Report of the Treasurer for the Year Ended December 31, 2016 (2017) / Chapter Skim
Currently Skimming:
III. Financial Condition
III. Financial Condition
Pages 49-82
The Chapter Skim interface presents what we've algorithmically identified as the most significant single chunk of text within every page in the chapter.
Select key terms on the right to highlight them within pages of the chapter.
From page 49... ...
III. Financial Condition
|
From page 50... ...
Auditing Committee C June 7, 2 2017 Dr. Marc McNutt cia President t National Academy of Sciences Dear Dr.
|
From page 51... ...
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. Our responsibility is to express an opinion on these financial statements based on our audit.
|
From page 52... ...
The financial statements of the National Academy of Sciences as of and for the year ended December 31, 2015 were audited by other auditors. Those auditors expressed an unmodified opinion on those 2015 financial statements in their report dated May 27, 2016.
|
From page 53... ...
NET ASSETS Unrestricted 104,174 101,981 Temporarily restricted (Note 9) 782,378 754,958 Permanently restricted (Note 10)
|
From page 54... ...
266,514 - - 266,514 266,044 - - 266,044 Management and general 57,003 - - 57,003 48,994 - - 48,994 Fundraising 3,231 - - 3,231 2,826 - - 2,826 Total expenses 326,748 - - 326,748 317,864 - - 317,864 Postretirement changes other than net periodic benefit cost (Note 14) 1,233 - - 1,233 989 - - 989 Change in net assets 2,193 27,420 16,290 45,903 (8,534)
|
From page 55... ...
Adjustments to reconcile change in net assets to net cash provided by operating activities Depreciation and amortization 7,836 8,243 Loss on disposal of property and equipment - 16 Bad debt expense 4,932 (79) Net (gain)
|
From page 56... ...
To respond effectively to both the disciplinary concerns of the research community and the complex interdisciplinary problems facing American society, NRC performs its studies and workshops through the following major divisions: Behavioral and Social Sciences and Education Earth and Life Studies Engineering and Physical Sciences Gulf Research Program Health and Medicine Policy and Global Affairs Transportation Research Board NRC activities are under the control of the NAS governance structure and, therefore, are included in the NAS financial statements. National Academy of Medicine The Institute of Medicine ("IOM")
|
From page 57... ...
Such grants are classified as temporarily restricted net assets when use of the grant funds is limited to specific areas of study or is designated for use in future periods. Gifts of land, buildings, or equipment are reported as unrestricted net assets unless explicit donor stipulations specify how the donated assets must be used.
|
From page 58... ...
Split-Interest Agreements Charitable gift annuity agreements are classified as other assets and other long-term liabilities in the accompanying statements of financial position. Periodically, NAS pays a fixed amount of the assets to the beneficiary designated by the donor.
|
From page 59... ...
. Disclosures about investments in certain entities that calculate net assets value per share are limited under ASU 2015-07 to those investments for which the entity has elected to estimate the fair value using the net asset value practical expedient.
|
From page 60... ...
: 2016 2015 Investments: Program pool investments Cash equivalents $ 2,917 $ 2,642 Bonds and notes 43,770 43,582 Equity 11,414 10,628 58,101 56,852 Gulf Research Program investments Cash equivalents 560 140 Bonds and notes 110,698 41,312 Equity 111,554 41,575 222,812 83,027 Investment pool, including endowment assets Cash equivalents 4,288 7,531 Bonds and notes 38,244 38,092 Equity 256,294 286,076 Hedge funds 120,597 65,972 Private equity 23,232 22,210 442,655 419,881 Other investments Cash equivalents 854 1,258 Bonds and notes 19,432 20,681 Equity 16,034 14,784 36,320 36,723 Total investments $ 759,888 $ 596,483 The National Academies' Corporation (TNAC, see Note 15) , a related entity, invests certain of its assets in the NAS investment pool.
|
From page 61... ...
The techniques utilized in estimating the fair values are affected by the assumptions used, including discount rates and estimates of the amount and timing of future cash flows. Care should be exercised in deriving conclusions about NAS' business, its value or financial position based on the fair value information of financial assets presented.
|
From page 62... ...
The reported fair value of alternative investments, including private equity securities and hedge funds is based on the alternative investment fund managers' net asset value ("NAV")
|
From page 63... ...
48,605 48,605 - Real estate 15,587 15,587 - Long/short equity hedge funds 53,784 - - 53,784 Hedge fund investments 120,597 - - 120,597 Private equity funds 23,232 - - 23,232 Total investments 759,888 527,107 35,168 197,613 Charitable gift annuity assets 2,729 2,204 525 Deferred compensation assets 855 855 - Total financial assets $ 763,472 $ 530,166 $ 35,693 $ 197,613 63
|
From page 64... ...
43,659 43,659 - Real estate 15,100 15,100 - Long/short equity hedge funds 73,789 - - 73,789 Hedge fund investments 65,972 - - 65,972 Private equity funds 22,210 - - 22,210 Total investments 596,483 395,681 38,831 161,971 Charitable gift annuity assets 2,694 2,107 587 Deferred compensation assets 833 833 - Total financial assets $ 600,010 $ 398,621 $ 39,418 $ 161,971 64
|
From page 65... ...
(e) This class includes several global private equity funds with diverse portfolios consisting primarily of venture capital funds, leveraged buyout funds, midstage growth capital funds, assets of healthcare companies, and international private equity funds.
|
From page 66... ...
and contributions receivable, net (long-term) in the accompanying statements of financial position, and mature as follows (in thousands)
|
From page 67... ...
: 2016 2015 Gulf Research Program $ 485,449 $ 480,571 Other sponsored research and advisory programs 182,057 165,120 General endowment 80,401 77,672 Prizes and awards 31,012 28,358 Woods Hole facility 3,459 3,237 Total temporarily restricted net assets $ 782,378 $ 754,958 67
|
From page 68... ...
: 2016 2015 Sponsored research and advisory programs $ 89,626 $ 86,427 General endowment 42,574 32,487 Prizes and awards 27,176 24,172 Woods Hole facility 3,539 3,539 Total permanently restricted net assets 162,915 146,625 Less: permanently restricted pledges receivable (13,564)
|
From page 69... ...
accumulations to its permanent endowment required by the applicable donor gift instrument. The remaining portion of donor-restricted endowment funds that are not classified as permanently restricted are classified as temporarily restricted net assets until those amounts are appropriated for expenditure by NAS.
|
From page 70... ...
$ 204,462 $ 149,351 $ 353,584 Changes in endowment assets for the fiscal year ended December 31, 2015 are as follows (in thousands) : Temporarily Permanently Unrestricted Restricted Restricted Total Endowment assets, beginning of year $ - $ 205,320 $ 128,889 $ 334,209 Investment (loss)
|
From page 71... ...
These deficiencies were primarily a result of unfavorable market fluctuations that occurred shortly after the investment of new permanently restricted contributions. Subsequent gains that restore the fair value of the assets of the endowment fund to the required level are classified as an increase in unrestricted net assets.
|
From page 72... ...
maturing at various dates from January 1, 2016 through 2039 $ 61,000 $ 62,430 Series 2009A revenue bonds, term, at flexible rates (0.9% in 2016 and 0.7% in 2015) maturing at various dates from January 1, 2016 through 2028 47,945 49,065 Series 2010A revenue bonds, serial, with interest rates ranging from 3.0% to 5.0%, maturing at various dates from April 1, 2016 through 2030 24,620 25,890 Series 2010A revenue bonds, term: Interest rate 5%, maturing April 1, 2035 13,205 13,205 Interest rate 5%, maturing April 1, 2040 16,960 16,960 Total bonds, at face value 163,730 167,550 Plus unamortized premium 575 641 Less debt issuance costs (2,305)
|
From page 73... ...
Interest Rate Swaps In October 1999, NAS entered into a swap agreement, with an effective date of February 1, 2000, relating to the $66 million face amount of its Series 1999A revenue bonds. The agreement provides for NAS to receive 4.97% in interest on a notional amount of $65 million and to pay interest at a floating rate option based on the weekly interest rate resets of tax-exempt variable-rate issues per the Securities Industry and Financial Markets Association ("SIFMA")
|
From page 74... ...
The related obligation is included in accrued employee benefits in the accompanying statements of financial position. Deferred compensation investments are held in debt and equity mutual funds along with some U.S.
|
From page 75... ...
NAS has elected to recognize the initial postretirement benefit obligation over a period of 20 years. The accrued postretirement benefit obligation is reported in accrued employee benefits in the accompanying statements of financial position.
|
From page 76... ...
(49) Recognized actuarial loss 733 643 Net periodic benefit cost $ 1,337 $ 1,137 The assumptions used to determine net periodic benefit cost for the years ended December 31, 2016 and 2015 are as follows: 2016 2015 Discount rate 4.25 % 4.00 % Expected long-term return on plan assets 7.50 % 7.50 % Rate of increase in healthcare costs: Under age 65 7.75 % 8.00 % Over age 65 6.25 % 6.50 % 76
|
From page 77... ...
The healthcare cost trend rate assumption has a significant impact on the postretirement benefit costs and obligations. The effect of a 1% increase in the assumed healthcare cost trend rate would have resulted in the following effects (in thousands)
|
From page 78... ...
308 308 Total investments $ 37,462 $ 33,038 $ 4,424 The following table presents the fair value hierarchy for the postretirement benefit plan assets at December 31, 2015 (in thousands) : Fair Value Measurements Using Fair Value Level 1 Level 2 Financial assets: Retiree Welfare Benefit Plan investments: Cash equivalents $ 884 $ 884 $ Bonds and notes U.S.
|
From page 79... ...
This facility, the Arnold and Mabel Beckman Center, located in Irvine, California, operates to expand and support the general activities of NAS, NRC, NAM, and NAE. The financial position and results of TNAC are not consolidated in the NAS financial statements.
|
From page 80... ...
NAS has evaluated subsequent events from the statement of financial position date through June 7, 2017, the date at which the financial statements were issued, and determined that there are no other items to disclose.
|
From page 81... ...
Matthews Jeremiah P Ostriker FINANCIAL MANAGEMENT STAFF Didi Salmon, Chief Financial Officer Laura Douglas, Controller 8
|
Key Terms
This material may be derived from roughly machine-read images, and so is provided only to facilitate research.
More
information on Chapter Skim is available.