17

19 Notes to the Financial Statements (Continued) Note B - Summary of Significant Accounting Policies (Continued) NHMA's investment in CTP is carried under the equity method of accounting, whereby the gain or loss in operations of CTP is recognized in proportion to the ownership shares, and the investment in CTP is adjusted to recognize the gain or loss. In October of 2015 CTP sold a subdivided parcel of land adjacent to the office building. A portion of the net proceeds were used to fund operating and capital requirements, with the remaining balance being remitted to CTP stockholders in proportion to their ownership as a shareholder distribution during For NHMA, the shareholder distribution received amounted to $6,366 for the year ending December 31, CTP recorded an impairment loss on the remaining land held in June CTP utilized the results of an independent land appraiser in determining the amount of the impairment. For the year ending December 31, 2016 NHMA recognized a loss of $5,462 from the operations of CTP for the year ended December 31, 2016, which includes the impairment loss. The carrying value of the investment in CTP at December 31, 2016 is $80,056. Revenue Recognition Revenue is generally recognized on a monthly basis over the service period, contract term or period to which the revenue relates. As described more fully in Note E, amounts received in cash that will be earned in the future are deferred and reported as unearned revenue. Net Position Net positions are classified based upon any restrictions that have been placed on those balances. Unrestricted net position represents resources that have met all applicable restrictions and are considered to be available for unrestricted use. Net position is reported as restricted when constraints placed on net position use are either externally imposed by creditors, grantors, contributors, or laws or regulations of other governments, or are imposed by law through constitutional provisions or enabling legislation. There are no restricted net positions as of December 31, 2016 and Income Taxes NHMA is exempt from federal and state income taxes under provisions of the Internal Revenue Code and State law. 18

20 Notes to the Financial Statements (Continued) Note B - Summary of Significant Accounting Policies (Continued) Operating Revenues and Expenses NHMA's statements of revenues, expenses and changes in net position distinguish between operating and non-operating revenues and expenses. Operating revenues primarily result from member dues, the annual meeting, advertising and publications, and providing training and other services to members. Operating expenses primarily consist of expenses incurred to provide services to members, and general and administrative expenses. Other income and expenses, including interest income and gains or losses on the disposal of capital assets, are classified as non-operating in the financial statements. Note C - Cash and Cash Equivalents NHMA maintains its cash in bank deposits and cash management accounts that are insured by the Federal Deposit Insurance Corporation (FDIC) up to $250,000 per financial institution. As of December 31, 2016 and 2015, the carrying amount of cash and cash equivalents held in excess of the FDIC limit was $1,014,600 and $1,041,482, respectively. The balance in excess of the FDIC limit is collateralized with securities held in joint custody with a third party custodian. Note D - Capital Assets Furniture and equipment with an estimated useful life greater than one year is recorded at cost. The cost of maintenance and repairs is charged to expense as incurred, while renewals, replacement of existing systems and betterments are capitalized. Upon sale or other disposition of assets, the cost and related accumulated depreciation are removed from the accounts, and any resulting gain or loss is reflected in the change in net position. Furniture and equipment is depreciated using primarily the straight-line method over a useful life of three to five years. Capital asset activity is as follows for the year ended December 31, 2016: Beginning Balance Additions Disposals Ending Balance Capital assets at cost: Computer hardware $ 8,126 $ - $ - $ 8,126 Less: accumulated depreciation (7,898) (228) - (8,126) Total net capital assets $ 228 $ (228) $ - $ - 19

21 Notes to the Financial Statements (Continued) Note D - Capital Assets (Continued) Capital asset activity is as follows for the year ended December 31, 2015: Beginning Balance Additions Disposals Ending Balance Capital assets at cost: Computer hardware $ 8,126 $ - $ - $ 8,126 Less: accumulated depreciation (6,063) (1,835) - (7,898) Total net capital assets $ 2,063 $ (1,835) $ - $ 228 Note E - Unearned Revenue The components of unearned revenue are as follows at December 31: Unearned member dues $ 311,966 $ 274,884 Unearned advertising revenue 21,453 25,235 Other unearned revenue 7,161 3,120 Total unearned revenue $ 340,580 $ 303,239 Members pay dues on an annual basis with a January 1 renewal date. Member dues are recognized as revenue ratably over the membership year to which they relate. The portion of the dues received in cash that will be earned in a future period is deferred and reported as unearned revenue. Unearned revenue is reduced ratably as membership dues are earned over the period to which they relate. Advertising revenue is recognized as revenue ratably over the contract period to which it relates or as services are performed, as applicable, with any unearned amounts recorded as unearned revenue. Unearned advertising revenue is reduced ratably as advertising revenue is earned. Note F - Lease Arrangements NHMA leases facilities from CTP pursuant to a lease agreement effective September 1, 2013 through December 31, Effective January 1, 2015, the lease continued on a month-tomonth basis until June 1, 2016 when a new 10 year lease agreement with CTP was implemented. Under the terms of the new agreement NHMA is charged a monthly fee of one-twelve (1/12) of NHMA's annual proportionate share (based on the square footage occupied by NHMA) of CTP's 20

22 Notes to the Financial Statements (Continued) Note F - Lease Arrangements (Continued) total budgeted operating expenses. The amount due will be adjusted effective January 1 of each calendar year based on CTP's then current budget NHMA incurred $35,629 and $34,030 in lease payments during the years ended December 31, 2016 and 2015, respectively. As of December 31, 2016, the expected future lease payments required under NHMA's lease with CTP are $37,536 and $36,840 for the years 2017 and 2018, respectively. NHMA estimates that its annual minimum lease payments will be as follows for the remaining term of the lease: Expected Annual Year Lease Expense 2019 $ 37, $ 38, $ 38, $ 39, $ 40, $ 41, $ 41, $ 42,606 Note G - Transactions with Former Affiliates Prior to September 1, 2013, Local Government Center HealthTrust, LLC (HealthTrust, LLC) and Local Government Center Property-Liability Trust, LLC (Property-Liability Trust, LLC) were subsidiaries of LGC. Effective with LGC's reorganization on September 1, 2013, HealthTrust, LLC and Property-Liability Trust, LLC transferred all of their assets, liabilities, net position and operations to the separate New Hampshire voluntary corporations HealthTrust, Inc. (HealthTrust) and Property-Liability Trust, Inc. (Property-Liability Trust), respectively. As such, effective September 1, 2013, NHMA has no ownership interest in and operates as a totally separate, independent organization from the former LGC subsidiaries. However, some members of NHMA are also members of, and insured by, HealthTrust and/or Property-Liability Trust. NHMA is a participant in HealthTrust's risk pool. For the years ended December 31, 2016 and 2015, NHMA incurred $115,051 and $114,168, respectively, for employee benefits coverage through HealthTrust's pool, which is included in the salaries and related benefits expense on the statements of revenues, expenses and changes in net position. 21

23 Notes to the Financial Statements (Continued) Note G - Transactions with Former Affiliates (Continued) NHMA receives administrative and other business support services from HealthTrust pursuant to a service agreement ratified by NHMA's governing board. NHMA incurred $60,668 and $67,012 for these support services during 2016 and 2015, respectively. NHMA has an informal exclusivity arrangement with HealthTrust whereby HealthTrust has rights as the exclusive employee benefits provider promoted by NHMA. Revenue earned under the exclusivity arrangement with HealthTrust was $48,000 in 2016 and 2015 and is included in the revenue from exclusivity arrangements on the statements of revenues, expenses and changes in net position. HealthTrust is a sponsor of NHMA's annual meetings. Revenue recognized from this sponsorship was $25,000 in 2016 and The sponsorship revenue from HealthTrust is included in annual meeting revenue on the statements of revenues, expenses and changes in net position. NHMA has entered into certain contracts with vendors for the provision of administrative services or the use of office equipment that are also utilized by HealthTrust. HealthTrust has also entered into certain contracts with vendors for the provision of administrative services or the use of office equipment that are utilized by NHMA. Pursuant to an agreement with HealthTrust, the associated costs are allocated based on each entity's proportionate usage. Note H - Deferred Compensation Plan The employees of NHMA are covered by a Section 457 Deferred Compensation Plan administered by ICMA Retirement Corporation. All full-time employees are immediately eligible to participate in the plan and may elect to defer up to 100% of their gross compensation up to the federal limits. Contributions to the plan and the related income on those contributions are held by ICMA Retirement Corporation. Employee contributions to the deferred compensation plan totaled $3,037 and $2,539 for the years ended December 31, 2016 and 2015, respectively. There were no employer contributions in 2016 and Note I - Defined Benefit Pension Plan Plan Description Effective January 1, 2007, LGC established the New Hampshire Local Government Center Defined Benefit Pension Plan, a single-employer plan. As part of the September 1, 2013 reorganization, the New Hampshire Local Government Center Defined Benefit Pension Plan became a costsharing multiple-employer defined benefit pension plan and changed its name to the 22

24 Notes to the Financial Statements (Continued) Note I - Defined Benefit Pension Plan (Continued) HealthTrust/PLT/NHMA Pension Plan (the Plan). This change had no impact on the financial assets or obligations of the pension plan, and there were no changes to the benefits provided or the eligibility criteria. The Boards of Directors of the participating employers in the Plan, NHMA, HealthTrust and Property-Liability Trust, collectively retain the authority to establish, amend or terminate the Plan and its provisions at any time subject to any legal limitations. The Boards of Directors also established a Retirement Committee to administer the Plan. The Retirement Committee serves as the Plan administrator to the Plan and has discretionary authority to interpret the terms of the Plan and its decisions regarding administration, interpretation and application. All active, nontemporary employees of NHMA, HealthTrust and Property-Liability Trust are required to participate in the Plan as a condition of employment. The Plan provides a monthly benefit when a Plan participant retires or leaves after qualifying for benefits. The Plan does not issue a standalone financial report. On February 19, 2016, the Retirement Committee determined that partial termination of the Plan occurred when the PLT Board voted to commence runoff on April 14, The partial termination triggered a clause in the Plan granting all PLT employees, regardless of service, who terminate employment on or after April 14, 2015, 100% vested status, eligible for pension benefits as provided in the Plan. Pursuant to the terms of the Plan, PLT must give 90-days advanced notice to the Retirement Committee before ceasing to make contributions and effectively withdrawing from the Plan. An employer may only withdraw as of the Plan s year-end, resulting in a withdrawal liability as calculated by the Plan s actuary. The withdrawing employer must pay the withdrawal liability in one lump sum within 60-days of being notified of the withdrawal liability by the Retirement Committee. On June 3, 2016, PLT gave notice of its intent to withdrawal from the Plan. Adoption of GASB 68 On June 25, 2012, the GASB voted to approve GASB 68, which revises and establishes new financial reporting requirements for most governmental organizations that provide their employees with pension benefits. GASB 68 is effective for fiscal years beginning after June 15, 2014, with earlier application encouraged. GASB 68 requires governments providing defined pension benefits to recognize their long-term obligation for pension benefits as a liability for the first time, and to more comprehensively and comparably measure the annual costs of pension benefits. GASB 68 also enhances accountability and transparency through revised and new note disclosures and required supplementary information. NHMA adopted GASB 68 on January 1, 2015, resulting in a cumulative effect of change in accounting principle adjustment that reduced net position by $37,194. The cumulative effect 23

25 Notes to the Financial Statements (Continued) Note I - Defined Benefit Pension Plan (Continued) adjustment represents the impact of adopting GASB 68 on NHMA's net position as of January 1, 2015 and is comprised of NHMA's proportionate share of the net pension liability of $91,689 based upon the December 31, 2013 valuation report, adjusted for deferred outflows of resources totaling $54,495 associated with contributions paid to the plan between the December 31, 2013 valuation date and the January 1, 2015 effective date. Benefits The participants' benefits are established in the Plan and may be changed only with an amendment to the Plan. A participant's benefit is determined under a formula that multiplies the participant's final average earnings by her/his credited service. The formula is 1.50% of the final average earnings for each year of credited services, not to exceed 50% of the participant s average salary. Final average salary is defined as the average of the highest three consecutive years out of the last ten years base salary prior to retirement or termination. If a participant chooses early retirement, the benefit will be reduced by 0.25% for each month prior to the normal retirement date. If a participant remains employed after age 65, benefits will continue to accrue without any actuarial adjustment for late retirement. Contributions The contribution requirements of the participating employers under the Plan are established and may be amended by the Retirement Committee based on the annual actuarial valuation of the Plan. The contribution requirements of the participating employees are established in the Plan and may be changed only with an amendment to the Plan. Participants contribute 5% of their base earnings to the Plan. The employers shall contribute to the Plan an amount determined by the Retirement Committee. For the plan years ended 2015, 2014 and 2013 the employers contributed 7.27%, 7.54% and 8.14%, respectively, of each participant's earnings to the Plan. A summary of employer and employee contributions to the Plan for the plan years ended December 31, 2015 and 2014 is as follows: Plan Year Ended Annual Required Contributions Employer Contributions Employee Contributions Percentage Contributed December 31, 2015 $454,483 $454,483 $301, % December 31, 2014 $498,632 $498,632 $306, % Summary Plan Financial Information The net pension liability was measured as of December 31, 2015 and the total pension liability used to calculate the net pension liability was determined by an actuarial valuation as of that date. 24