PLANETARY SCIENCE INSTITUTE

Transcription

1 AUDITED FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED JANUARY 31, 2016 AND 2015 MCGLADREY ALLIANCE IS A PREMIER AFFILIATION OF INDEPENDENT ACCOUNTING AND CONSULTING FIRMS. MCGLADREY ALLIANCE MEMBER FIRMS ARE SEPARATE AND INDEPENDENT BUSINESSES AND LEGAL ENTITIES THAT ARE RESPONSIBLE FOR THEIR OWN ACTS AND OMISSIONS, AND EACH ARE SEPARATE AND INDEPENDENT FROM RSM US LLP..

2 TABLE OF CONTENTS INDEPENDENT AUDITOR S REPORT AUDITED FINANCIAL STATEMENTS STATEMENTS OF FINANCIAL POSITION... 4 STATEMENTS OF ACTIVITIES AND CHANGES IN NET ASSETS... 5 STATEMENTS OF CASH FLOWS... 6 NOTES TO FINANCIAL STATEMENTS

3 INDEPENDENT AUDITOR S REPORT To the Board of Trustees Planetary Science Institute Report on the Financial Statements We have audited the accompanying financial statements of Planetary Science Institute (the Institute ), which comprise the statements of financial position as of January 31, 2016 and 2015, and the related statements of activities and changes in net assets, 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. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the 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 opinion. Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Institute as of January 31, 2016 and 2015, and the changes in its net assets and its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America. 1

4 To the Board of Trustees Planetary Science Institute Page 2 Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated June 9, 2016 on our consideration of the Institute 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 control 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 in considering the Institute s internal control over financial reporting and compliance. Tucson, Arizona June 9,

5 AUDITED FINANCIAL STATEMENTS

6 STATEMENTS OF FINANCIAL POSITION AS OF JANUARY 31, Assets Current assets Cash and cash equivalents $ 676,916 $ 69,026 Grant funds receivable 727, ,537 Unbilled receivables 125, ,582 Other receivables 5, Prepaid expenses and other assets 6,250 41,336 Total current assets 1,541,676 1,421,408 Property and equipment, net 1,375,617 1,492,447 Total assets $ 2,917,293 $ 2,913,855 Liabilities and Net Assets Current liabilities Accounts payable $ 109,420 $ 122,769 Accrued expenses 1,077, ,392 Other liabilities 51,867 66,684 Deferred revenue 47,998 29,566 Notes payable, current portion 72,367 69,955 Total current liabilities 1,359,364 1,262,366 Notes payable 1,144,492 1,216,702 Total liabilities 2,503,856 2,479,068 Unrestricted net assets 413, ,787 Total liabilities and net assets $ 2,917,293 $ 2,913,855 THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS 4

7 STATEMENTS OF ACTIVITIES AND CHANGES IN NET ASSETS FOR THE YEARS ENDED JANUARY 31, Revenues Grant funds $ 11,596,707 $ 10,594,258 Contributions 79,746 68,427 Other 1, Total revenues 11,677,896 10,662,768 Expenses Salaries, wages and benefits 9,165,149 8,299,275 Operating and general 1,510,765 1,373,179 Occupancy 218, ,676 Travel 528, ,561 Interest 62,707 66,257 Depreciation 213, ,292 Total expenses 11,699,246 10,550,240 Change in unrestricted net assets (21,350) 112,528 Unrestricted net assets, beginning of year 434, ,259 Unrestricted net assets, end of year $ 413,437 $ 434,787 THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS 5

8 STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED JANUARY 31, Cash Flows from Operating Activities Change in net assets $ (21,350) $ 112,528 Adjustments to reconcile change in net assets to net cash provided by operating activities: Depreciation 213, ,292 Changes in operating assets and liabilities: Grant funds receivable (81,926) 129,698 Unbilled receivables 538,903 (187,388) Other receivables (4,441) 767 Prepaid expenses and other assets 35,086 (34,926) Accounts payable (13,349) 70,883 Accrued expenses 104, ,768 Other liabilities (14,817) 10,778 Deferred revenue 18,432 (25,899) Net cash provided by operating activities 774, ,501 Cash Flows from Investing Activities Purchases of property and equipment (96,714) (139,456) Net cash used in investing activities (96,714) (139,456) Cash Flows from Financing Activities Net borrowings under the line of credit - (220,000) Repayment of notes payable (69,798) (72,415) Net cash used in financing activities (69,798) (292,415) Change in cash and cash equivalents 607,890 33,630 Cash and cash equivalents, beginning of year 69,026 35,396 Cash and cash equivalents, end of year $ 676,916 $ 69,026 Supplemental Cash Flow Information Cash paid for interest $ 60,271 $ 66,464 THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS 6

9 NOTES TO FINANCIAL STATEMENTS 1. Organization The Planetary Science Institute (the Institute ) is a non-profit corporation incorporated in the State of Arizona. The Institute is dedicated to research and education in planetary science, earth science, and astronomy. The Institute is headquartered in Tucson, Arizona. 2. Summary of Significant Accounting Policies Basis of Presentation The Institute follows accounting standards set by the Financial Accounting Standards Board ( FASB ). The FASB sets accounting principles generally accepted in the United States of America ( GAAP ) that the Institute follows to ensure the consistent reporting of its financial condition, changes in net assets and cash flows. References to GAAP issued by the FASB in the notes are to the FASB Accounting Standards Codification ( ASC ). The Institute s financial statements have been prepared on the accrual basis of accounting in accordance with ASC 958, Not-for-Profit Entities. Under this authoritative guidance, the Institute is required to provide financial statements which are prepared to focus on the organization as a whole and to present balances and transactions according to the existence or absence of donor-imposed restrictions. The Institute is required to report information regarding its financial position and activities according to three classes of net assets: unrestricted net assets, temporarily restricted net assets, and permanently restricted net assets. In the accompanying financial statements, net assets having similar characteristics have been combined into similar categories. Unrestricted net assets are not subject to donor-imposed restrictions. Expenses are generally reported as decreases in unrestricted net assets. All contributions are considered to be available for unrestricted use unless specifically restricted by the donor. If a restriction is fulfilled in the same reporting period in which the contribution is received, the Institute reports the support as unrestricted. Contributions of long-lived assets not having donorimposed purpose or time restrictions are reported as unrestricted contributions in amounts equal to the fair value of the contributed assets. Contributions restricted by the donor for particular operating purposes or for a particular operating period are reported as revenues in a temporarily restricted net asset group. Once the Institute has complied with all of the specific restrictions, the contribution is reclassified to the unrestricted net asset group as a net asset released from restrictions. This reclassification increases unrestricted net assets and decreases temporarily restricted net assets. As of January 31, 2016 and 2015, the Institute had no temporarily or permanently restricted net assets. Revenue Recognition The majority of the Institute s funding is derived from research grants with the National Aeronautics and Space Administration ( NASA ). These government grant agreements are accounted for as exchange transactions. Revenue is recognized as an increase in the statement of activities and changes in net assets as expenditures are incurred in accordance with applicable grant agreements under expenditure reimbursement contracts or when the Institute performs research work using a level of effort model for fixed cost grants. A receivable is recorded to the extent contract revenue exceeds payment received; conversely, deferred revenue is recorded when cash received exceeds contract revenues. 7

10 NOTES TO FINANCIAL STATEMENTS Summary of Significant Accounting Policies (continued) Revenue Recognition (continued) A portion of the Institute s revenues from government grant agreements include reimbursement for indirect costs as allowed in accordance with the Code of Federal Regulations (2 CFR 230). The Institute negotiates allowable indirect billing rates with its cognizant agency annually and adjusts revenue for any differences from its actual indirect billing rates. These adjustments are reported within deferred revenue and resulted in a decrease of $182 and an increase of $87 for the years ended January 31, 2016 and 2015, respectively. Final indirect cost adjustments based on Government indirect cost rate audits are reported in the period that they become known and finalized. Cash and Cash Equivalents For financial statement reporting purposes, the Institute considers all highly liquid instruments purchased with original maturities of three months or less to be cash equivalents. Cash equivalents include money market funds that are readily convertible into cash. These cash equivalents are stated at amortized cost plus interest, which approximates fair value. Cash equivalents are considered Level 1 inputs in the fair value hierarchy, as defined by ASC 820, Fair Value Measurements and Disclosures. The Institute places its cash and cash equivalents with high credit quality institutions. At times, such deposits may be in excess of the Federal Deposit Insurance Corporation ( FDIC ) insurance limit. As of January 31, 2016 and 2015, the Institute had approximately $383,841 and $0 in excess of FDIC insured limits, respectively; however, management does not believe it is exposed to any significant credit risk on cash and cash equivalents. As part of its cash management process, the Institute regularly monitors the relative credit standing of these institutions. Grant Funds Receivable Grant funds receivable consist of invoiced amounts due from the Institute s funding agencies incurred under the applicable executed grant agreements. The Institute believes that any risk of accounting loss with respect to grant funds receivable is limited due to the fact its receivables are governmental in nature. The Institute uses the specific identification method in determining the estimated allowance for doubtful accounts. Receivables are written off when deemed uncollectible. Recoveries of receivables previously written off are recorded when received. As of January 31, 2016 and 2015, grant funds receivable are considered fully collectible by management, therefore no allowance for doubtful accounts has been provided. Unbilled Receivables Unbilled receivables represent revenue earned during the reporting period but not billed to the funding agency until a future period, as specified per the related grant agreements. Property and Equipment, Net Property and equipment are stated at cost if purchased or at fair value at date of acquisition if donated. Depreciation is provided over the estimated useful life of each class of depreciable assets and is computed using the straight-line method over the estimated useful lives of the assets, ranging from three to twenty years. Depreciation of the buildings is provided for using the straight-line method over twenty years. 8

11 NOTES TO FINANCIAL STATEMENTS Summary of Significant Accounting Policies (continued) Property and Equipment, Net (continued) The Institute s policy is to capitalize expenditures for fixed assets and donated fixed assets received that exceed $5,000, which coincides with the capitalization policy associated with its government grants. When items are retired or disposed of, the cost and accumulated depreciation are removed from the accounts and any gain or loss is included in the statement of activities and changes in net assets. Repairs and maintenance for normal upkeep are charged to expense as incurred. In accordance with ASC 360, Property, Plant and Equipment, the Institute periodically reviews the carrying value of long-lived assets held and used, and assets to be disposed of, for possible impairment when events and circumstances warrant such a review. Through January 31, 2016, the Institute had not experienced impairment losses on its long-lived assets. Accrued Annual Leave Annual leave is accrued as a liability when earned by the employees, since the employees receive vested rights to this employee benefit. Accrued annual leave totaled $701,115 and $654,377 at January 31, 2016 and 2015, respectively, and is included in accrued expenses in the accompanying statements of financial position. Income Taxes The Institute is exempt from federal income taxes under Section 501(c)(3) of the Internal Revenue Code. The Institute is also exempt from state income taxes. Accordingly, no provision for federal or state income taxes is recorded in the accompanying financial statements. Management is not aware of any matters which would cause the Institute to lose its tax-exempt status. However, income from certain activities not directly related to the Institute s tax-exempt purpose, may be subject to taxation as unrelated business income. Management has considered its tax positions and believes that all of the positions taken in its federal and state exempt organization tax returns are more likely than not to be sustained upon examination. The Institute s returns are subject to examination by federal and state taxing authorities, generally for three years and four years, respectively, after they are filed. The Institute recognizes interest and penalties related to unrecognized tax benefits in operating and general expenses in the accompanying financial statements. During the years ended January 31, 2016 and 2015, the Institute did not recognize any interest and penalties. Use of Estimates in Preparing Financial Statements The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Functional Allocation of Expenses Expenses that can be identified with a specific program are allocated directly according to their natural classification. Other expenses that are common to several functions are allocated by other reasonable methods. 9

12 NOTES TO FINANCIAL STATEMENTS Summary of Significant Accounting Policies (continued) Reclassification Certain amounts in the prior year s financial statements and related notes have been reclassified to conform to the current year presentation, with no effect on previously reported net assets. 3. Property and Equipment, Net Property and equipment, net consists of the following as of January 31: Buildings $ 1,758,935 $ 1,758,935 Furniture, fixtures and equipment 694, ,801 2,453,450 2,356,736 Less accumulated depreciation (1,077,833) (864,289) 4. Revolving Line of Credit $ 1,375,617 $ 1,492,447 On November 19, 2013, the Institute executed a $400,000 revolving line of credit agreement with National Bank of Arizona. All outstanding principal and interest is due November 5, The line carries a variable interest rate of Prime (3.25%) plus 0.5%. and interest is payable monthly. The revolving line of credit is collateralized by a deed of trust on real property. As of January 31, 2016 and 2015, the Institute had no outstanding balance on the revolving line of credit. The line of credit carries several covenants, the most restrictive of which requires the Institute to maintain a minimum debt service coverage ratio of 1.1:1.0, and a loan to value ratio (as defined by the business loan agreement) not to exceed 80% of the value of collateralized property. The Institute was in compliance with all relevant requirements as of January 31, 2016 and

13 NOTES TO FINANCIAL STATEMENTS 5. Notes Payable Note payable to bank with a stated interest rate of approximately 5.23%. The note calls for 119 monthly principal and interest payments of $5,955, and a final lump sum payment of all outstanding principal and interest due December 13, This loan is collateralized by a deed of trust on real property. The agreement requires that a specific debt coverage ratio and loan to value ratio be maintained as measured at fiscal year end. The Institute was in compliance with these debt covenants as of January 31, 2016 and $ 823,074 $ 850,150 Note payable to bank with a stated interest rate of approximately 4.5%. The note calls for monthly principal and interest payments of $2,887 through April 13, This loan is collateralized by a deed of trust on real property. The agreement requires that a specific debt coverage ratio and loan to value ratio to be maintained as measured at fiscal year end. The Institute was in compliance with these debt covenants as of January 31, 2016 and , ,007 Eleven individual uncollateralized promissory notes with principal amounts varying from $5,000 to $50,000 at inception. Collectively, the notes require annual principal payments of $19,500, plus interest payments of 4% on the outstanding balance. Principal and interest payments are due through December All of the notes are held by related parties. 156, ,500 1,216,859 1,286,657 Less current portion (72,367) (69,955) $ 1,144,492 $ 1,216,702 Scheduled future principal payments are summarized as follows as of January 31, 2016: Fiscal Year Ending Amount 2017 $ 72, , , , ,931 Thereafter 826,467 $ 1,216,859 11

14 NOTES TO FINANCIAL STATEMENTS 6. Operating Lease The Institute leases a building located at 1650 E. Fort Lowell under a forty-eight month lease ending January 31, The monthly rent during the lease period is $8,775 per month. The following is a summary of future minimum lease payments under the non-cancelable operating lease as of January 31, 2016: Year Ended Amount 2017 $ 105, , , ,300 Total rent expense for the years ended January 31, 2016 and 2015 totaled $111,881 and $119,906, respectively. 7. Functional Expenses The Institute incurs administrative and general expenses for various activities, including management and administrative activities, which support its research and education mission. The following is a summary of expenses related to providing these services for the years ended January 31: Scientific research and education direct costs $ 8,705,928 $ 7,990,412 Scientific research and education indirect costs 1,552,306 1,201,309 Fundraising direct costs 22,897 25,570 Fundraising indirect costs 7,656 11,507 Administrative and general indirect costs 1,398,951 1,310,610 Administrative and general other costs 11,508 10,832 Total $ 11,699,246 $ 10,550, Retirement Plan The Institute established a 403(b) defined contribution retirement plan with the Teachers Insurance and Annuity Association College Retirement Equities Fund (the Plan ) effective December 5, All Institute employees who have completed two years of eligible service, have reached the age of 21, and work an average of 20 hours or more per week, are eligible to participate in the Plan. For the years ending January 31, 2016 and 2015 the Institute made employer matching contributions to the Plan at the rate of 14% of each eligible employee s gross wages for the year. Employees are allowed to make contributions to the Plan. Plan contributions are fully vested and non-forfeitable when they are made. Retirement plan expense totaled $898,725 and $760,010 for the years ended January 31, 2016 and 2015, respectively. 12

15 NOTES TO FINANCIAL STATEMENTS 9. Commitments and Contingencies The Institute receives the majority of its funding through direct and indirect grants from NASA. A significant reduction in this funding, if this were to occur, would have a material effect on the programs and activities of the Institute. NASA and other grantors and/or contract funding sources may, at their discretion, request reimbursement for expenses or return of funds by the Institute if, at a later date, it is determined that the Institute or its contracted providers were not in compliance with the terms of grants or contracts. Through June 9, 2016 the Institute has not been advised of any request for reimbursement or return of funds. 10. Subsequent Events The Institute evaluated subsequent events through June 9, 2016, which represents the date the financial statements were available to be issued, and concluded that no additional disclosures are required. 13

16 SINGLE AUDIT REPORTS AND SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS FOR THE YEAR ENDED JANUARY 31, 2016 MCGLADREY ALLIANCE IS A PREMIER AFFILIATION OF INDEPENDENT ACCOUNTING AND CONSULTING FIRMS. MCGLADREY ALLIANCE MEMBER FIRMS ARE SEPARATE AND INDEPENDENT BUSINESSES AND LEGAL ENTITIES THAT ARE RESPONSIBLE FOR THEIR OWN ACTS AND OMISSIONS, AND EACH ARE SEPARATE AND INDEPENDENT FROM RSM US LLP.

17 TABLE OF CONTENTS 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 REPORT ON COMPLIANCE FOR EACH MAJOR FEDERAL PROGRAM; REPORT ON INTERNAL CONTROL OVER COMPLIANCE; AND REPORT ON THE SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS REQUIRED BY THE UNIFORM GUIDANCE SCHEDULE OF FINDINGS AND QUESTIONED COSTS SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS NOTES TO THE SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS... 15

18 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 INDEPENDENT AUDITOR S REPORT To the Board of Trustees Planetary Science Institute We have audited, in accordance with the auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the financial statements of Planetary Science Institute (the Institute ), which comprise the statement of financial position as of January 31, 2016, and the related statements of activities and changes in net assets, and cash flows for the year then ended, and the related notes to the financial statements, and have issued our report thereon dated June 9, Internal Control over Financial Reporting In planning and performing our audit of the financial statements, we considered the Institute's internal control over financial reporting ( internal control ) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinion on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the Institute s internal control. Accordingly, we do not express an opinion on the effectiveness of the Institute s internal control. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity s financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. 1

19 To the Board of Trustees Planetary Science Institute Page 2 Compliance and Other Matters As part of obtaining reasonable assurance about whether the Institute's financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. Purpose of this Report The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the Institute s internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the Institute s internal control and compliance. Accordingly, this communication is not suitable for any other purpose. Tucson, Arizona June 9,

20 REPORT ON COMPLIANCE FOR EACH MAJOR FEDERAL PROGRAM; REPORT ON INTERNAL CONTROL OVER COMPLIANCE; AND REPORT ON SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS REQUIRED BY THE UNIFORM GUIDANCE INDEPENDENT AUDITOR S REPORT To the Board of Trustees Planetary Science Institute Report on Compliance for the Major Federal Program We have audited Planetary Science Institute s (the Institute ) compliance with the types of compliance requirements described in the OMB Compliance Supplement that could have a direct and material effect on the Institute s major federal program for the year ended January 31, The Institute s major federal program is identified in the summary of auditor s results section of the accompanying schedule of findings and questioned costs. Management s Responsibility Management is responsible for compliance with the requirements of laws, regulations, contracts, and grants applicable to its federal programs. Auditor s Responsibility Our responsibility is to express an opinion on compliance for each of the Institute s major federal programs based on our audit of the types of compliance requirements referred to above. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and the audit requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards ( Uniform Guidance ). Those standards and the Uniform Guidance require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major federal program occurred. An audit includes examining, on a test basis, evidence about the Institute s compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. 3

21 To the Board of Trustees Planetary Science Institute Page 2 We believe that our audit provides a reasonable basis for our opinion on compliance for the major federal program. However, our audit does not provide a legal determination of the Institute s compliance. Opinion on the Major Federal Program In our opinion, the Institute complied, in all material respects, with the types of compliance requirements referred to above that could have a direct and material effect on its major federal program for the year ended January 31, Report on Internal Control Over Compliance Management of the Institute is responsible for establishing and maintaining effective internal control over compliance with the types of compliance requirements referred to above. In planning and performing our audit of compliance, we considered the Institute s internal control over compliance with the types of requirements that could have a direct and material effect on the major federal program to determine the auditing procedures that are appropriate in the circumstances for the purpose of expressing an opinion on compliance for each major federal program and to test and report on internal control over compliance in accordance with the Uniform Guidance, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of the Institute s internal control over compliance. A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a federal program on a timely basis. A material weakness in internal control over compliance is a deficiency, or combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a federal program will not be prevented, or detected and corrected, on a timely basis. A significant deficiency in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance with a type of compliance requirement of a federal program that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance. Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over compliance that might be material weaknesses or significant deficiencies. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. The purpose of this report on internal control over compliance is solely to describe the scope of our testing of internal control over compliance and the results of that testing based on the requirements of the Uniform Guidance. Accordingly, this report is not suitable for any other purpose. 4

22 To the Board of Trustees Planetary Science Institute Page 3 Report on Schedule of Expenditures of Federal Awards Required by the Uniform Guidance We have audited the financial statements of the Institute as of and for the year ended January 31, 2016, and have issued our report thereon dated June 9, 2016, which contained an unmodified opinion on those financial statements. Our audit was conducted for the purpose of forming an opinion on the financial statements as a whole. The accompanying schedule of expenditures of federal awards is presented for purposes of additional analysis as required by the Uniform Guidance and is not a required part of the financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the financial statements. The information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the schedule of expenditure of federal awards is fairly stated in all material respects in relation to the financial statements as a whole. Tucson, Arizona June 9,

23 SCHEDULE OF FINDINGS AND QUESTIONED COSTS FOR THE YEAR ENDED JANUARY 31, 2016

24 SCHEDULE OF FINDINGS AND QUESTIONED COSTS FOR THE YEAR ENDED JANUARY 31, 2016 SECTION I SUMMARY OF AUDITOR S RESULTS Financial Statements 1. Type of auditor s report issued:... Unmodified 2. Internal control over financial reporting: a. Material weakness(es) identified?... No b. Significant deficiency(ies) identified?... None Reported 1. Noncompliance material to financial statements noted?... No Federal Awards 1. Internal control over major programs: a. Material weakness(es) identified?... No b. Significant deficiency(ies) identified?... None Reported 2. Type of auditor s report issued on compliance for major programs:... Unmodified 3. Any audit findings disclosed, which are required to be reported in accordance with section 2 CFR (a)?... No 4. Identification of major programs: CFDA Number , , , , 43.UNKNOWN, , , Title of Federal Program or Cluster Research and Development Cluster 5. Dollar threshold used to distinguish between type A and type B programs:... $750, Auditee qualified as low-risk auditee?... Yes 7

25 SCHEDULE OF FINDINGS AND QUESTIONED COSTS FOR THE YEAR ENDED JANUARY 31, 2016 (CONTINUED) SECTION II FINANCIAL STATEMENT FINDINGS This section identifies the significant deficiencies, material weaknesses, and instances of fraud, illegal acts, violations of provision of contracts and grant agreements, and abuse related to the financial statements for which Government Auditing Standards require reporting. No matters were reported. SECTION III FINDINGS AND QUESTIONED COSTS FOR FEDERAL AWARDS This section identifies audit findings required to be reported by the 2 CFR (a), including significant deficiencies, material weaknesses, and material instance of noncompliance, including questioned costs, and material abuse. No matters were reported. 8

26 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS FOR THE YEAR ENDED JANUARY 31, 2016

27 Federal Pass-Through Passed Total Federal Grantor/Pass Through CFDA Entity Identifying Through to Federal Grantor/Program or Cluster Title Number Number Subrecipients Expenditures Research and Development - Cluster: NATIONAL AERONAUTICS AND SPACE ADMINISTRATION Direct Programs: Goddard Space Flight Center Science NNX07AR70G $ - $ 13,223 Science NNX09AM06G 45,522 47,259 Science NNX09AM83G 98, ,544 Science NNX09AV96G - 76,546 Science NNX10AC53G - 655,649 Science NNX10AG49G - 42,013 Science NNX10AM83G 9,206 25,804 Science NNX10AO24G - 38,910 Science NNX10AR19G - 15,078 Science NNX10AP77G - 66,637 Science NNX11AB34G - 29,452 Science NNX11AC59G - 17,987 Science NNX11AB84G - 35,157 Science NNX11AJ98A - 1,063 Science NNX11AF88G - 62,771 Science NNX11AH60G - 5,556 Science NNX11AI82G 20,056 59,868 Science NNX11AI84G 64 12,478 Science NNX11AK15G - 13,113 Science NNX11AG49G - 8,324 Science NNX11AM43G - 3,729 Science NNX11AM44G Science NNX11AP73G - 18,803 Science NNX11AQ20G - 57,889 Science NNX12AF26G - 66,000 Science NNX12AH74G - 92,715 Science NNX12AH94G - 13,664 Science NNX12AH98G 17,277 33,118 Science NNX12AG56G 1,631 67,121 Science NNX12AJ42G - 118,902 Science NNX12AJ15G - 12,333 Science NNX12AI84G - 48,185 Science NNX12AI97G 24,118 48,119 Science NNX12AJ48G - 93,830 Science NNX12AK65G - 47,044 Science NNX12AM27G - 13,208 Science NNX12AM76G 7,893 18,237 Science NNX12AM77G 11,909 33,237 Science NNX12AR68G - 48,616 Science NNX13AB83G 12,008 20,357 Science NNX13AG45G - 19,011 Science NNX13AG83G - 43,821 Science NNX13AG78G - 2,286 Science NNX13AI20G - 56,329 Science NNX13AH98G 1,995 1,995 Science NNX13AJ05G 37,459 74,277 Science NNX13AJ57G - 38,480 Science NNX13AJ63G - 89,906 Science NNX13AK03G ,141 Science NNX13AK73G - 44,410 Science NNX13AK61G - 114,787 Science NNX13AK81G 17,841 74,978 Science NNX13AL07G - 24,587 Science NNX13AL08G 7, ,062 Science NNX13AM81G - 38,768 Science NNX13AO33G - 17,146 Science NNX13AP27G - 136,251 Science NNX13AQ14G - 92,978 Science NNX13AQ11G - 22,985 Science NNX13AQ43G - 4,750 Science NNX13AR11G 8,327 91,410 Science NNX13AR15G - 70,881 Science NNX14AC44G - 46,548 Science NNX14AC64G 77, ,970 Science NNX14AD96G 37,153 90,933 SEE ACCOMPANYING NOTE TO THE SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS 10

28 Federal Pass-Through Passed Total Federal Grantor/Pass Through CFDA Entity Identifying Through to Federal Grantor/Program or Cluster Title Number Number Subrecipients Expenditures Research and Development - Cluster: NATIONAL AERONAUTICS AND SPACE ADMINISTRATION Goddard Space Flight Center (continued) Science NNX14AG73G - 110,858 Science NNX14AI12G - 41,203 Science NNX14AJ58G - 68,218 Science NNX14AL06G - 105,363 Science NNX14AM11G - 67,125 Science NNX14AM14G - 70,610 Science NNX14AM94G - 58,982 Science NNX14AN16G 42, ,519 Science NNX14AO21G - 168,437 Science NNX14AN23G - 83,395 Science NNX14AN35G - 109,778 Science NNX14AN11G - 81,826 Science NNX14AL68G - 81,883 Science NNX14AO96G - 39,163 Science NNX14AP93G 10,135 70,109 Science NNX14AP52G - 38,375 Science NNX15AB23G - 93,877 Science NNX14AM14G - 6,847 Science NNX15AC12A 9, ,762 Science NNX15AE02G - 6,723 Science NNX15AE04G 15,734 25,026 Science NNX15AF18G - 91,081 Science NNX15AH50A - 26,047 Science NNX15AH46G - 5,615 Science NNX15AI35G - 69,419 Science NNX15AI36G - 71,677 Science NNX15AL09G - 28,743 Science NNX15AM44G - 8,143 Science NNX15AM60G - 55,506 Science NNX15AM54G - 34,059 Science NNX15AM87G - 52,455 Science NNX15AL34G Science NNX15AN80G - 38,488 Science NNX15AN79G - 72,310 Science NNX15AL66G 4,045 48,742 Science NNX15AP22G - 15,587 Science NNX15AM45G 2,023 20,991 Science NNX15AP35G 8,845 44,557 Science NNX16AB60G - 26,567 Science NNX16AC55A - 72,996 Cross Agency Support NNX14AT50G 88, , ,154 6,320,592 Ames Research Center Science NNX11AO88A - 266,627 Science NNX15AK47A - 16, ,399 Total National Aeronautics and Space Administration Direct Programs 618,154 6,603,991 Pass-Through Programs From: Jet Propulsion Laboratory Science ,485 Science ,372 Science ,319 Science ,817 Science Science ,455 Science ,085 Science ,222 Science ,876 Science ,881 Science ,931 Science ,613 Science ,773 Science ,187 SEE ACCOMPANYING NOTE TO THE SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS 11

29 Federal Pass-Through Passed Total Federal Grantor/Pass Through CFDA Entity Identifying Through to Federal Grantor/Program or Cluster Title Number Number Subrecipients Expenditures Research and Development - Cluster: NATIONAL AERONAUTICS AND SPACE ADMINISTRATION Jet Propulsion Laboratory (continued) Science ,233 Science ,561 Science ,136 Science ,008 Science ,698 Science ,954 Science Science ,682 Science ,038 Science ,070 Science ,503-1,946,234 Arizona State University Science ,001 Science ,188 Science , ,533 Boise State University Science A - 39,511 California Institute of Technology Science A ,928 Carnegie Institution of Washington Science DTM ,239 Science DTM , ,267 Cornell University Science ,975 The Institute for Global Environmental Strategies, Inc. Science I009-11,141 Johns Hopkins University - APL Science ,621 Science ,839 Science ,822-80,282 Lowell Observatory Science PO# ,840 Monterey Institute for Research in Astronomy Science ,022 Smithsonian Observatory Science SUBC ,833 Science SUBC ,243-47,076 Southern Illinois University Science ,848 Southwest Research Institute Science D99007KC - 137,809 Science F99032MO - 87,425 Science F99036MO - 90,028 Science F99071M0-100,951 Science GC ,929 Science GC , ,792 SEE ACCOMPANYING NOTE TO THE SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS 12

30 Federal Pass-Through Passed Total Federal Grantor/Pass Through CFDA Entity Identifying Through to Federal Grantor/Program or Cluster Title Number Number Subrecipients Expenditures Research and Development - Cluster: NATIONAL AERONAUTICS AND SPACE ADMINISTRATION Space Science Institute Science ,529 Science ,137-10,666 The Research Foundation for the State University of New York Science ,614 Science ,176-20,790 University of Arizona Science Y ,788 Science Y ,707 Science ,543 Science PO ,015 OSIRIS-Rex 43.UNKNOWN Y ,634 OSIRIS-Rex 43.UNKNOWN ,382 OSIRIS-Rex Asteroid Sample Return Mission 43.UNKNOWN PO , ,377 University of California, Los Angeles Science G SA222-44,906 University of California, Santa Cruz Science S ,971 Science S ,171-22,142 University of Central Florida Science ,023 Exploration ,068-68,091 University of Chicago Science FP ,922 University of Colorado Aeronautics ,850 Aeronautics ,812-86,662 University of Hawaii Science MA ,874 University of Maryland Science Z ,811 Science Z ,083-32,894 University of North Dakota Science ,669 Science ,971 Science ,185-96,825 University of Pittsburgh Science ( ) - 28,579 Universities Space Research Association Science ,413 Science USRA - 6,633 Science ,524 Science ,738 Science ,968 Science , ,055 SEE ACCOMPANYING NOTE TO THE SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS 13

31 Federal Pass-Through Passed Total Federal Grantor/Pass Through CFDA Entity Identifying Through to Federal Grantor/Program or Cluster Title Number Number Subrecipients Expenditures Research and Development - Cluster: NATIONAL AERONAUTICS AND SPACE ADMINISTRATION University of Washington Science UWSC ,613 US Geological Survey Science G15PX ,000 Science G15PX ,935-29,935 TOTAL NATIONAL AERONAUTICS AND SPACE ADMINISTRATION 618,154 10,961,771 NATIONAL SCIENCE FOUNDATION Direct Programs: Mathematical and Physical Sciences AST ,181 Geosciences AGS ,344 Total National Science Foundation Direct Programs - 26,525 Pass-Through Programs From: University Enterprises Corporation Mathematical and Physical Sciences GT ,380 Carnegie Institution of Washington Computer and Information Science and Engineering ,352 TOTAL NATIONAL SCIENCE FOUNDATION - 100,257 Total Research and Development - Cluster 618,154 11,062,028 Total Expenditures of Federal Expenditures $ 618,154 $ 11,062,028 SEE ACCOMPANYING NOTE TO THE SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS 14

32 NOTES TO THE SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS FOR THE YEAR ENDED JANUARY 31, Basis of Presentation The accompanying schedule of expenditures of federal awards ( SEFA ) includes the federal award activity of the Institute under programs of the federal government for the year ended January 31, The information in the SEFA is presented in accordance with the requirements of the Uniform Guidance. Because the SEFA presents only a selected portion of the operations of the Institute, it is not intended to and does not present the financial position, changes in net assets, or cash flows of the Institute. 2. Summary of Significant Accounting Policies Expenditures reported on the SEFA are reported on the basis of accounting prescribed by the NASA Handbook and related grant accounting requirements. Such expenditures are recognized following, as applicable, either the cost principles in OMB Circular A-122, Cost Principles for Non-Profit Organizations, or the cost principles contained in the Uniform Guidance, wherein certain types of expenditures are not allowable or are limited as to reimbursement. The Organization has not elected to use the 10-percent de minimis indirect cost rate allowed under the Uniform Guidance. 15