NATIONAL INSTITUTE ON MONEY IN STATE POLITICS FINANCIAL REPORT June 30, 2017 and 2016
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 through 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) (a nonprofit organization), which comprise the statements of financial position as of June 30, 2017 and 2016, 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, 2017 and 2016, 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. Report on Supplementary Information 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 purpose 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 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 January 25, 2018-2-
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, 2017 and 2016 ASSETS 2017 2016 CURRENT ASSETS Cash and cash equivalents $ 1,002,713 $ 1,241,875 Cash and cash equivalents - restricted for emergency reserve 200,000 200,000 Accounts receivable 38,483 12,714 Grants and contracts receivable 840,000 737,500 Prepaid expenses 13,266 14,053 Total current assets 2,094,462 2,206,142 PROPERTY AND EQUIPMENT, at cost Office equipment 124,255 134,553 Furniture 7,797 7,797 Leasehold improvements 14,534 14,534 Computer software 7,133 7,133 153,719 164,017 Less accumulated depreciation (121,419) (117,916) Property and equipment, net 32,300 46,101 INTANGIBLE ASSETS, net 189,434 336,492 Total assets $ 2,316,196 $ 2,588,735 LIABILITIES AND NET ASSETS CURRENT LIABILITIES Accounts payable $ 2,563 $ 1,988 Accrued liabilities 107,965 108,352 Deferred royalty fees 74,750 13,250 Total current liabilities 185,278 123,590 Total liabilities 185,278 123,590 NET ASSETS Unrestricted - undesignated 1,128,887 1,507,296 Unrestricted - designated for emergency reserve 200,000 200,000 Total unrestricted 1,328,887 1,707,296 Temporarily restricted 802,031 757,849 Total net assets 2,130,918 2,465,145 Total liabilities and net assets $ 2,316,196 $ 2,588,735 The Notes to Financial Statements are an integral part of these statements. -3-
STATEMENT OF ACTIVITIES Year Ended June 30, 2017 2017 Temporarily Unrestricted Restricted Total REVENUE AND SUPPORT Grants and contributions $ 10,000 $ 1,305,650 $ 1,315,650 Program service revenue 65,450-65,450 Royalty fees 147,913-147,913 In kind 1,013-1,013 Interest and dividends 2,635-2,635 Other revenue and donations 24,658-24,658 Gain on disposal of assets 128-128 Net assets released from restriction 1,261,468 (1,261,468) - Total revenue and support 1,513,265 44,182 1,557,447 EXPENSES Program services 1,696,456-1,696,456 Management and general 146,771-146,771 Fundraising 48,447-48,447 Total expenses 1,891,674-1,891,674 Change in net assets (378,409) 44,182 (334,227) Net assets, beginning of year 1,707,296 757,849 2,465,145 Net assets, end of year $ 1,328,887 $ 802,031 $ 2,130,918 The Notes to Financial Statements are an integral part of these statements. -4-
STATEMENT OF ACTIVITIES Year Ended June 30, 2016 REVENUE AND SUPPORT Grants and contributions Program service revenue Royalty fees In kind Interest and dividends Other revenue and donations Gain 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 2016 Temporarily Unrestricted Restricted Total $ 1,560,000 $ 777,500 $ 2,337,500 32,406-32,406 84,246-84,246 7,603-7,603 2,665-2,665 10,980-10,980 200-200 452,214 (452,214) - 2,150,314 325,286 2,475,600 1,886,654-1,886,654 221,302-221,302 213,913-213,913 2,321,869-2,321,869 (171,555) 325,286 153,731 1,878,851 432,563 2,311,414 $ 1,707,296 $ 757,849 $ 2,465,145 The Notes to Financial Statements are an integral part of these statements. -5-
STATEMENTS OF CASH FLOWS Years Ended June 30, 2017 and 2016 2017 2016 CASH FLOWS FROM OPERATING ACTIVITIES Change in net assets $ (334,227) $ 153,731 Adjustments to reconcile change in net assets to net cash flows from operating activities: Depreciation and amortization 242,463 234,036 Gain on disposal of assets (128) (200) Change in operating assets and liabilities: Grants and contracts receivable (102,500) (437,500) Accounts receivable (25,769) (1,922) Prepaid expenses 787 8,352 Accounts payable 575 (3,461) Accrued liabilities (387) (10,031) Deferred royalty fees 61,500 10,472 Net cash flows from operating activities (157,686) (46,523) CASH FLOWS FROM INVESTING ACTIVITIES Website development costs (81,726) (117,045) Purchase of property and equipment - (7,359) Proceeds from sale of property and equipment 250 - Net cash flows from investing activities (81,476) (124,404) Net change in cash and cash equivalents (239,162) (170,927) Cash and cash equivalents, beginning of year 1,441,875 1,612,802 Cash and cash equivalents, end of year $ 1,202,713 $ 1,441,875 Reconciliation of Cash to Statements of Financial Position Cash $ 1,002,713 $ 1,241,875 Restricted cash 200,000 200,000 $ 1,202,713 $ 1,441,875 The Notes to Financial Statements are an integral part of these statements. -6-
NOTES TO FINANCIAL STATEMENTS June 30, 2017 and 2016 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 an 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, 2017 and 2016 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. 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, 2017 and 2016 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Property and Equipment Donated property and equipment is recorded at its estimated fair value on the date of donation. Purchased property and equipment is 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 5 years 7 years 15 years 3 years Depreciation expense amounted to $13,679 and $15,032 for the years ended June 30, 2017 and 2016, 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, 2017 and 2016, the Institute did not incur any impairment to the carrying value of intangible assets. Amortization expense for the years ended June 30, 2017 and 2016 amounted to $228,784 and $219,004. Amortization expense scheduled for subsequent years amounts to $106,978 for the year ending 2018, $59,754 for the year ending 2019 and $22,702 for the year ending 2020. 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. -9-
NOTES TO FINANCIAL STATEMENTS (CONTINUED) June 30, 2017 and 2016 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. Royalty Fees The Institute contracts with third parties to perform custom research services. The Institute agrees to license the information and make it available for the third party to include the licensed information in present and/or future products. The Institute records the licensing fees as royalty fee income. Fees received for multi-year agreements are recorded as deferred royalty fees until earned by the Institute. 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 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 January 25, 2018, the date which the financial statements were available for issue. NOTE 2. CONCENTRATIONS OF CREDIT RISK During 2017 and 2016, the Institute derived approximately 92% of its revenue from two grantors and 71% from three grantors, respectively. At June 30, 2017 and 2016, the Institute had approximately 91% from three grantors and 97% from five grants included in grants receivable, 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. -10-
NOTES TO FINANCIAL STATEMENTS (CONTINUED) June 30, 2017 and 2016 NOTE 2. CONCENTRATIONS OF CREDIT RISK (CONTINUED) The Institute maintains its cash deposits at various financial institutions and are insured by the Federal Deposit Insurance Corporation (FDIC) for deposits up to $250,000. From time to time, the Institute s deposits with financial institutions may exceed the amounts insured by the FDIC. As of June 30, 2017 and 2016, the Institute s cash balances were fully insured. NOTE 3. DONATED GOODS AND SERVICES During 2017 and 2016, no donated services were received that met GAAP standards for recognition. During the years ended June 30, 2017 and 2016, the Institute recorded donated materials as follow: 2017 2016 Membership dues $ - $ 4,500 Other supplies - 651 Travel costs - 902 AmX Rewards 1,013 1,550 $ 1,013 $ 7,603 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 2017 and 2016. The following is a schedule of future minimum lease payments for each fiscal year required under the above operating lease as of June 30, 2017: 2018 $ 78,000 2019 78,000 2020 78,000 2021 $ 26,000 260,000 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 for each of the years ending 2017 and 2016, respectively. Future minimum lease payments total $2,130 for year 2018 and $1,776 in 2019. -11-
NOTES TO FINANCIAL STATEMENTS (CONTINUED) June 30, 2017 and 2016 NOTE 5. EMPLOYEE BENEFIT PLANS 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, 2017 and 2016, the Institute contributed $24,608 and $29,612, respectively. The Institute provides a Health Savings Accounts for eligible employees. For those employees covered by the High Deductible Health Plan option, the Institute contributes up to $1,500 per year to employees with Health Savings Accounts. NOTE 6. ACCRUED LIABILITIES Accrued liabilities consist of the following: 2017 2016 Accrued payroll, taxes and other benefits $ 54,007 $ 50,668 Compensated absences 53,958 57,684 $ 107,965 $ 108,352 NOTE 7. TEMPORARILY RESTRICTED NET ASSETS Temporarily restricted net assets at June 30, 2017 and 2016 are available for the following purposes: 2017 2016 Purpose restricted: Policy Lockdown: Investigating the Money Behind Corrections Industry Policy $ - $ 20,349 Marketing and training of journalists - 12,500 Power Mapping Initiative 2,031-2,031 32,849 Time restricted: General operations 800,000 725,000 Total temporarily restricted net assets $ 802,031 $ 757,849-12-
NOTES TO FINANCIAL STATEMENTS (CONTINUED) June 30, 2017 and 2016 NOTE 7. TEMPORARILY RESTRICTED NET ASSETS (CONTINUED) Net assets released for the years ended June 30, 2017 and 2016 were: 2017 2016 Purpose restricted: Policy Lockdown: Investigating the Money Behind Corrections Industry Policy $ 60,349 $ 19,651 Marketing and training of journalists 12,500 77,940 Hosting the convening of national advisors and foundation officers 10,000 923 Research on California's political spending - 22,000 Prototype enhancements to Followthemoney.org - 31,700 New Mexico Sleuth: Invigorating Investigative Reporting in New Mexico 40,650 - Power Mapping Initiative 12,969-136,468 152,214 Time restricted: General operations 1,125,000 300,000 Total release from restrictions $ 1,261,468 $ 452,214 NOTE 8. SUBSEQUENT EVENTS In July 2017, the Institute adopted a self-insured health plan (Plan) for medical insurance coverage for its employees. Under the Plan, the Institute has no obligations for expenses in excess of premiums. The Institute covers 100% of employee premiums for permanent employees working at least twenty hours per week. -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, 2017 Program Management Services and General Fundraising Total Salaries $ 1,016,610 $ 93,577 $ 29,424 $ 1,139,611 Payroll taxes 93,706 7,955 2,513 104,174 Benefits 159,378 13,029 4,166 176,573 Accounting and legal fees 13,272 1,155 373 14,800 Independent contractors 12,517 4 1,946 14,467 Database development 10,006 874 282 11,162 Depreciation and amortization 217,344 18,985 6,134 242,463 Insurance 3,512 307 99 3,918 Membership dues 1,569 - - 1,569 Miscellaneous 1,910 128 41 2,079 Postage 358 31 10 399 Printing and publications 636 56 18 710 Rent and utilities 88,335 7,718 2,490 98,543 Staff development 7,760 - - 7,760 Supplies 9,376 819 264 10,459 Telecommunications 4,699 411 132 5,242 Travel and meetings 55,468 1,722 555 57,745 $ 1,696,456 $ 146,771 $ 48,447 $ 1,891,674-14-
SCHEDULE OF FUNCTIONAL EXPENSES Year Ended June 30, 2016 Program Management Services and General Fundraising Total Salaries $ 1,095,692 $ 137,432 $ 137,682 $ 1,370,806 Payroll taxes 101,981 11,856 9,058 122,895 Benefits 196,914 30,504 22,288 249,706 Accounting and legal fees 11,830 1,333 1,277 14,440 Independent contractors 37,377 4,370 4,125 45,872 Database development 14,664 2,240 2,446 19,350 Depreciation and amortization 210,633 9,361 14,042 234,036 Insurance 3,087 367 335 3,789 Membership dues 5,870 57 53 5,980 Miscellaneous 3,511 201 197 3,909 Postage 742 100 94 936 Printing and publications 4,612 548 369 5,529 Rent and utilities 80,995 10,896 10,755 102,646 Staff development 292 - - 292 Supplies 13,042 1,823 1,824 16,689 Telecommunications 4,805 637 624 6,066 Travel and meetings 100,607 9,577 8,744 118,928 $ 1,886,654 $ 221,302 $ 213,913 $ 2,321,869-15-
CERTIFIED PUBLIC ACCOUNTANTS & BUSINESS ADVISORS www.azworld.com MEMBER: AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS