Report of the Treasurer for the Year Ended December 31, 2018 (2019) / Chapter Skim
Currently Skimming:
III. Financial Condition
III. Financial Condition
Pages 47-86
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 47... ...
III. Financial Condition
|
From page 48... ...
McNutt: In accordance with paragraph 11 of section II of the Bylaws of the National Academy of Sciences, the firm of Grant Thornton 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, 2018, and to report to the Auditing Committee. The independent accountants have completed their audit and submitted their report.
|
From page 49... ...
, which comprise the statements of financial position as of December 31, 2018 and 2017, and the related statements of activities and cash flows for the years then ended, and the related notes to 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.
|
From page 50... ...
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, 2018 and 2017, 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. Washington, DC June 12, 2019 50
|
From page 51... ...
950,822 1,003,187 Total net assets 1,061,919 1,116,295 Total liabilities and net assets $ 1,313,044 $ 1,378,180 The accompanying notes are an integral part of these financial statements.
|
From page 52... ...
(54,376) 8,934 57,894 66,828 Net assets at beginning of year 113,108 1,003,187 1,116,295 104,174 945,293 1,049,467 Net assets at end of year $ 111,097 $ 950,822 $ 1,061,919 $ 113,108 $ 1,003,187 $ 1,116,295 The accompanying notes are an integral part of these financial statements.
|
From page 53... ...
$ 66,828 Adjustments to reconcile change in net assets to net cash provided by operating activities Depreciation and amortization 6,595 6,609 Loss on disposal of property and equipment 279 33 Bad debt expense (recovery)
|
From page 54... ...
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 55... ...
All amounts previously reported as "Unrestricted net assets" have been reclassified to be presented as "Net assets without donor restrictions." Similarly, all amounts previously reported as "Temporarily restricted net assets" and "Permanently restricted net assets" have been reclassified to be presented as "Net assets with donor restrictions." The changes in net assets have similarly been reclassified. There was no change in total net assets or total change in net assets as result of the adoption of ASU 2014-16 during 2018.
|
From page 56... ...
This standard requires that an employer report the service cost component in the same line item or items as other compensation costs arising from services rendered by the pertinent employees during the period. The other components of net benefit cost – including interest cost, expected return on plan assets, recognized prior service credit or cost, and recognized actuarial gain or loss – are required to be presented in the statement of activities separately from the service cost component.
|
From page 57... ...
Periodically, NAS pays a fixed amount of the assets to the beneficiary designated by the donor. Upon termination of an annuity, the remainder interest in the assets, if any, is available for use by NAS as net assets with or without donor restrictions in accordance with the respective donor's stipulation.
|
From page 58... ...
Contracts receivable consisted of $22.4 million of billed receivables, $42.5 million of unbilled receivables, and $3.4 million of indirect costs under-recovered on federal contracts and grants as of December 31, 2017. Receivables related to revenue from exchange contracts and grants is included in contracts receivable, net in the accompanying statements of financial position.
|
From page 59... ...
Since the contracts for meetings have an original expected duration of one year or less, NAS has elected the practical expedient and not disclosed the value of unsatisfied performance obligations and expected timing for completion related to fees and publications. Deferred Revenue and Advances For both federal and non-federal grants and contracts that are determined to be exchange transactions, revenue is recognized in the amount to which NAS has the right to invoice.
|
From page 60... ...
For exchange contracts and grants, which are recognized based on the right to invoice, NAS has elected the practical expedient and not to disclose information about unsatisfied performance obligations. For PNAS subscriptions, any subscription revenue received in advance of the subscription year is recorded as deferred revenue and advances in the statement of financial position.
|
From page 61... ...
Reclassifications Certain amounts from the prior year have been reclassified to conform to the current year presentation. There were no changes to total assets, liabilities, net assets, revenues, expenses or changes in net assets as previously reported in the fiscal 2017 financial statements.
|
From page 62... ...
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 63... ...
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 64... ...
21,208 21,208 - Real estate 5,982 5,982 - Long/short equity hedge funds 38,993 - - 38,993 Hedge fund investments 175,877 - - 175,877 Private equity funds 28,571 - - 28,571 Total 1,035,800 $ 789,588 $ 2,771 $ 243,441 Cash held for investment 1,194 Total investments $ 1,036,994 Other assets: Charitable gift annuity assets $ 3,261 $ 2,713 $ 548 $ Deferred compensation assets (Note 13) 862 862 - Total other assets $ 4,123 $ 3,575 $ 548 $ 64
|
From page 65... ...
29,994 29,994 - Real estate 8,277 8,277 - Long/short equity hedge funds 36,004 - - 36,004 Hedge fund investments 152,729 - - 152,729 Private equity funds 23,109 - - 23,109 Total 987,372 $ 761,139 $ 14,391 $ 211,842 Cash held for investment 1,088 Total investments $ 988,460 Other assets: Charitable gift annuity assets $ 3,022 $ 2,510 $ 512 $ Deferred compensation assets (Note 13) 963 963 - Total other assets $ 3,985 $ 3,473 $ 512 $ 65
|
From page 66... ...
TNAC investments participate in the investment pool proportionally with all other funds in this pool. The NAS obligation to TNAC for these funds held in trust, which totaled approximately $12.3 million and $13.3 million as of December 31, 2018 and 2017, respectively, is reported as funds held on behalf of others in the accompanying statements of financial position.
|
From page 67... ...
and contributions receivable, net (long-term) in the accompanying statements of financial position, and mature as follows (in thousands)
|
From page 68... ...
Interest expense related to the lines of credit for the years ended December 31, 2018 and 2017 totaled approximately $87,000 and $115,000, respectively.
|
From page 69... ...
: Financial assets: Cash and cash equivalents $ 18,131 Contracts receivable, net 58,968 Contributions and other receivables, net, current 18,209 Investments 1,036,994 1,132,302 Plus endowment fund appropriation for following year 5,159 Less those unavailable for general expenditures within one year, due to: Contractual or donor-imposed restrictions: Endowment funds (387,286) Funds restricted by donors through time or purpose restrictions (554,669)
|
From page 70... ...
: 2018 2017 Subject to expenditure for specific purpose: Gulf Research Program $ 470,043 $ 498,217 Other sponsored research and advisory programs 89,291 91,091 559,334 589,308 Investment in perpetuity, including amounts above the original gift amount which, once appropriated, are expendable to support: Other sponsored research and advisory programs 196,183 206,630 Prizes and awards 61,932 65,252 Woods Hole facility 7,183 7,677 General operations 126,190 134,320 391,488 413,879 Total net assets with donor restrictions $ 950,822 $ 1,003,187 Net assets were released from donor-imposed restrictions in satisfaction of the following purposes during the years ended December 31, 2018 and 2017 (in thousands) : 2018 2017 Purpose-restricted releases: Gulf Research Program $ 18,223 $ 21,600 Other sponsored research and advisory programs 47,091 42,327 Prizes and awards 1,935 995 Woods Hole facility 328 327 67,577 65,249 Time-restricted releases 5,488 5,368 Net assets released from restrictions $ 73,065 $ 70,617 70
|
From page 71... ...
Appreciation on donor-restricted endowment funds is classified in net assets with donor restrictions until such amounts are appropriated for spending by the NAS Council in a manner consistent with the standard of prudence prescribed by the Act in accordance with the Act, NAS considers the following factors in making a determination to appropriate investment earnings attributable to donor-restricted endowment funds: (1) The duration and preservation of its endowment fund; (2)
|
From page 72... ...
At December 31, 2017, there were no endowment funds with a fair value below the original value of the gift. Subsequent gains that restore the fair value of the assets of the endowment fund to the required level are classified as an increase in net assets with donor restrictions.
|
From page 73... ...
The under-recovery is included in the contracts receivable, net balance in the accompanying statements of financial position.
|
From page 74... ...
, maturing at various dates from January 1, 2018 through 2049 45,770 46,770 Series 2010A revenue bonds, serial, with interest rates ranging from 3.0% to 5.0%, maturing at various dates from April 1, 2018 through 2020 2,945 4,330 Series 2017A revenue bonds, term, with fixed interest rates of 2.24% until July 15, 2018 and 2.65% until 4/1/2020, with flexible rates thereafter, maturing at various dates from April 1, 2018 through 2040 52,605 52,760 Total bonds, at face value 159,620 163,360 Plus: unamortized premium 12 40 Less: debt issuance costs (1,940)
|
From page 75... ...
Interest Rate Swaps In October 1999, NAS entered into an interest-rate 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 76... ...
The fair value of the swap is recorded as a liability of approximately $4.8 million and $6.1 million as of December 31, 2018 and 2017, respectively, and is included in other current liabilities and other long-term liabilities in the accompanying statements of financial position. The fair value of the swaps are determined using pricing models based on observable market data such as prices of instruments with similar maturities and characteristics, interest rate yield curves, and measures of interest rate volatility.
|
From page 77... ...
The accrued postretirement benefit obligation is reported in accrued employee benefits in the accompanying statements of financial position. Postretirement changes other than net periodic benefit cost are as follows (in thousands)
|
From page 78... ...
$ (56) Recognized actuarial loss 684 848 Total $ 628 $ 792 The following table presents the changes in benefit obligations, changes in plan assets, funded status, and the components of net periodic benefit cost for the years ended December 31, 2018 and 2017 (in thousands)
|
From page 79... ...
(49) Recognized actuarial loss 848 840 Net periodic benefit cost $ 1,064 $ 1,261 The assumptions used to determine net periodic benefit cost for the years ended December 31, 2018 and 2017 are as follows: 2018 2017 Discount rate 3.50 % 4.00 % Expected long-term return on plan assets 6.75 % 6.75 % Rate of increase in healthcare costs: Under age 65 6.21 % 6.41 % Over age 65 5.54 % 5.65 % The assumptions used to calculate the accumulated postretirement benefit obligation for the years ended December 31, 2018 and 2017 are as follows: 2018 2017 Discount rate 4.25 % 3.50 % Rate of increase in healthcare costs for next year: Under age 65 5.99 % 6.21 % Over age 65 5.43 % 5.54 % The trend rate for growth in healthcare costs was assumed to decline gradually beginning in 2018 to 4.5% in the year 2038 for the years ended December 31, 2018 and 2017.
|
From page 80... ...
The fund is diversified between fixed income and equity investments. With this diversification and investment in broader market funds, there is reasonable assurance that no single security or class of securities will have a disproportionate impact on plan assets.
|
From page 81... ...
treasuries/government bonds 8,743 8,743 Mortgage-backed securities 3,117 - 3,117 Corporate bonds 11,209 8,925 2,284 Non-U.S. fixed income 29 - 29 Equity: U.S.
|
From page 82... ...
NAS expects to contribute to the Plan the actuarially determined net periodic cost for 2019, which is approximately $892,000. The following benefit payments, which reflect future services, are expected to be paid in future years as noted, as of December 31, 2018 (in thousands)
|
From page 83... ...
The financial position and results of TNAC are not consolidated in the NAS financial statements. NAS manages the operations of the Beckman Center.
|
From page 84... ...
16. SUBSEQUENT EVENTS NAS has evaluated subsequent events from the statement of financial position date through June 12, 2019, the date at which the financial statements were issued, and determined that there are no other items to disclose.
|
From page 85... ...
Stead FINANCIAL MANAGEMENT STAFF Didi Salmon, Chief Financial Officer Laura Douglas, Controller 85
|
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.