NATIONAL INSTITUTE ON MONEY IN STATE POLITICS FINANCIAL REPORT June 30, 2015 and 2014
C O N T E N T S PAGE INDEPENDENT AUDITOR'S REPORT... 1 and 2 FINANCIAL STATEMENTS Statements of Financial Position...3 Statements of Activities... 4 and 5 Statements of Cash Flows...6 Notes to Financial Statements...7 to 13 SUPPLEMENTAL INFORMATION Schedules of Functional Expenses... 14 and 15
ANDERSON ZURMUEHLEN & CO., P.C. CERTIFIED PUBLIC ACCOUNTANTS & BUSINESS ADVISORS MEMBER: AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS DISCOVERY BLOCK 828 GREAT NORTHERN BOULEVARD P.O. BOX 1040 HELENA, MONTANA 59624-1040 TEL: 406.442.1040 FAX: 406.442.1100 WEB: www.azworld.com To the Board of Directors National Institute on Money in State Politics 833 N. Last Chance Gulch Helena, Montana INDEPENDENT AUDITOR'S REPORT We have audited the accompanying financial statements of the National Institute on Money in State Politics, (the Institute), which comprise the statements of financial position as of June 30, 2015 and 2014, and the related statements of activities 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. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. -1-
ANDERSON ZURMUEHLEN & CO., P.C CERTIFIED PUBLIC ACCOUNTANTS & BUSINESS ADVISORS Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of National Institute on Money in State Politics as of June 30, 2015 and 2014, 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. Other Matters Our audits were conducted for the purpose of forming an opinion on the financial statements as a whole. The schedules of functional expenses on pages 14 and 15 are presented for purposes of additional analysis and are 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 the auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated in all material respects in relation to the financial statements as a whole. Helena, Montana November 20, 2015-2-
F I N A N C I A L S T A T E M E N T S
STATEMENTS OF FINANCIAL POSITION June 30, 2015 and 2014 ASSETS 2015 2014 CURRENT ASSETS Cash and cash equivalents $ 1,612,802 $ 1,150,011 Accounts receivable 10,792 - Grants and contracts receivable 300,000 880,000 Prepaid expenses 22,405 23,358 Total current assets 1,945,999 2,053,369 PROPERTY AND EQUIPMENT, at cost Office equipment 127,538 109,968 Furniture 7,252 7,252 Leasehold improvements 14,534 14,534 Computer software 7,133 7,133 156,457 138,887 Less accumulated depreciation (102,884) (88,601) Property and equipment, net 53,573 50,286 INTANGIBLE ASSETS, net 438,452 463,634 Total assets $ 2,438,024 $ 2,567,289 LIABILITIES AND NET ASSETS CURRENT LIABILITIES Accounts payable $ 5,449 $ 81,914 Accrued liabilities 118,383 101,668 Deferred royalty fees 2,778 2,778 Total current liabilities 126,610 186,360 Total liabilities 126,610 186,360 NET ASSETS Unrestricted - undesignated 978,851 1,353,092 Unrestricted - designated for emergency reserve 900,000 - Total unrestricted 1,878,851 1,353,092 Temporarily restricted 432,563 1,027,837 Total net assets 2,311,414 2,380,929 Total liabilities and net assets $ 2,438,024 $ 2,567,289 The Notes to Financial Statements are an integral part of these statements. -3-
STATEMENT OF ACTIVITIES Year Ended June 30, 2015 2015 Temporarily Unrestricted Restricted Total REVENUE AND SUPPORT Grants and contributions $ 1,480,000 $ 506,000 $ 1,986,000 Custom research 500-500 Data sales 7,000-7,000 Royalty fees 97,083-97,083 In kind 900-900 Interest and dividends 2,855-2,855 Other revenue and donations 6,905-6,905 Loss on disposal of assets - - - Net assets released from restriction 1,101,274 (1,101,274) - Total revenue and support 2,696,517 (595,274) 2,101,243 EXPENSES Program services 1,772,773-1,772,773 Management and general 247,999-247,999 Fundraising 149,987-149,987 Total expenses 2,170,758-2,170,758 Change in net assets 525,759 (595,274) (69,515) Net assets, beginning of year 1,353,092 1,027,837 2,380,929 Net assets, end of year $ 1,878,851 $ 432,563 $ 2,311,414 The Notes to Financial Statements are an integral part of these statements. -4-
STATEMENT OF ACTIVITIES Year Ended June 30, 2014 REVENUE AND SUPPORT Grants and contributions Custom research Data sales Royalty fees In kind Interest and dividends Other revenue and donations Loss on disposal of assets Net assets released from restriction Total revenue and support EXPENSES Program services Management and general Fundraising Total expenses Change in net assets Net assets, beginning of year Net assets, end of year 2014 Temporarily Unrestricted Restricted Total $ 1,779,989 $ 1,100,000 $ 2,879,989 - - - 500-500 96,783-96,783 14,989-14,989 2,608-2,608 5,614-5,614 (181) - (181) 384,714 (384,714) - 2,285,016 715,286 3,000,302 1,545,697-1,545,697 133,047-133,047 71,079-71,079 1,749,822-1,749,822 535,194 715,286 1,250,480 817,898 312,551 1,130,449 $ 1,353,092 $ 1,027,837 $ 2,380,929 The Notes to Financial Statements are an integral part of these statements. -5-
STATEMENTS OF CASH FLOWS Years Ended June 30, 2015 and 2014 2015 2014 CASH FLOWS FROM OPERATING ACTIVITIES Change in net assets $ (69,515) $ 1,250,480 Adjustments to reconcile change in net assets to net cash flows from operating activities: Depreciation and amortization 186,063 35,393 Loss on disposal of assets - 181 Change in operating assets and liabilities: Grants and contracts receivable 580,000 (720,000) Accounts receivable (10,792) 6,043 Prepaid expenses 953 (9,641) Accounts payable (76,465) 78,500 Accrued liabilities 16,715 18,685 Deferred royalty fees - - Net cash flows from operating activities 626,959 659,641 CASH FLOWS FROM INVESTING ACTIVITIES Purchase of intangible asset (146,598) (192,736) Purchase of property and equipment (17,570) (29,221) Net cash flows from investing activities (164,168) (221,957) Net change in cash and cash equivalents 462,791 437,684 Cash and cash equivalents, beginning of year 1,150,011 712,327 Cash and cash equivalents, end of year $ 1,612,802 $ 1,150,011 The Notes to Financial Statements are an integral part of these statements. -6-
NOTES TO FINANCIAL STATEMENTS June 30, 2015 and 2014 NOTE l. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Organization The National Institute on Money in State Politics (the Institute), is a nonpartisan, non-profit organization dedicated to accurate, comprehensive and unbiased documentation and research on campaign finance, lobbying and related activities at the state level. The Institute is supported primarily through foundation grants and accepts no funds from candidate committees or political parties. Basis of Accounting The financial statements of the Institute are prepared using the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America (GAAP) as codified by the Financial Accounting Standards Board. Classification of Net Assets As required by GAAP, the Institute classifies contributions as unrestricted, temporarily restricted or permanently restricted in accordance with donor stipulations. Donor restricted support is reported as increase in temporarily or permanently restricted net assets, depending on the nature of the restriction. Expirations of temporary restrictions on net assets are reported as reclassifications to unrestricted net assets. All expenses are reported in unrestricted net assets, after satisfaction of applicable restrictions. The resulting three classes of net assets are as follows: Unrestricted Undesignated Net Assets Net assets that are not subject to donor-imposed stipulations. These net assets are available for general operations of the Institute and donor restricted contributions whose restrictions are met in the same reporting period. Unrestricted Designated Net Assets Net assets that are not subject to donor-imposed stipulations. These net assets have been designated by the board as an emergency reserve fund. Temporarily Restricted Net Assets Net assets subject to donor-imposed stipulations that may or will be met either by actions of the Institute and/or the passage of time. Temporarily restricted net assets include grants for which grantor imposed restrictions have not yet been met. Permanently Restricted Net Assets Net assets subject to grantor or donor-imposed stipulations that they be maintained permanently by the Foundation. The donor restrictions on these assets permit the Institute to use the income earned and capital gains, if any, from the investment assets as support for general or specific purposes, unless otherwise specified by the donor. The Institute has no permanently restricted net assets. -7-
NOTES TO FINANCIAL STATEMENTS (CONTINUED) June 30, 2015 and 2014 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Restricted and Unrestricted Support, Revenue and Net Assets Grants and contributions received are recorded as unrestricted, temporarily restricted, or permanently restricted support, depending on the existence and/or nature of any donor restrictions. Support that is restricted by the donor is reported as an increase in unrestricted net assets if the restriction expires in the reporting period in which the support is recognized. All other donor restricted support is reported as an increase in temporarily or permanently restricted net assets, depending on the nature of the restriction. When a restriction expires (that is, when a stipulated time restriction ends or purpose restriction is accomplished), temporarily restricted net assets are reclassified to unrestricted net assets and reported in the statement of activities as net assets released from restrictions. Unconditional grants are recognized as revenues or gains in the period received. Conditional grants are recognized when the conditions on which they depend are substantially met. Accounting Estimates 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 revenue and expenses during the reported period. Accordingly, actual results could differ from those estimates. Income Taxes The Institute operates under Internal Revenue Code section 501(c) (3) as a non-profit organization and, therefore, is exempt from income taxes unless taxable income would result from business operations not directly related to the Institute's exempt purpose. With few exceptions, the Institute is no longer subject to examination by federal tax authorities for years before 2012. Cash and Cash Equivalents For purposes of the statement of cash flows, the Institute considers all unrestricted highly liquid investments with an initial maturity of three months or less to be cash equivalents. Receivables The Institute considers all receivables fully collectible. Accordingly, no allowance for uncollectible grants or accounts has been provided. -8-
NOTES TO FINANCIAL STATEMENTS (CONTINUED) June 30, 2015 and 2014 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Property and Equipment Donated property and equipment is recorded at its estimated fair market value on the date of donation. Purchased property and equipment are recorded at cost. The Institute s capitalization policy is set at $500. Depreciation expense is computed using the straight-line method over the following estimated useful lives: Computer equipment Furniture Leasehold improvements Computer software -9-5 years 7 years 15 years 3 years Depreciation expense amounted to $14,283 and $8,120 for the years ended June 30, 2015 and 2014, respectively. Intangible Assets The Institute has incurred costs for the development of the Institute s website for use in data integration and distribution, which was implemented May 2014. The Institute follows the provisions of GAAP to account for the costs of website development obtained for internal use. Much of the contracted services, payroll and payroll-related costs for employees who are directly associated with, and who devote time to, the development of significant upgrades and enhancements are capitalized. Management tracks specific upgrades and enhancement projects that result in additional functionality to the website. Capitalized costs are amortized over the website s estimated useful life, which is three years. The carrying value of long-lived assets, including intangible assets, is evaluated on a regular basis for the existence of facts or circumstances, both internally and externally, that may suggest impairment of value. For the years ended June 30, 2015 and 2014, the Institute did not incur any impairment to the carrying value of intangible assets. Amortization expense for the years ended June 30, 2015 and 2014 amounted to $171,780 and $27,273. Amortization expense scheduled for subsequent years amounts to $212,501 for the year ending 2016, $185,229 for the year ending 2017 and $40,721 for the year ending 2018. Compensated Absences The Institute accrues a liability for earned but unused vacation benefits. An employee who terminates employment will be paid for the balance of earned and accrued vacation, up to the maximum accrual limit, at the current base rate of pay. No vacation can be taken during the first six months of employment. Employees may accrue a maximum of six weeks (240 hours) of leave. When a full-time employee s accrued leave reaches the maximum 240 hours at any point, the employee will not accrue additional leave until he/she has reduced their annual leave below the maximum. Leave is prorated for part-time employees.
NOTES TO FINANCIAL STATEMENTS (CONTINUED) June 30, 2015 and 2014 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Compensated Absences (Continued) Regular full-time employees earn twelve days (96) hours of sick leave per year. This is accrued at a rate of 3.69 hours per pay period. Employees may accrue and carry over into the next year a maximum of five weeks (200 hours) of sick leave. Employees are not compensated for unused sick leave at termination of employment; therefore, no amount is accrued on the financial statements. Leave is prorated for part-time employees. Donated goods and services The Institute records various types of in-kind support including contributed professional services, membership dues, travel costs, and supplies. Contributed professional services are recognized if the services received (a) create or enhance long-lived assets or (b) require specialized skills, are provided by individuals possessing those skills, and would typically need to be purchased if not provided by donation. Contributions of tangible assets are recognized at fair market value when received. The amounts reflected in the accompanying financial statements as in-kind support are offset by corresponding amounts reflected in expenses, except fixed assets, as appropriate. Contributed assets are recorded as assets in accordance with the Institute s capitalization policy. Functional Allocation of Expenses The costs of providing the various programs and other activities have been summarized on a functional basis in the statement of activities. Accordingly, certain expenses have been allocated among the programs and supporting services benefited. Subsequent Events Management has evaluated subsequent events through November 20, 2015, the date which the financial statements were available for issue. NOTE 2. CONCENTRATIONS OF CREDIT RISK During 2015 and 2014, the Institute derived approximately 80.56% from two different granting organizations and 76.74% from five different granting organizations of its revenue, respectively. A significant variation in the level of this support, if this were to occur, would have a material effect on the Institute s programs and activities. The Institution maintains its cash deposits at various financial institutions whose non-interest bearing cash deposits are insured by the Federal Deposit Insurance Corporation (FDIC) for deposits up to $250,000. From time to time, the Institution s deposits with financial institutions may exceed the amounts insured by the FDIC. As of June 30, 2015 and 2014, the Institution s cash balances were fully insured. -10-
NOTES TO FINANCIAL STATEMENTS (CONTINUED) June 30, 2015 and 2014 NOTE 3. DONATED GOODS AND SERVICES During the years ended June 30, 2015 and 2014, the Institute recorded donated services and materials as follow: 2015 2014 Membership dues $ - $ 1,850 Professional services - 11,460 Other supplies 800 910 Travel costs 100 769 $ 900 $ 14,989 NOTE 4. LEASE COMMITMENTS The Institute leases space in Helena, Montana, under a non-cancellable office lease agreement beginning November 1, 2010 and terminating October 31, 2020. The lease requires monthly payments of $6,500 for the duration of the lease period. Rent expense totaled $78,000 in both 2015 and 2014. The following is a schedule of future minimum lease payments for each fiscal year required under the above operating lease as of June 30, 2015: 2016 $ 26,000 The Institute leases a copier machine under a non-cancellable lease and maintenance agreement beginning May 1, 2014 and terminating April 30, 2019. The lease requires monthly payments of $177 for the duration of the lease period. Copier lease expenses totaled $2,130 and $400 for 2015 and 2014, respectively. Future minimum lease payments total $2,130 for years 2016-2018 and $1,776 in 2019. NOTE 5. EMPLOYEE BENEFIT PLAN Effective January 1, 2013, the Institute implemented a SIMPLE IRA plan. All employees from the date of hire who receive at least $550 in yearly compensation are eligible to participate and the Institute contributes 2% of compensation. For the years ended June 30, 2015 and 2014, the Institute contributed $28,662 and $24,000, respectively. -11-
NOTES TO FINANCIAL STATEMENTS (CONTINUED) June 30, 2015 and 2014 NOTE 6. HEALTH SAVINGS ACCOUNT For those employees covered by the High Deductible Health Plan option, the Institute contributes up to $3,000 per year to employees with Health Savings Accounts. NOTE 7. ACCRUED LIABILITIES Accrued liabilities consist of the following: 2015 2014 Accrued payroll, taxes and other benefits $ 58,369 $ 51,304 Compensated absences 60,014 50,364 $ 118,383 $ 101,668 NOTE 8. TEMPORARY RESTRICTED NET ASSETS Temporarily restricted net assets at June 30, 2015 and 2014 are available for the following purposes: 2015 2014 Purpose restricted: Marketing and training of journalists $ 77,940 $ 222,264 Training for investigative reporting for elections - 40,394 Expand transparency and publish research - state level - 35,179 Data integration and collaboration - 50,000 Hosting the convening of national advisors and foundation officers 923 - Research on California's political spending 22,000 Prototype enhancements to Followthemoney.org 31,700-132,563 347,837 Time restricted: General operations 300,000 680,000 Total temporarily restricted net assets $ 432,563 $ 1,027,837-12-
NOTES TO FINANCIAL STATEMENTS (CONTINUED) June 30, 2015 and 2014 NOTE 8. TEMPORARY RESTRICTED NET ASSETS (CONTINUED) Net assets released for the years ended June 30, 2015 and 2014 were: 2015 2014 Purpose restricted: Infrastructure upgrade $ 100,000 $ - Hosting the convening of national advisors and founda 34,077 - Research on California's political spending 14,000 - Prototype enhancements to Followthemoney.org 3,300 - Increase capacity of media grantees in California - 47,055 Substantial capacity and impact expansion - 75,000 Marketing and training of journalists 144,325 27,735 Training for investigative reporting for elections 40,393 4,607 Expand transparency and publish research - state level 35,179 14,821 Data integration and collaboration 50,000 25,000 Improve disclosure of lobbying activity - state level - 30,496 421,274 224,714 Time restricted: General operations 680,000 160,000 Total release from restrictions $ 1,101,274 $ 384,714-13-
S U P P L E M E N T A L I N F O R M A T I O N
SCHEDULE OF FUNCTIONAL EXPENSES Year Ended June 30, 2015 Program Management Services and General Fundraising Total Salaries $ 1,046,425 $ 133,252 $ 97,650 $ 1,277,327 Payroll taxes 94,902 11,573 9,259 115,734 Benefits 210,503 25,671 20,537 256,711 Accounting and legal fees - 14,144-14,144 Travel and meetings 108,770 11,964-120,734 Rent and utilities 73,164 8,922 7,138 89,224 Telecommunications 4,771 687 465 5,923 Staff development - 3,531-3,531 Supplies 25,019 3,885 2,098 31,002 Printing and publications 250 5,522-5,772 Postage 757-120 877 Insurance - 3,777-3,777 Depreciation and amortization 167,457 7,443 11,164 186,063 Database development 38,599 - - 38,599 Consultants 1,250 13,750-15,000 Research and subscriptions 906-77 983 Membership dues - 3,878-3,878 Miscellaneous - - 1,479 1,479 $ 1,772,773 $ 247,999 $ 149,987 $ 2,170,758-14-
SCHEDULE OF FUNCTIONAL EXPENSES Year Ended June 30, 2014 Program Management Services and General Fundraising Total Salaries $ 929,323 $ 58,800 $ 49,880 $ 1,038,003 Payroll taxes 85,668 5,287 4,333 95,288 Benefits 182,423 10,490 8,476 201,389 Accounting and legal fees - 28,096-28,096 Travel and meetings 72,393 9,202-81,595 Rent and utilities 80,717 4,435 3,548 88,700 Telecommunications 5,553 102 8 5,663 Supplies 23,327 1,086 869 25,282 Printing and publications - 5,426-5,426 Postage 2,655-295 2,950 Insurance - 3,707-3,707 Depreciation 31,854 1,416 2,124 35,393 Database development 31,774 - - 31,774 Consultants 99,105 - - 99,105 Research and subscriptions 905-75 980 Membership dues - 5,000-5,000 Miscellaneous - - 1,471 1,471 $ 1,545,697 $ 133,047 $ 71,079 $ 1,749,822-15-
CERTIFIED PUBLIC ACCOUNTANTS & BUSINESS ADVISORS www.azworld.com MEMBER: AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS