Report of the Treasurer for the Year Ended December 31, 2015 (2016) / Chapter Skim
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III. Financial Condition
III. Financial Condition
Pages 49-75
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From page 49... ...
III. Financial Condition
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From page 50... ...
Cicerone President National Academy of Sciences Dear Dr. Cicerone: In accordance with paragraph 11 of section II of the Bylaws of the National Academy of Sciences, the firm of KPMG LLP was retained by the Auditing Committee on behalf of the Council to conduct an audit of the accounts of the Treasurer for the year ended December 31, 2015, and to report to the Auditing Committee.
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From page 51... ...
generally accepted accounting principles; 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. Auditors' Responsibility Our responsibility is to express an opinion on these financial statements based on our audits.
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Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the National Academy of Sciences as of December 31, 2015 and 2014, and the changes in its net assets and its cash flows for the years then ended, in accordance with U.S. generally accepted accounting principles.
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From page 53... ...
Total liabilities and net assets $ 1,291,794 $ 1,299,713 See accompanying notes to financial statements.
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266,044 - - 266,044 274,155 - - 274,155 Management and general 48,994 - - 48,994 48,794 - - 48,794 Fundraising 2,826 - - 2,826 2,453 - - 2,453 Total expenses 317,864 - - 317,864 325,402 - - 325,402 Postretirement changes other than net periodic benefit cost (note 14) 989 - - 989 6,906 - - 6,906 Change in net assets (8,534)
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$ 26,323 Adjustments to reconcile change in net assets to net cash provided by operating activities: Depreciation and amortization 8,243 8,177 Loss on disposal of property and equipment 16 77 Bad debt expense (79)
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ance structure and, therefore, are included in the NAS Accordingly, net assets of NAS are classified and financial statements. reported as follows: (c)
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When a donor represent Level 3 inputs in the fair value hierarchy. The restriction expires, temporarily restricted net assets are carrying value of contributions receivable approximates reclassified to unrestricted net assets.
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. Disclosures about investments in certain entities that calculate net assets value per share are limited (h)
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Bonds and notes 32,276 34,805 The standard describes three levels of inputs that may be Equity 286,076 284,954 used to measure fair value: Hedge funds 71,882 73,700 Private equity 22,210 18,899 Level 1: Quoted prices in active markets for identical 419,881 422,989 assets or liabilities. Gulf Research Program investments: Level 2: Observable inputs other than Level 1 prices such Cash equivalents 140 133 as quoted prices for similar assets or liabilities; quoted Bonds and notes 41,312 13,279 prices in markets that are not active; or other inputs that Equity 41,575 13,556 are observable or can be corroborated by observable 83,027 26,968 market data for substantially the full term of the assets or liabilities.
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2015 and 2014. Fair value of alternative investments including private equity securities and hedge funds is based on the alternative investment fund managers' net asset value (NAV)
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43,659 43,659 - Real estate 15,100 15,100 - Long/short equity hedge funds 73,788 - - 73,788 Hedge fund investments 71,882 - - 71,882 Private equity funds 22,210 - - 22,210 Total short-term and long-term investments 596,483 395,588 33,015 167,880 Charitable gift annuity assets: Cash equivalents 87 87 - Bonds and notes U.S. treasuries/government bonds 191 191 - Mortgage-backed securities 281 44 237 Corporate bonds 114 114 - U.S.
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The following table presents NAS' fair value hierarchy for those assets and liabilities measured at fair value on a recurring basis at December 31, 2014 (in thousands) : Total fair Fair value measurements using: Investments measured value Level 1 Level 2 at net asset value1 Financial assets: Short-term and long-term investments: Cash equivalents $ 15,865 $ 15,865 $ - $ Bonds and notes U.S.
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equity (developed) 172 172 - Total deferred compensation assets 1,209 1,209 - Total financial assets $ 546,104 $ 360,675 $ 39,542 $ 145,887 Financial liabilities: Funds held on behalf of others $ 11,582 $ 7,587 $ - $ 3,995 Deferred compensation liability 1,209 1,209 - Interest rate swaps 9,958 - 9,958 Total financial liabilities $ 22,749 $ 8,796 $ 9,958 $ 3,995 1 Certain investments that are measured at fair value using the net asset value per share (or its equivalent)
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From page 64... ...
Asset classes include domestic and class is that distributions are received through liquidainternational marketable equity securities, hedged tion of the underlying assets of the funds. It is estimated equity, real estate, natural resource, fixed income, and that the underlying assets of the funds will be liquidated private equity and absolute return strategies, primarily over 1 to 10 years.
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From page 65... ...
Prizes and awards 28,358 30,890 Total contributions receivable, long-term $ 268,889 Woods Hole facility 3,237 3,622 Total temporarily restricted net assets $ 754,958 $ 766,186 As of December 31, 2015 and 2014, 95% of contribu- Temporarily restricted net assets were released from tions receivable was due from two corporations. NAS restriction for the following purposes during the years does not believe there is any significant risk associated ended December 31, 2015 and 2014 (in thousands)
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The Total equity 66 remaining portion of donor-restricted endowment funds that are not classified as permanently restricted are U.S. fixed income/cash 9 classified as temporarily restricted net assets until those Non-U.S.
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with individual donor-restricted endowment funds may Subsequent gains that restore the fair value of the assets fall below the original value of the gift donated to the of the endowment fund to the required level are permanent endowment. Deficiencies of this nature are classified as an increase in unrestricted net assets.
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RECOVERY OF INDIRECT COSTS to refund the Series 1999A revenue bonds, as well as pay certain costs of issuing the bonds. NAS receives indirect cost recovery on its federal contracts and grants.
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Series 2010A revenue bonds, term: Interest rate 5%, maturing April 1, 2035 13,205 13,205 (b) Interest Rate Swaps Interest rate 5%, maturing April 1, 2040 16,960 16,960 Total bonds, at face value 167,550 171,195 In October 1999, NAS entered into a swap agreement, Plus unamortized premium 641 725 with an effective date of February 1, 2000, relating to the $66 million face amount of its Series 1999A revenue Total bonds payable 168,191 171,920 bonds.
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The fair value of ees. The fair value of these investments was approxithe interest rate swap was recorded as an asset of mately $0.8 million and $1.2 million as of Decem$161,000 and $372,000 as of December 31, 2015 and ber 31, 2015 and 2014, respectively, which is reported 2014, respectively, and is included in other assets in the within other assets in the statements of financial statements of financial position.
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From page 71... ...
(49) Prior service credit - The assumptions used to determine net periodic benefit Recognized prior service cost 49 49 Recognized net initial obligation - cost for the years ended December 31, 2015 and 2014 are as follows: Total $ 989 $ 6,906 2015 2014 Items not yet recognized as a component of net periodic Discount rate 4.00% 4.75% benefit cost at December 31, 2015 and 2014 are as Expected long-term return on plan assets 7.50 7.50 follows (in thousands)
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From page 72... ...
275 275 The investment objective of the Plan is to produce a rate of return over the long term that will provide for fund Total investments $28,339 $ 25,099 $ 3,240 growth, protect against the effect of inflation, and provide for some stability in different market environ- The following table presents the fair value hierarchy for ments. The fund is diversified between fixed income the postretirement benefit plan assets at December 31, and equity investments.
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SUBSEQUENT EVENTS each party. That agreement will terminate upon NAS has evaluated subsequent events from the statepay-back of the advance, sale of the property, or the end ment of financial position date through May 27, 2016, of the individual's employment with NAS, which will the date at which the financial statements were available not exceed 12 years.
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Matthews FINANCIAL MANAGEMENT STAFF Didi Salmon, Chief Financial Officer Laura Douglas, Controller 75
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