CAFR. Comprehensive Annual Financial Report

Transcription

1 CAFR Comprehensive Annual Financial Report FISCAL YEAR ENDED JUNE 2014

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3 The National Association of State Auditors, Comptrollers and Treasurers is an organization for state officials responsible for the financial management of state government. Headquarters Office 449 Lewis Hargett Circle, Suite 290 Lexington, KY P (859) , F (859) Washington Office The Hall of the States 444 N. Capitol Street, NW, Suite 234 Washington, DC P (202) , F (202)

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5 National Association of State Auditors, Comptrollers and Treasurers Comprehensive Annual Financial Report For the Fiscal Year Ended June 30, 2014 INTRODUCTORY SECTION... 1 Letter of Transmittal... 3 List of Officers and Members of the Executive Committee... 6 List of Staff Members... 7 FINANCIAL SECTION... 9 Independent Auditor s Report on Basic Financial Statements Management s Discussion and Analysis Basic Financial Statements: Statement of Net Position Statement of Revenues, Expenses and Changes in Fund Net Position Statement of Cash Flows Notes to the Financial Statements REQUIRED SUPPLEMENTARY INFORMATION Budgetary Comparison Schedule STATISTICAL SECTION Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of the Financial Statements Performed in Accordance with Government Auditing Standards i

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7 1 Introductory Section

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9 August 29, 2014 To the Executive Committee and Members of the National Association of State Auditors, Comptrollers and Treasurers: I am pleased to submit the Comprehensive Annual Financial Report of the National Association of State Auditors, Comptrollers and Treasurers for the fiscal year ended June 30, Responsibility for both the accuracy of the data and the completeness and fairness of the presentation, including all disclosures, rests with the Association. To the best of our knowledge, the enclosed data are accurate in all material respects and are reported in a manner designed to present fairly the financial position and results of operations of the Association. All disclosures necessary to enable the reader to gain an understanding of the Association s financial activities have been included. Management of the Association is responsible for establishing and maintaining internal control designed to provide reasonable, but not absolute, assurance regarding the safeguarding of assets against loss from unauthorized use or disposition and the reliability of financial records for preparing financial statements and maintaining accountability for assets. The concept of reasonable assurance recognizes that the cost of a control should not exceed the benefits likely to be derived, and that the evaluation of costs and benefits requires estimates and judgments by management. Article VI of the Association s Constitution and Bylaws requires that an annual audit be conducted of the Association s financial statements. NASACT s Audit Committee appointed a team of three auditors who conducted the audit of the FY 2014 financial statements in August The independent auditor s report is at the beginning of the financial section of this report. The Comprehensive Annual Financial Report is presented in three sections: the introductory section, the financial section and the statistical section. The introductory section includes this transmittal letter, a list of the Association s officers and Executive Committee for and a list of staff in the Lexington and Washington offices at August 29, The financial section includes the independent auditor s report, management s discussion and analysis, the basic financial statements and notes to the financial statements. The required supplementary information includes the budgetary comparison schedule. The statistical section contains trend information about NASACT s financial position, revenues and debt, as well as demographic and operating information. Profile of NASACT NASACT was founded in 1915 to allow principal state officials concerned with state financial management to gather annually to discuss issues of mutual interest. Over the years, as state financial management became increasingly complex, NASACT expanded its services and offerings to members. With the establishment of the Governmental Accounting Standards Board in 1984 came the need for technical services as members became involved in the process of setting accounting and financial reporting standards. 3

10 Now, the Association engages in a wide variety of activities to enhance the professionalism of its members and to foster accountability, efficiency and effectiveness in state government. Among these activities are the following: Organize conferences and webinars. Offer training seminars on a variety of finance and audit-related topics. Publish a monthly newsletter and a weekly Washington Update while Congress is in session. Communicate regularly with standards-setting bodies regarding matters related to governmental accounting, financial reporting and auditing. Serve as an advocate for states interests in the nation s capital. Conduct research on a variety of topics of interest to members. Work cooperatively with peer organizations of state government officials on topics and projects of mutual interest. Major Projects and Initiatives Fiscal year 2014 has been an active year for NASACT and its members. Listed below are some of the activities focused on during the year: NASACT released best practices on continuing disclosure. In August 2013, NASACT released the document Voluntary Interim Financial Reporting: Best Practices for State Governments. The document has been praised by the Securities and Exchange Commission and endorsed by the National Federation of Municipal Analysts. In May 2014, NASACT received an Excellence in Disclosure Award for the document from NFMA. NASACT continues, through the efforts of a work group, to develop guidance for states as they implement the best practices. NASACT worked with OMB on reforms to grants policy. NASACT has worked with the U.S. Office of Management and Budget, providing extensive input to OMB on reforms to grants policy guidance. The long-awaited final guidance was released on December 26, NASACT has continued to provide input on Q&As to clarify guidance and guide implementation. Specifically, NASACT received a favorable response to a requested clarification on how non-federal entities and their auditors should interpret and apply the requirements regarding internal controls contained in Section NASACT monitored progress of the DATA Act and continues to advocate state interests as the act is implemented. The Digital Accountability and Transparency act was signed into law on May 9, NASACT provided input to legislators as the DATA Act made its way through Congress and will continue to engage in a dialogue with the U.S. Treasury Department as standards are developed and the act is implemented. NASACT is monitoring the SEC s proposal to regulate money market mutual funds. NASACT has weighed in on the SEC s proposal to regulate money market mutual funds. NASACT and several other groups have been meeting with SEC commissioners to reiterate concerns with the proposal that if finalized, could affect the cost and availability of financing and investments for state and local governments. NASACT developed a pension implementation group to help states implement GASB pension standards. The Pension Standards Implementation Group holds regular conference calls to assist the states as they work to implement Statements 67 and 68 from the Governmental Accounting Standards Board. The state auditors also created an information sharing group to examine audit issues. NASACT is assisting states as they manage the implementation of the Affordable Care Act. NASACT has distributed guidance from the Internal Revenue Service on shared responsibility 4

11 provisions related to employee health care coverage under section 4980H of the Internal Revenue Code, enacted by the Affordable Care Act. NASACT is also participating in calls with the U.S. Government Accountability Office to discuss the audit implications of the ACA. NASACT worked with The Big 7 and other groups to educate those on Capitol Hill about misinformation related to public pension systems and government bankruptcies. NASACT participated with The Big 7 and other national peer associations to update a fact sheet to help allay attacks on public pensions and to help educate members of Congress. NASACT testified at a GASB hearing and provided input on exposure drafts on pension EDs and other issues. Testified in a GASB hearing on September 20. Responded to: o ED Measurement of Elements of Financial Statements o PV Fair Value Measurement and Application o Financial Accounting Foundation proposal on changing GASB s agenda-setting process. NASACT provided multiple training opportunities and technical resources for members NASACT Annual Conference August NSAA IT Workshop and Conference September/October NASC Annual Conference March Middle Management Conference April NSAA Annual Conference Scheduled in June Technical response networks for state auditors and state comptrollers (ongoing) Webinars featuring the following topics: o Treasury Offset Program (Sep 2013) o Sustaining High Performance at the State Level (Oct 2013) o High Impact Audits and Reports (Nov 2013) o OMB A-133 Collection Form (Nov 2013) o OMB Final Grants Policy Guidance (Feb 2014) o Pension Implementation Issues (Apr 2014) o ERP eprocurement and Vendor Self-Service (Apr 2014) NASACT continues and expands travel assistance program. In FY 2014, NASACT offered up to $1,700 for all members or new officials to attend the NASACT annual conference and up to $750 for comptrollers and auditors to attend their annual conferences. The program has been expanded in FY 2015 to offer up to $2,000 for the NASACT annual conference and up to $1,000 for the NASC and NSAA annual conferences. The preparation of this report was made possible by the dedicated support of NASACT s finance manager along with the assistance of our accounting student intern and input and collaboration by the entire NASACT staff. Questions about this report may be directed to NASACT s headquarters office. Respectfully submitted, R. Kinney Poynter Executive Director 5

12 NATIONAL ASSOCIATION OF STATE AUDITORS, COMPTROLLERS AND TREASURERS EXECUTIVE COMMITTEE OFFICERS President James B. Lewis State Treasurer New Mexico First Vice President William G. Holland Auditor General Illinois Second Vice President Calvin McKelvogue Chief Operating Officer State Accounting Enterprise Iowa Secretary Richard K. Ellis State Treasurer Utah Treasurer Debra K. Davenport Auditor General Arizona OTHER MEMBERS Immediate Past President Martin J. Benison Comptroller Massachusetts Manju Ganeriwala State Treasurer Virginia David H. Lillard, Jr. State Treasurer Tennessee Roger Norman Legislative Auditor Arkansas Beth Pearce State Treasurer Vermont David W. Martin Auditor General Florida John C. Reidhead Director Division of Finance Utah David A. Von Moll State Comptroller Virginia Rebecca Otto State Auditor Minnesota Kim R. Wallin State Controller Nevada 6

13 NATIONAL ASSOCIATION OF STATE AUDITORS, COMPTROLLERS AND TREASURERS STAFF (August 29, 2014) In Lexington R. Kinney Poynter, CPA, Executive Director Patsy Hackney, Administrative Assistant Glenda Johnson, Communications Manager Donna Maloy, Conference Manager Ariana Moeves, Student Intern Kimberly O Ryan, CPA, NASC Association Director Adrian Puryear, IT / Web Manager Sherri Rowland, CPA, NSAA Association Director Lori Slagle, Finance Manager Kathleen Young, Peer Review Coordinator In Washington Cornelia Chebinou, J.D., Washington Director Tanya Grayson, Administrative Assistant Neal Hutchko, Policy Analyst 7

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15 9 Financial Section

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17 STATE OF MAINE OFFICE OF THE STATE AUDITOR 66 STATE HOUSE STATION AUGUSTA, MAINE TEL: (207) FAX: (207) POLA A. BUCKLEY, CPA, CISA STATE AUDITOR MARY GINGROW-SHAW, CPA DEPUTY STATE AUDITOR MICHAEL J. POULIN, CIA DIRECTOR OF AUDIT and ADMINISTRATION INDEPENDENT AUDITOR S REPORT EXECUTIVE COMMITTEE AND MEMBERS R. KINNEY POYNTER, EXECUTIVE DIRECTOR NATIONAL ASSOCIATION OF STATE AUDITORS, COMPTROLLERS AND TREASURERS Lexington, Kentucky Report on the Financial Statements We have audited the accompanying financial statements of the National Association of State Auditors, Comptrollers, and Treasurers, as of and for the year ended June 30, 2014, and the related notes to the financial statements, which collectively comprise NASACT s basic financial statements as listed in the table of contents. 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 audit. We conducted our audit 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 NASACT 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 NASACT 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. 11

18 INDEPENDENT AUDITOR S REPORT (CONCLUDED) Opinion In our opinion, based on our audit, the financial statements referred to above present fairly, in all material respects, the financial position of the National Association of State Auditor, Comptrollers, and Treasurers, as of June 30, 2013, and the changes in financial position and, where applicable, cash flows thereof for the year then ended in accordance 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 s Discussion and Analysis 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 The introductory and statistical sections are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the basic financial statements. The introductory and statistical sections have 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. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated August 28, 2014 on our consideration of NASACT 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 NASACT s internal control over financial reporting and compliance. Mary Gingrow-Shaw, CPA Deputy State Auditor Augusta, Maine August 28,

19 MANAGEMENT S DISCUSSION AND ANALYSIS The following discussion about the financial performance of NASACT provides a narrative overview and analysis of the financial activities for the fiscal year ended June 30, Readers are encouraged to consider this narrative in conjunction with the information that is furnished in the letter of transmittal, which can be found preceding this analysis, and with the basic financial statements that follow. Activities that are normally intended to recover all or a significant portion of their costs through user fees and charges to external users of goods and services are required to report as business-type activities. Since NASACT s activities are expected to recover their costs, the Association reports as a business-type activity. HIGHLIGHTS Net Position The assets of NASACT exceeded liabilities at fiscal year-end by $2,520,817 (presented as Total net position ). Of this amount $1,918,441 was reported as Unrestricted. In FY 2013, net position exceeded liabilities by $2,416,975 and unrestricted net position was $1,794,055. The unrestricted net position represents the amount available to meet ongoing obligations. Change in Net Position In FY 2014, NASACT s total net position increased by $103,842. OVERVIEW OF THE FINANCIAL STATEMENTS This overview and analysis is intended to serve as an introduction to the Association s basic financial statements, which include two components: (1) the financial statements and (2) notes to the financial statements. This report also contains required supplementary information, which is the Budgetary Comparison Schedule. These components are described below. Financial Statements Because NASACT reports as a business-type activity, it presents the statements required for that type of entity. The statements provide both short-term and long-term information about the Association s financial position. These statements are prepared using the flow of economic resources measurement focus and the accrual basis of accounting, the same measurement focus and basis of accounting that is used in the private sector. These financial statements take into account all revenues and expenses related to the fiscal year regardless of whether the cash involved has been received or disbursed. The financial statements include three statements: 1. The Statement of Net Position (page 18) presents the Association s assets and liabilities, with the difference between the two reported as Total net position. Over time, increases or decreases in the Association s net position serve as an indicator of whether the financial position of NASACT is improving or deteriorating. 2. The Statement of Revenues, Expenses and Changes in Fund Net Position (page 19) presents information regarding how net position changed during the fiscal year. All changes in net position are reported when the underlying event occurs, regardless of the timing of the related cash flow. Thus, revenues and expenses are reported in this statement for items that will not result in cash transactions until future fiscal periods (such as uncollected contract revenues and earned, but not used, personal leave). 3. The Statement of Cash Flows (page 20) presents the cash receipts and cash payments occurring during the fiscal year. In this statement, changes in net cash are reported when the cash transaction occurs, regardless of the timing of the underlying events. This report provides users 13

20 with the information needed to assess the Association s ability to generate future cash flows and meet obligations as they come due and to assess operating versus investing activities. Notes to the Financial Statements The Notes to the Financial Statements provide additional information that is essential to a full understanding of the data provided in the financial statements. The notes to the financial statements may be found immediately following the financial statements, pages 21 through 25. Required Supplementary Information Following the Basic Financial Statements is required supplementary information which further explains and supports the information in the financial statements. The supplementary information is the Budgetary Comparison Schedule, which can be found on page 29. FINANCIAL ANALYSIS OF NASACT The condensed information below was derived from NASACT s Statement of Net Position at June 30, 2014, and June 30, The net position at June 30, 2014, is $2,520,817, an increase of $103,842 over fiscal year 2013 s net position of $2,416,975. Net Position as of Amount June 30, 2014 June 30, 2013 Change % Change Current assets $ 1,334,348 $ 1,628,587 $ (294,239) -18% Capital assets 602, ,920 (20,544) -3% Other assets 2,477,503 2,002, ,000 24% Total assets 4,414,227 4,254, ,217 4% Current liabilities 1,772,218 1,722,206 50,012 3% Noncurrent liabilities 121, ,829 6,363 6% Total liabilities 1,893,410 1,837,035 56,375 3% Investment in capital assets 602, ,920 (20,544) -3% Unrestricted net position 1,918,441 1,794, ,386 7% Total net position $ 2,520,817 $ 2,416, ,842 4% Current assets include cash, investments, deposits, accounts receivable, accrued interest receivable, prepaid expenses and restricted cash. Current assets at June 30, 2014, decreased about 18 percent compared to FY 2013 due to the purchase of long-term investments. NASACT invested an additional $525,000 in certificates of deposit with longer maturities. The additional investments are classified as other assets causing that category to increase by 24 percent. Accounts receivable increased by approximately $90,000 from contract and benchmarking revenues. The majority of these receivables have been collected to the date of the audit. Capital assets decreased by three percent due to depreciation. Total liabilities include accounts payable, employee cafeteria plan payable, salaries payable, unearned income and compensated absences. Total liabilities increased by three percent for the year mainly from payables owed for benchmarking and peer review activities. The larger component of NASACT s net position (76 percent) is the unrestricted portion, which are resources that may be used at the Association s discretion to meet ongoing obligations. Unrestricted net position was seven percent higher at June 30, 2014, compared to June 30, 2013, mainly due to the positive change in net position for FY

21 The remaining portion of net position represents NASACT s investment in capital assets such as an office building, office equipment, furniture and software applications. The Association uses these assets to provide services to members; these assets are not available for future spending. After netting capital asset acquisitions, net investment in capital assets decreased by approximately three percent. The decrease is due to depreciation. The following condensed financial information was derived from NASACT s Statement of Revenues, Expenses and Changes in Fund Net Position for the years ended June 30, 2014, and June 30, Statement of Changes in Net Position for the Fiscal Year Ended June 30, Amount Change % Change Revenues State dues $ 583,050 $ 552,500 $ 30,550 6% Technical service fees 233, ,000-0% Corporate associates 472, ,000 91,000 24% Sponsor fees 143, ,000 2,500 2% Registration fees 603, ,731 93,246 18% Contract revenue 166, ,755 (30,049) -15% Admin service reimbursements 572, ,647 (71,529) -11% Admin service fees 80,840 76,762 4,078 5% Interest revenue 40,995 41,945 (950) -2% Miscellaneous revenue 104,663 24,276 80, % Total revenues 3,000,849 2,801, ,233 7% Expenses Salaries and employee benefits 1,245,245 1,196,407 48,838 4% Admin service expense 573, ,734 (69,991) -11% Meeting expense 521, ,244 83,699 19% Travel reimbursements 134,524 90,656 43,868 48% Consultant services 66,694 56,087 10,607 19% Rent expense 61,682 59,410 2,272 4% Travel expense 50,831 50,945 (114) 0% Supplies expense 36,098 20,758 15,340 74% Consultant expense 31,016 43,761 (12,745) -29% Other expenses 175, ,240 4,991 3% Total expenses 2,897,007 2,770, ,765 5% Increase (decrease) in net position 103,842 31,374 72, % Net position - beginning 2,416,975 2,385,601 31,374 1% Net position - ending $ 2,520,817 $ 2,416,975 $ 103,842 4% State dues are payments from states in support of NASACT. State dues increased by $30,500, or six percent, compared to FY The NASACT Executive Committee previously voted to increase members annual dues by 3.5 percent. In addition, two states paid dues that had not in past years. Technical service fees are funds received from states in support of NASC and NSAA. The fees and number of states paying remained constant between 2014 and Corporate associates are receipts from NASACT s private sector partners in support of the NASACT annual conference. The FY 2014 and FY 2013 conferences were held in Boston, MA, and Seattle, WA, respectively. NASACT attracted additional corporate associates for the FY 2014 conference, and a few increased their membership level. These funds increased by $91,000, or 24 percent, from FY Corporate associate levels are shown on page 39 in the supplemental information of this report. Sponsor fees are payments from NASACT s private sector partners in support of the NASC and NSAA annual conferences. Sponsor fees for the NASC annual conference dropped about $5,000. A few 15

22 sponsors that supported NASC in 2013 dropped out in The 2014 conference also picked up a few new sponsors, but at lower levels. The NSAA conference received an additional $7,500 of sponsor revenue in FY Registration fees for the organization increased by 18 percent, or $93,000, compared to FY The largest increase came from registrations for the NASACT annual conference held in Boston during FY 2014 in the amount of $50,000. Next, webinar registration revenue increased $27,000 from FY NASACT held nine webinars in FY 2014 compared to seven in FY The NSAA IT conference and Tennessee Training Seminars revenue increased by $7,500 and $5,000, respectively. Contract revenue is a combination of payments on contracts for state training seminars, ALGA and NASRA. The major portion of the $30,000 decrease was from state training seminars. NASACT scheduled the same number of contracts during FY 2014, but the associated fees were less. Revenues from the contracts with ALGA and NASRA increase slightly each year. The administrative services program is comprised of two activities, NSAA s peer review program and the benchmarking program. It has two sources of revenue, administrative fees and reimbursements, the latter of which is offset by administrative service expense. Both the revenues and expenses for these activities vary based on program participation during the fiscal year. Administrative service reimbursements for peer review and benchmarking totaled $572,000 for FY 2014 compared to $644,000 for FY The organization scheduled 20 peer reviews in FY 2014 and collected $70,000 in administrative fees. In 2013, team members performed 18 peer reviews. The service fees for benchmarking amounted to $11,000 compared to $14,000 in FY Interest revenue is generated on the association s investments in savings and certificates of deposit. The revenue remained about the same between FY 2014 and FY Miscellaneous income increased significantly in FY NASACT received approximately $78,000 from the sale of Principal Financial Group stock. NASACT received these shares as part of the demutualization of Principal in Also, due to changes in NASACT s health insurance policy, the organization received approximately $6,000 from an insurance subtrust. Salaries and employee benefits expenses include salaries, insurance, retirement, etc. These amounts increased by $49,000 from FY The majority of the increase stems from additional salaries expense and changes in cost of insurance. As discussed above, administrative service expense is a combination of expense relating to peer review and the benchmarking program. These expenses are reimbursed by states for participation in these programs. Meeting expenses are associated with the annual conferences held throughout the year. This cost increased by $84,000 from FY The majority of the increase came from the NASACT annual conference held in Boston. This conference attracted more participants than the previous year, driving up the costs. Meeting costs are also affected by the location of the conference. Travel reimbursements are funds returned to attendees of the NASACT, NASC and NSAA annual conferences. The expense increased by $44,000 from FY The maximum reimbursement for the NASACT annual conference increased from $1,000 in FY 2013 to $1,700 in FY The number of requests from the NASACT annual conference increased. The maximum amount for the NASC and NSAA remained the same at $750, but the number of requests increased for NSAA. Consultant services are fees charged by professionals to perform specific services for NASACT. The fees for these services increased by about $10,000 from FY The majority of the increase stemmed from NASACT hiring an agency to assist in creating a new logo and brand. Rent expense is for the staff offices at NASACT s Washington, D.C. location. This expense increased slightly per the contract with the lessor. Travel expense is derived from staff travel to conferences. This expense stayed relatively the same for FY 2014 and FY

23 Supplies increased by $15,000 from FY Supplies include paper, toner, cables, folders, etc., and numerous other items that aid in the everyday functions of both offices and for conferences. Supplies for conferences increased about $2,000. The remaining increase was for the purchase of computers for use at the conferences that are under the capitalization threshold. Consultant expenses decreased by $13,000 from FY In FY 2013, NASACT spent $6,500 to cover expenses relating to a cooperative agreement with the Comision Permanente de Contralores Estados- Federacion (CPCE-F). NASACT did not incur these expenses during FY In addition, the consultant expenses for state training seminars decreased by $2,500. Other expenses include office condo association fees, postage, telephone, printing, bank fees, copier rental, etc. These expenses increased by $5,000. BUDGETARY HIGHLIGHTS NASACT s Executive Committee approves the Association s annual budget prior to the beginning of the fiscal year. NASACT s actual financial performance for FY 2014 tracked closely with the approved budget with the exception of a $134,000 variance in registration revenue due to increased attendance at the annual conferences and Tennessee Training Seminars. The variance for state reimbursement revenue was $224,000 higher than budgeted due to additional activity for benchmarking. Expenses in regards to benchmarking were also higher than budget for the same reason. Meeting expense was higher than budget by $114,000 because of the additional attendance at conferences. NASACT s management is aware of the importance of reducing expenses and pursuing cost-saving techniques. During the past years, staff have aggressively pursued these initiatives. Recently, staff either initiated or continued the following cost-saving and revenue generating techniques: Invested excess reserves in financial instruments yielding higher returns than the operating account. Implemented document scanning to eliminate or reduce photocopying, storage, and supplies expenses. Utilized to distribute information (including electronic publication of the NASACT News), resulting in postage savings. Utilized frequent flyer miles to the extent possible, reducing travel expenses. Utilized hotel point programs to the extent possible, reducing hotel expenses. Produced and printed conference-related materials in-house, resulting in significant savings in printing costs. ECONOMIC CONDITION AND OUTLOOK Despite the current economic conditions, the Association experienced a positive financial year due to continued support from members. For FY 2014, NASACT s budget projected a decrease in net position of $98,197; however, total revenues were somewhat higher than anticipated which allowed the Association to finish the year with a positive change in net position of $103,842. NASACT expects to meet budget in FY REQUESTS FOR INFORMATION This financial report is designed to provide a general overview of the finances of the National Association of State Auditors, Comptrollers and Treasurers to interested individuals. Questions concerning any of the information provided in this report or requests for additional information should be addressed to NASACT, 449 Lewis Hargett Circle, Suite 290, Lexington, KY 40503, (859)

24 National Association of State Auditors, Comptrollers and Treasurers Statement of Net Position June 30, 2014 ASSETS Current assets: Cash and cash equivalents $ 440,228 Investments 500,000 Deposits held in custody by others 4,700 Accounts receivable 164,329 Accrued interest receivable 18,661 Prepaid expenses 45,121 Restricted cash 161,309 Total current assets 1,334,348 Noncurrent assets: Investments 1,727,503 Restricted investments 750,000 Capital assets - building, net of accumulated depreciation 583,913 Capital assets - equipment, net of accumulated depreciation 18,463 Total noncurrent assets 3,079,879 Total assets $ 4,414,227 LIABILITIES Current liabilities: Accounts payable $ 131,200 Salaries payable 42,458 Employee cafeteria plan payable 448 Unearned income 1,575,262 Compensated absences 22,850 Total current liabilities 1,772,218 Noncurrent liabilities: Compensated absences 121,192 Total noncurrent liabilities 121,192 Total liabilities 1,893,410 NET POSITION Investment in capital assets 602,376 Unrestricted 1,918,441 Total net position 2,520,817 Total liabilities and net position $ 4,414,227 The notes to the financial statements are an integral part of this statement. 18

25 National Association of State Auditors, Comptrollers and Treasurers Statement of Revenues, Expenses and Changes in Fund Net Position For the Period Ended June 30, 2014 OPERATING REVENUES: State dues $ 583,050 Technical service fees 233,000 Corporate associates 472,000 Sponsor fees 143,500 Registration fees 603,977 Contract revenue 166,706 Administrative service reimbursements 572,118 Administrative service fees 80,840 Sale of publications 575 Miscellaneous revenue 104,088 Total operating revenues 2,959,854 OPERATING EXPENSES: Salaries 1,003,021 Employee benefits 242,224 Supplies 36,098 Postage and handling 6,035 Communication services 16,726 Copying 4,454 Repairs and maintenance 2,162 Continuing education 5,478 Consultant services 66,694 Consultant expenses 31,016 Staff travel 50,831 Executive committee/president expense 10,191 Meeting expense 521,943 Travel reimbursement 134,524 Administrative service expense 573,743 Printing 14,354 Books and periodicals 2,086 Credit card fees 27,308 Miscellaneous 3,216 Professional membership dues 155 Banking service fees 2,344 Rent 61,682 Office condo association fees 11,583 Utilities 5,290 Janitorial services 2,900 Copier rental 5,238 Software support 15,070 Insurance 4,114 Auditing 3,723 Depreciation - building 19,197 Depreciation - equipment 13,607 Total operating expenses 2,897,007 Operating income (loss) 62,847 Nonoperating revenues (expenses) Interest and investment revenue 40,995 Interest expense Total nonoperating revenues (expenses) 40,995 Change in net position 103,842 Total net position - beginning 2,416,975 Total net position - ending $ 2,520,817 The notes to the financial statements are an integral part of this statement. 19

26 National Association of State Auditors, Comptrollers and Treasurers Statement of Cash Flows For the Year Ended June 30, 2014 Other Cash GASB Cash Total Cash CASH FLOWS FROM OPERATING ACTIVITIES Receipts from members $ 878,750 $ $ 878,750 Receipts from corporate associates 456, ,000 Receipts from sponsors 143, ,500 Receipts from participants 608, ,952 Receipts from contractors 119, ,422 Receipts from administrative service reimbursements 509, ,186 Receipts from administrative service fees 80,840 80,840 Receipts from sales of publications Receipts for cafeteria plan 6,662-6,662 Other receipts 103, ,811 Payments to vendors (1,564,862) (20,728) (1,585,590) Payments to employees (1,236,547) (2,746) (1,239,293) Payments to cafeteria plan participants (6,223) - (6,223) Net cash provided by operating activities 100,066 (23,474) 76,592 CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Purchases of capital assets (12,844) - (12,844) Sale of capital assets Interest paid on capital debt Principal paid on capital debt Net cash used by capital and related financing activities (12,440) - (12,440) CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from the sale and maturity of investments 450, ,000 Purchase of investments and securities (975,000) - (975,000) Interest and dividends 26,763 26,763 Net cash provided by investing activities (498,237) - (498,237) Net increase (decrease) in cash and cash equivalents (410,611) (23,474) (434,085) Balances - beginning of the year 851, ,155 1,035,622 Balances - end of the year $ 440,856 $ 160,681 $ 601,537 Reconciliation of operating income to net cash provided by operating activities: Operating income $ 62,847 Adjustments to reconcile operating income to net cash provided by operating activities: Depreciation 32,804 Change in assets and liabilities: Increase in accounts receivable (93,298) Decrease in prepaid expenses 17,684 Increase in deposits held by others - Increase in accounts payable 36,412 Increase in employee café plan payable 439 Increase in salaries payable 2,038 Increase in unearned income 11,003 Increase in compensated absences 6,663 Net cash provided by operating activities $ 76,592 The notes to the financial statements are an integral part of this statement. 20

27 National Association of State Auditors, Comptrollers and Treasurers Notes to the Financial Statements June 30, 2014 Note 1 Summary of Significant Accounting Policies The accompanying financial statements have been prepared in conformity with generally accepted accounting principles as prescribed by GASB. The Association has prepared required supplementary information titled Management s Discussion and Analysis, which precedes the basic financial statements, and required supplementary information, which includes the Budgetary Comparison Schedule, which follows these footnotes. a. Reporting Entity The National Association of State Auditors, Comptrollers and Treasurers, an unincorporated association, is an instrumentality of the states. Its mission, as set forth in its constitution, is to assist state leaders to enhance and promote effective and efficient management of government resources. Because of the Association s standing as an instrumentality of the states, its financial statements have been prepared in accordance with generally accepted accounting principles as prescribed by the GASB. b. Measurement Focus, Basis of Accounting and Basis of Presentation The Association is considered a special purpose government and reports as a business-type activity, using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Operating revenues and expenses are distinguished from non-operating items. Operating revenues and expenses result from providing services in connection with ongoing operations. Items not meeting the criteria of operating transactions are recorded as non-operating. c. Budgetary Data The annual budget for FY 2014 was prepared using the full accrual basis of accounting. The Association s budget and any subsequent revisions are approved by the Executive Committee. d. Capital Assets Capital assets, which include an office building, office equipment, furniture, and software, are reported on the Statement of Net Position. The Association defines capital assets as assets that have a cost of $1,000 or more at the date of acquisition and have an expected useful life of more than one year. Capital assets are depreciated using the straight-line method over the assets estimated useful lives. Estimated useful lives generally are assigned as follows: building, 39 years; equipment, 2-10 years; furniture, 5-10 years; software, 2-10 years. e. Business-Type Activity Accounting and Financial Reporting The Association applies all applicable GASB pronouncements as well as the following pronouncements issued on or before November 30, 1989, unless those pronouncements conflict with or contradict GASB pronouncements: Financial Accounting Standards Board statements and interpretations, Accounting Principles Board opinions and accounting research bulletins. 21

28 National Association of State Auditors, Comptrollers and Treasurers Notes to the Financial Statements June 30, 2014 f. Basis for Cash Restriction NASACT classifies cash into two categories, restricted and unrestricted. Restricted cash balances are cash amounts administered by NASACT, but imposed by law through enabling legislation, which in NASACT s case is the Executive Committee. Restricted cash balances reported in the financial statements include the balance of the collections from the states for GASB funding and the employee cafeteria plan. As stated in Note 6, the Financial Accounting Foundation changed the funding mechanism for the GASB in FY 2013 and the NASACT Executive Committee determined that any remaining GASB funds collected by NASACT should be retained by the Association for GASB-related activities. The Executive Committee established a policy in August 2012 specifying the appropriate uses of these funds. All other cash held by the Association is considered unrestricted for reporting purposes. Note 2 Cash and Cash Equivalents, Restricted Cash and Investments As of June 30, 2014, the Association had the following investments and securities: Deposit Type Fair Value Cash: Demand $ 633,928 Investments: Certificates of deposit 2,977,503 Total 3,611,431 Net withdrawals and deposits in transit (32,392) Total cash and investments in bank $ 3,579,039 Custodial Credit Risk. Custodial credit risk is the risk that in the event of a bank failure, the Association s deposits may not be returned to it. The Association s policy requires bank institutions to provide collateralization in excess of the FDIC limit. As of June 30, 2014, $30,338 of the Association s total bank deposits were exposed to custodial credit risk because this portion was uninsured and uncollateralized. As of August 28, 2014, the Association has taken steps to remedy this situation. Interest Rate Risk. Managing interest rate risk limits NASACT s exposure to fair value losses arising from changes in interest rates. According to the Association s investment policy, at least one third of the net financial assets of the Association may be invested in instruments with a maturity of no more than 13 months. The remainder of the assets may be invested in financial instruments with a maturity of no more than five years with adequate laddering to insure that the average life shall be no greater than two and a half years. As of June 30, 2014, the Association had ten investments with a maturity greater than one year. 22

29 National Association of State Auditors, Comptrollers and Treasurers Notes to the Financial Statements June 30, 2014 Note 3 Accounts Receivable Accounts receivable have been aggregated and presented in the financial statements. Detailed information is presented below: Contracts $ 66,300 Peer Review 58,355 Benchmarking 31,733 Registrations 6,823 Other 1,118 Accounts receivable, June 30, 2014 $ 164,329 Note 4 Capital Assets The Association s investment in capital assets as of June 30, 2014, totals $602,376 (net of accumulated depreciation). This investment in capital assets includes the headquarters office, furniture, equipment and software. Capital asset activity for the year ended June 30, 2014, is summarized below: Beginning Ending Balance Increases Decreases Balance Capital assets Building $ 748,689 $ - $ - $ 748,689 Furniture 22,683 4,368-27,051 Equipment 53,492 8,476 1,166 60,802 Software 25,171-25,171 Total capital assets 850,035 12,844 1, ,713 Less accumulated depreciation Building 145,578 19, ,776 Furniture 19,627 1,896 21,523 Equipment 39,734 9, ,865 Software 22,176 1,997 24,173 Total accumulated depreciation 227,115 32, ,337 Capital assets, net $ 622,920 $ (19,961) $ (583) $ 602,376 Note 5 Accounts Payable Accounts payable have been aggregated and presented in the financial statements. Detailed information is presented below: Vendors $ 86,415 Benchmarking 30,809 Payroll Taxes 7,818 Retirement 6,158 Accounts payable, June 30, 2014 $ 131,200 23

30 National Association of State Auditors, Comptrollers and Treasurers Notes to the Financial Statements June 30, 2014 Note 6 Unearned Income As stated in Note 1, amounts collected by NASACT for the GASB are considered restricted cash. During FY 2012, the Financial Accounting Foundation changed the method of collecting funds in support of the GASB. At June 30, 2012, the remaining funds were set aside to be used for GASB-related activities such as travel by members to GASB hearings. The balance of the account at June 30, 2013, was $934,155. During FY 2014, the association used approximately $23,500. The balance at June 30, 2014 is $910,700. The remaining $665,000 in unearned income consists of dues, technical assessments, registrations and corporate associates relating to FY Note 7 Compensated Absences Compensated absences activity for the year ended June 30, 2014, is summarized below. Of this amount, $22,850 is considered a current liability. Compensated absences, July 1, 2013 $ 137,379 Additions 11,261 Deletions 4,598 Compensated absences, June 30, 2014 $ 144,042 Note 8 Operating Leases The following is a schedule of future minimum rental payments required under operating leases that have initial or remaining non-cancelable lease terms in excess of one year as of June 30, 2014: Year Ending June 30 Office Space Copier Total ,108 5,016 62, ,483 5,016 63, , , ,339-63, and thereafter 99,979-99,979 Total future minimum lease payments $ 338,802 $ 10,450 $ 349,252 The following schedule shows the composition of total rental expenditures for all operating leases: For the Year Ended June 30, 2014 Minimum rentals: Office space $ 61,682 Copier 5,238 Total $ 66,920 24

31 National Association of State Auditors, Comptrollers and Treasurers Notes to the Financial Statements June 30, 2014 Note 9 Retirement Plan Generally, all employees are eligible to participate in the Teachers Insurance and Annuity Association/College Retirement Equities Fund, a privately administered, defined contribution retirement plan. Participant eligibility and contributory requirements are established in the Retirement Resolution. Employees contribute five percent of gross wages and the Association contributes ten percent of gross wages. The Association will match additional employee contributions up to five percent. After an employee completes 25 years of service and reaches age 60, or after completing 30 years of service and reaching age 55, the Association contributes an additional ten percent of gross wages, for a total employer contribution of 20 percent. The Association assumes no liability other than its contributions. The plan administrator s annual report may be obtained by writing to: TIAA-CREF, 730 Third Avenue, New York, NY For the year ended June 30, 2014, the Association had a total payroll of $1,003,021, of which $989,059 was covered by the plan. Employee contributions for the plan years ending June 30, 2014, 2013, and 2012, were $109,929, $111,804, and $110,347, respectively. Employer contributions for the plan years ending June 30, 2014, 2013, and 2012 were $138,973, $138,103, and $130,011, respectively. Note 10 Risk Management and Insurance Coverage Association employee benefits for health, dental, long-term disability and life insurance coverage are fully insured through commercial carriers. A commercial insurance carrier provides coverage for property exposure. There were no reductions in commercial insurance coverage during the fiscal year ended June 30, The Association does not participate in any risk pools. Note 11 Disposition of NSAA Portion of Unrestricted Net Position In fiscal year 2001, the National State Auditors Association eliminated support for the training packages component of the State Auditor Training Program and designated the remaining balance of $139,547 at June 30, 2001, until further study and analysis could be performed regarding the appropriate distribution of the training packages balance. After applying the provisions of GASB 34, the designated balance was reduced to $134,884 and is reflected as a component of Unrestricted Net Position. On March 24, 2003, the NSAA Executive Committee approved a scholarship program to assist members/speakers in attending NSAA conferences. The scholarships are funded by the interest earned on the training fund; the principal will remain intact. 25