FINANCIAL STATEMENTS September 30, 2013 (With Comparative Totals for September 30, 2012)

Transcription

1 FINANCIAL STATEMENTS (With Comparative Totals for September 30, 2012)

2 CONTENTS INDEPENDENT AUDITOR S REPORT 1 FINANCIAL STATEMENTS: Statements of Financial Position 3 Statements of Activities 5 Statements of Cash Flows 6 NOTES TO FINANCIAL STATEMENTS 8

3 1200 Buhl Building 535 Griswold Street Detroit, Michigan (313) Fax (313) INDEPENDENT AUDITOR S REPORT January 23, 2014 To the Board of Trustees The Pewabic Society, Inc. Report on the Financial Statements We have audited the accompanying financial statements of The Pewabic Society, Inc. (the Society, a Michigan non-profit Corporation), which comprise the statement of financial position as of, and the related statements of activities and cash flows for the year then ended, as well as the related notes to the financial statements. Management s Responsibility for the Financial Statements The Society s 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 audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. 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 Society 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 Society s internal control. Accordingly, we express no such opinion. An Independent Member of the BDO Seidman Alliance

4 Board of Trustees The Pewabic Society, Inc. January 23, 2014 Page Two INDEPENDENT AUDITOR S REPORT (CONTINUED) Auditor s Responsibility (continued) 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 Pewabic Society, Inc. as of, and the changes in its net assets and its cash flows for the year then ended, in accordance with accounting principles generally accepted in the United States of America. Report on Summarized Comparative Information We have previously audited the Society s financial statements as of, and for the year ended, September 30, 2012, and our report dated January 28, 2013 expressed an unmodified opinion on those audited financial statements. In our opinion, the summarized comparative information presented herein as of, and for the year ended, September 30, 2012 is consistent, in all material respects, with the audited financial statements from which it has been derived. CERTIFIED PUBLIC ACCOUNTANTS Detroit, Michigan

5 STATEMENTS OF FINANCIAL POSITION (With Comparative Totals as of September 30, 2012) ASSETS Current Assets: Cash and cash equivalents $ 90,248 $ 92,147 Accounts receivable (net of allowance of $5,285 and $12,740 in 2013 and 2012, respectively) 47,560 62,925 Pledges receivable (net of allowance of $4,816 and $-0- in 2013 and 2012, respectively) 43,349 16,500 Grants receivable (no allowance considered necessary) 67, ,265 Inventories (Note E) 176, ,990 Prepaid expenses 39,183 20,095 Total Current Assets 464, ,922 Other Assets: Property and equipment, net (Note F) 2,020,505 1,936,792 Beneficial interest in assets held by Community Foundation for Southeast Michigan (Note G) 18,252 16,941 Museum collection (Note A) 150, ,197 Trademark 1,740 1,740 Total Other Assets 2,190,694 2,105,670 Total Assets $ 2,654,911 $ 2,759,592 See notes to financial statements. -3-

6 STATEMENTS OF FINANCIAL POSITION (CONTINUED) (With Comparative Totals as of September 30, 2012) LIABILITIES AND NET ASSETS Current Liabilities: Accounts payable $ 128,934 $ 147,855 Line of credit (Note I) -0-55,035 Notes payable - current portion (Note J) 21,596 20,121 Accrued payroll and vacation 78,778 97,346 Customer deposits 60,100 64,699 Deferred revenue 7,791 6,112 Gift certificates 12,896 17,927 Total Current Liabilities 310, ,095 Long-Term Liabilities: Notes payable (net of current portion) (Note J) 476, ,293 Total Liabilities 786, ,388 Net Assets: Unrestricted: Board-designated (Note D) 1,522,209 1,363,343 Undesignated 73, ,455 Total Unrestricted Net Assets 1,595,914 1,578,798 Temporarily restricted (Note B) 243, ,294 Permanently restricted (Note C) 29,112 29,112 Total Net Assets 1,868,116 1,852,204 Total Liabilities and Net Assets $ 2,654,911 $ 2,759,592 See notes to financial statements. -4-

7 STATEMENTS OF ACTIVITIES For the Year Ended (With Comparative Totals for the Year Ended September 30, 2012) 2013 Total Temporarily Permanently Unrestricted Restricted Restricted Public Support, Revenue, and Gains: Public support: Contributions $ 223,336 $ 287,337 $ -0- $ 510,673 $ 635,647 Memberships and events 114, , ,331 Net assets released from restrictions (Note B) 288,541 (288,541) Total Public Support 626,874 (1,204) , ,978 Revenue and gains: Gallery sales and commissioned projects (Note K) 1,734,515 1,734,515 1,796,819 Educational 243, , ,871 Other revenue and gains 24,161 24,161 11,955 Total Revenue and Gains 2,002, ,002,261 2,017,645 Total Public Support, Revenue, and Gains 2,629,135 (1,204) -0-2,627,931 2,759,623 Expenses and Losses: Program services: Art design studio 336, , ,567 Gallery 1,198,102 1,198,102 1,154,172 Education 416, , ,454 Museum 29,450 29,450 12,547 Exhibitions 35,234 35,234 30,910 Total Program Services 2,015, ,015,908 2,043,650 Supporting services: Administrative and general 355, , ,711 Development, membership, and campus expansion 240, , ,184 Total Supporting Services 596, , ,895 Total Expenses 2,612, ,612,019 2,613,545 Loss on disposition of property and equipment -0-2,093 Total Expenses and Losses 2,612, ,612,019 2,615,638 Net Increase (Decrease) in Net Assets 17,116 (1,204) -0-15, ,985 Net Assets, Beginning of Year 1,578, ,294 29,112 1,852,204 1,708,219 Net Assets, End of Year $ 1,595,914 $ 243,090 $ 29,112 $ 1,868,116 $ 1,852,204 See notes to financial statements. -5-

8 STATEMENTS OF CASH FLOWS For the Year Ended (With Comparative Totals for the Year Ended September 30, 2012) Cash Flows from Operating Activities: Net increase in net assets $ 15,912 $ 143,985 Adjustments to reconcile net increase in net assets to net cash provided by operating activities: Depreciation 84,543 79,304 Loss on disposition of property and equipment -0-2,093 Net realized and unrealized gains in beneficial interest in assets held by Community Foundation for Southeast Michigan (1,311) (2,191) (Increase) decrease in: Accounts receivable 15,365 (7,777) Pledges receivable (26,849) (10,500) Grants receivable 233,065 (89,381) Inventories (14,687) 30,354 Prepaid expenses (19,088) 4,812 Increase (decrease) in: Accounts payable (18,921) 7,166 Accrued payroll and vacation (18,568) 12,855 Customer deposits (4,599) 4,381 Deferred revenue 1,679 1,029 Gift certificates (5,031) 3,268 Net Cash Provided by Operating Activities 241, ,398 Cash Flows from Investing Activities: Acquisition of property, equipment, and collections (168,256) (107,998) Net Cash Provided (Used) by Investing Activities $ (168,256) $ (107,998) See notes to financial statements. -6-

9 STATEMENTS OF CASH FLOWS (CONTINUED) For the Year Ended (With Comparative Totals for the Year Ended September 30, 2012) Cash Flows from Financing Activities: Payments on notes payable $ (20,118) $ (18,647) Borrowings on line of credit 975, ,070 Repayments on line of credit (1,030,362) (827,838) Net Cash Provided (Used) by Financing Activities (75,153) (161,415) Net Increase (Decrease) in Cash and Cash Equivalents (1,899) (90,015) Cash and Cash Equivalents Balance, Beginning of Year 92, ,162 Cash and Cash Equivalents Balance, End of Year $ 90,248 $ 92,147 Supplemental Disclosure of Cash Flow Information: Cash paid during the year for interest $ 23,753 $ 42,432 See notes to financial statements. -7-

10 NOTES TO FINANCIAL STATEMENTS NOTE A NATURE OF ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Nature of Organization The Pewabic Society, Inc. (the Society ) is a Michigan non-profit Corporation established to preserve the heritage of the arts and craft movement in America through its stewardship of the National Historic Landmark Pottery Building, which is a living museum, and through education programs. The Society s mission is focused on: (a) education of students of all ages, but especially youth, (b) creating artistic and audience development for ceramic artists in its galleries, exhibitions program, and special events, and (c) designing and fabricating architectural tile, which continues the legacy of artist and founder Mary Chase Stratton, who created tile art for private and public buildings. The Society s revenue is derived principally from contributions, gallery sales, and commissioned tile projects, which sustain its mission. Cash Equivalents For purposes of the statements of cash flows, the Society considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. Accounts Receivable Accounts receivable are comprised primarily of amounts due on commissioned and gallery projects. The Society provides for probable uncollectible amounts through a charge to earnings and a credit to a valuation allowance. The allowance for doubtful accounts is established based on a specific assessment of the accounts receivable balance at the end of the year. All amounts deemed to be uncollectible after management has made reasonable collection attempts are charged against the allowance for doubtful accounts in the period the determination is made. Pledges Receivable The Society s pledges receivable are comprised primarily of amounts committed from individuals and foundations for the Society s activities. Support is recognized when a pledge representing an unconditional promise to give is received; in the absence of such promise, support is recognized when the intent to give is collected. Unconditional promises to give that are expected to be collected in future years are recorded at the present value of their estimated future cash flows. -8-

11 NOTE A NATURE OF ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Grants Receivable The Society receives grants from various funding sources. An allowance for doubtful accounts is established on a specific assessment of the amounts still owed at the end of the year. All amounts deemed uncollectible are charged against the allowance for doubtful accounts in the period the determination is made. Management did not consider an allowance for doubtful accounts necessary as of and Inventories Inventories consist of work-in-process and finished products and are stated at the lower of cost, determined by the first-in, first-out method, or market. The Society makes an allocation of manufacturing expenses to work-in-process and finished products, as well as charging direct labor costs. Property and Equipment Property and equipment are stated at cost. Donated property and equipment are recorded at approximate fair value at the date of the gift. Improvements and renewals are capitalized, while ordinary maintenance and repairs are expensed. Management annually reviews these assets to determine whether carrying values have been impaired. Depreciation is computed on the straightline basis over the estimated useful lives of the related assets, which range from three to 25 years. Museum Collection The Society s museum collection consists of various art objects that are held for exhibition on site. Purchased items are capitalized at cost, while donated items are recorded at estimated fair value at the date of receipt from the donor. Contributed Services Many individuals volunteer their time that assists the Society in running its programs and fund raising campaigns. Contributed services meeting the requirements for recognition in the financial statements totaled $12,500 and $23,251 for the years ended and 2012, respectively. -9-

12 NOTE A NATURE OF ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Donated Items and Materials Donated items and materials totaled $6,661 and $4,169 for the years ended and 2012, respectively. Public Support and Revenue Contributions Contributions received are recorded as unrestricted, temporarily restricted, or permanently restricted support, depending on the existence and/or nature of any donor restrictions. The Society reports contributions of cash and other assets as restricted support if they are received with donor stipulations that limit the use of the donated assets. When a donor restriction expires (that is, when a stipulated time restriction ends or a purpose restriction is accomplished), temporarily restricted net assets are reclassified to unrestricted net assets and are reported in the statements of activities as net assets released from restrictions. Gallery Sales Sales of gallery items are recognized as revenue at the time of sale. Commissioned Projects Revenue from commissioned projects is recognized at the time the project is completed and is either picked up or shipped, as applicable. Educational Revenue from educational activities is recognized in the period in which the activity occurs. Deferred Revenue Deferred revenue represents advance payments primarily relating to an educational event. Such deferred amounts are recognized as revenue in the period in which the event occurs. -10-

13 NOTE A NATURE OF ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Customer Deposits The Society receives up-front payments on commissioned projects and records such payments as customer deposit liabilities. Such deposits are recognized as revenue in the period in which the corresponding project is completed and shipped or picked up. Functional Allocation of Expenses Expenses by function have been allocated between program and supporting service classifications based upon management s estimates of time devoted to the specific activities. Advertising The Society uses advertising to promote its programs among the audiences it serves. Advertising costs are expensed as incurred. Advertising expense for the years ended and 2012 was $116,669 and $125,235, respectively. Tax-Exempt Status No provision has been established for income taxes since the Society is exempt from federal income taxes under section 501(c)(3) of the Internal Revenue Code ( IRC ) and is not classified as a private foundation by the Internal Revenue Service ( IRS ). The Society s management is not aware of any unrecognized tax benefits as of or The Society is no longer subject to federal income tax examinations by the IRS for years prior to the year ended September 30, Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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 revenue and expenses during the reporting period. Actual results could differ from those estimates. -11-

14 NOTE A NATURE OF ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Fair Value Measurements The Society uses fair value measurements in the preparation of its financial statements, which utilize various inputs, including those that can be readily observable, corroborated, or are generally unobservable. The Society utilizes market-based data and valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. Additionally, the Society applies assumptions that market participants would use in pricing an asset or liability, including assumptions about risk. The measurement of fair value includes a hierarchy based on the quality of inputs used to measure fair value. Financial assets and liabilities are categorized into this three-level fair value hierarchy based on the inputs to the valuation technique. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets and liabilities and the lowest priority to unobservable inputs. The various levels of the fair value hierarchy are described as follows: Level 1 - Financial assets and liabilities whose values are based on unadjusted quoted market prices for identical assets and liabilities in an active market that the Society has the ability to access Level 2 - Financial assets and liabilities whose values are based on quoted prices in markets that are not active or model inputs that are observable for substantially the full term of the asset or liability Level 3 - Financial assets and liabilities whose values are based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement The use of observable market data, when available, is required in making fair value measurements. When inputs used to measure fair value fall within different levels of the hierarchy, the level within which the fair value measurement is categorized is based on the lowest level input that is significant to the fair value measurement. -12-

15 NOTE A NATURE OF ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Concentration of Credit Risk Financial instruments which potentially subject the Society to concentrations of credit risk consist principally of cash, cash equivalents, and grants and accounts receivable. Cash and cash equivalents are maintained at financial institutions and, at times, balances may exceed the federally insured limit of $250,000 per depositor at each financial institution. Cash and cash equivalents on deposit did not exceed the federally insured limit as of. Grants receivable are due from various funding sources. Accounts receivable are due from various entities primarily for amounts due on commissioned and gallery projects, as well as educational projects. Comparative Financial Information The financial statements include prior-year summarized comparative information in total but not by class of net assets. Accordingly, such information should be read in conjunction with the Society s financial statements as of, and for the year ended, September 30, 2012, from which the summarized information was derived. Reclassifications Certain reclassifications have been made to the financial statements as of, and for the year ended, September 30, 2012 to conform to classifications used as of, and for the year ended, September 30, Subsequent Events The Society has evaluated subsequent events through January 23, 2014, the date that the accompanying financial statements were available to be issued. -13-

16 NOTE B TEMPORARILY RESTRICTED NET ASSETS Temporarily restricted net assets are available as of and 2012 for the following purposes or periods: Restricted for specific purposes: Capital projects $ 64,943 $ 3,560 Educational projects 90,895 57,793 Marketing project 69, ,000 Other projects -0-41, , ,353 Restricted for use in future periods 18,252 16,941 $ 243,090 $ 244,294 Net assets were released from donor restrictions by incurring expenses satisfying the restricted purposes or by occurrence of other events specified by donors, as follows: Purpose restrictions accomplished for the following purposes: Capital projects $ 122,471 $ 117,386 Educational projects 69, ,550 Marketing project 56, Other projects 41,000 43,500 NOTE C PERMANENTLY RESTRICTED NET ASSETS $ 288,541 $ 302,436 Permanently restricted net assets totaling $29,112 as of and 2012 consist of a donor-imposed restriction that requires the gift be maintained in perpetuity. Investment income is available to the Society for general operations. -14-

17 NOTE D BOARD-DESIGNATED NET ASSETS The Society s Board of Trustees has designated $1,522,209 and $1,363,343 of unrestricted net assets as not being available for general operations without prior Board approval as of and 2012, respectively. The Board-designated net asset balance approximates the net book value of property, less long-term and other debt. NOTE E - INVENTORIES Inventories consist of the following components as of and 2012: Work-in-process $ 90,459 $ 84,004 Finished goods 86,218 77,986 NOTE F - PROPERTY AND EQUIPMENT $ 176,677 $ 161,990 Property and equipment consist of the following as of and 2012: Land and land improvements $ 1,483,233 $ 1,483,233 Buildings 471, ,856 Building improvements 441, ,452 Machinery and equipment 521, ,478 2,917,275 2,749,019 Less: Accumulated depreciation (896,770) (812,227) $ 2,020,505 $ 1,936,792 Depreciation expense totaled $84,543 and $79,304 for the years ended and 2012, respectively. -15-

18 NOTE G - CHARITABLE ENDOWMENT FUND The Society has established the Pewabic Pottery Fund (the Endowment Fund ) as a component fund of the Community Foundation for Southeast Michigan (the Foundation ). The Endowment Fund is an asset of the Foundation. The majority of the Endowment Fund s assets is invested in registered investment companies. The Foundation actively solicits contributions that can be designated to the Society. The Foundation transfers earnings on the Endowment Fund to the Society periodically in the form of grants so long as the Society continues to meet its tax-exempt purpose. The portion of the Endowment Fund that was funded by the Society, plus the net earnings on that balance, represents a reciprocal transfer and is, therefore, included in the Society s financial statements. The Endowment Fund provides general support for the Society. The fair value of the Endowment Fund as of and 2012 is $46,362 and $42,932, respectively; the portion included in the financial statements of $18,252 and $16,941 as of and 2012, respectively, is entirely in temporarily restricted net assets. A reconciliation of the fair value of the Endowment Fund assets included in the Society s financial statements for the years ended and 2012 is presented in Note H. The Society s Board of Trustees has interpreted existing law and the agreement with the Foundation as not requiring the preservation of the fair value of the any deposits to the Endowment Fund. As a result of this interpretation, although the income generated by the Endowment Fund may be used to support various activities of the Society, the Endowment Fund is subject to a time restriction and, therefore, is classified in temporarily restricted net assets. The Society s policy is to spend assets from the Endowment Fund as they are distributed by the Foundation. The Foundation invests the assets of the Endowment Fund as part of a pooled endowment with similar funds held on behalf of other non-profit organizations. The assets of the Foundation s pooled endowment are invested in a manner intended to maximize investment returns over a diversified portfolio in order to achieve a moderate level of investment risk. -16-

19 NOTE H FAIR VALUE The Society s fair value hierarchy for those assets measured at fair value on a recurring basis as of and 2012 is summarized as follows: 2013 Quoted Prices in Active Significant Markets for Other Significant Identical Observable Unobservable Assets Inputs Inputs (Level 1) (Level 2) (Level 3) Total Assets: Beneficial interest in assets held by Community Foundation for Southeast Michigan $ -0- $ -0- $ 18,252 $ 18,252 Cash and cash equivalents 90,248 90, Fair Value Measurements $ 90,248 $ -0- $ 18,252 $ 108,500 Assets: Beneficial interest in assets held by Community Foundation for Southeast Michigan $ -0- $ -0- $ 16,941 $ 16,941 Cash and cash equivalents 92,147 92,147 $ 92,147 $ -0- $ 16,941 $ 109,

20 NOTE H FAIR VALUE (CONTINUED) The fair value reconciliation of the Society s Level 3 assets that are measured at fair value on a recurring basis for the years ended and 2012, which also represents the reconciliation of Endowment Fund assets for those periods, is as follows: -18- Beneficial Interest in Assets Held by Community Foundation for Southeast Michigan (Endowment Fund) Changes in Endowment Fund (Level 3) Assets: Net realized and unrealized gains $ 1,311 $ 2,191 Net Increase in Endowment Fund (Level 3) Assets 1,311 2,191 Balance, Beginning of Year 16,941 14,750 Balance, End of Year $ 18,252 $ 16,941 Net gains for the year included in changes in net assets attributable to the change in unrealized gains or losses relating to assets still held as of September 30 $ 1,311 $ 2,191 NOTE I - LINE OF CREDIT The Society has available a $400,000 line of credit with a bank, due in February The line bears interest at rates which are set by the bank; the effective rate is 6.25 percent as of September 30, Interest is payable monthly, and the line of credit is secured by the Society s accounts receivable, inventory, and property and equipment. As of and 2012, the outstanding balance on the line of credit is $-0- and $55,035, respectively. The line of credit has covenants that restrict or limit the Society s ability to incur additional debt or liens, make investments or advances, or acquire certain levels of capital expenditures. It also requires the Society to meet certain financial covenants and ratios, including restricting the line of credit balance from exceeding unrestricted net assets and requiring the line of credit to be paid down for 15 consecutive days during the agreement period. As of, the Society was in compliance with all covenants.

21 NOTE J NOTES PAYABLE The Society has notes payable to a bank as of and 2012 which are due in monthly installments of $4,688, including interest at seven percent per annum. A balloon payment is due in October The notes payable are collateralized by the Society s real estate. Future maturities are summarized as follows as of : For the Years Ending September 30: 2014 $ 21, ,700 $ 498,296 Total interest expense on both the line of credit and the notes payable was $23,753 and $42,432 for the years ended and 2012, respectively. NOTE K - GALLERY SALES AND COMMISSIONED PROJECTS Gallery sales and commissioned projects are comprised of the following amounts for the years ended and 2012: Gallery sales and commissioned projects $ 1,765,401 $ 1,837,326 Less: Returns and discounts (30,886) (40,507) $ 1,734,515 $ 1,796,819 Cost of sales related to gallery sales and commissioned projects is allocated among the Society s various program services and total $983,244 and $1,040,680 for the years ended and 2012, respectively. NOTE L - LEASES The Society leases certain equipment and facilities under operating leases which expire at various dates through September

22 NOTE L LEASES (CONTINUED) Future minimum rental commitments as of are as follows: For the year ending September 30, 2014 $ 1,773 Rental expense for the years ended and 2012 was $2,218 and $6,444, respectively. NOTE M - RETIREMENT PLAN The Society has a defined contribution retirement plan available to substantially all employees. Participants may make basic contributions of their compensation up to the legal limit prescribed by section 403(b) of the IRC. There were no matching contributions made to the Plan by the Society for the years ended and NOTE N - HEALTH CARE REFORM LEGISLATION In March 2010, the Patient Protection and Affordable Care Act, along with the Health Care and Education Reconciliation Act, was enacted into law. This legislation includes the following provisions that are effective January 1, 2014 that may have a significant financial impact on employers: Employers with an average of at least 50 full-time employees will be subject to financial penalties for full-time employees who have purchased health insurance through a state insurance exchange because the employer has not offered health care coverage, has offered minimum essential coverage that is unaffordable, or has offered minimum essential coverage consisting of a plan under which the plan s share of the total allowed cost of benefits is less than 60 percent. Employers offering minimum essential coverage through an eligible employer-sponsored plan and paying a portion of that coverage will be subject to providing certain qualified employees with a voucher whose value can be applied to the purchase of a health plan through the Insurance Exchange. The Society s management does not anticipate any impact on its future operations as a result of this legislation. -20-