Annual Report 2004
Financial Report for the year ended June 30, 2004
McMaster & Associates, PC
Certified Public Accountants
The Council of American Historical Association Washington, DC
Independent Auditors’ Report
We have audited the accompanying statement of financial position of the American Historical Association as of June 30, 2004 and 2003 and the related statements of activities and cash flows for the years then ended. These financial statements are the responsibility of the Association’s management. 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 audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the American Historical Association as of June 30, 2004 and 2003, and its changes in net assets and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.
Our audits were made for the purpose of forming an opinion on the basic financial statements of the American Historical Association taken as a whole. The accompanying supplemental statements of expenses by program, net assets by classification and general operations for the years ended June 30, 2004 and 2003 are presented for purposes of additional analysis and are not a required part of the basic financial statements. The information for the years ended June 30, 2004 and 2003 has been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole.
October 25, 2004
1. DESCRIPTION OF THE ORGANIZATION
The American Historical Association (the Association) is a District of Columbia non-stock corporation founded in 1884 and incorporated by Congress in 1889 for the promotion of historical studies, the collection and preservation of historical manuscripts, and the dissemination of historical research.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Accounting
The financial statements have been prepared on the accrual basis of accounting in accordance with generally accepted accounting principles. Accordingly, revenues are recognized when earned and expenses are recognized when incurred.
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates.
Cash and Equivalents
The Association considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents.
Pledges receivable represents amounts which have been promised but not yet received. Pledges beyond one year are discounted to reflect the present value of the pledge.
Investments are recorded at market value. Realized and unrealized gains and losses on investments are reported on the statement of activities as they occur.
Furniture and equipment are reported at cost. Assets and capital lease purchases are depreciated over a three to five year estimated life using the straight line method. Depreciation expense for the years ended June 30, 2004 and 2003 was $70,658 and $52,856, respectively.
The Association records income for membership dues, subscriptions and publication advertising which have been paid in advance as deferred revenue.
Net assets are reported by the Association in accordance with Financial Accounting Standards Board (FASB) 116 and 117. Accordingly, net assets have been reported using the following categories.
Unrestricted net assets represent resources over which the Council has discretionary control and are used to carry out operations of the Association in accordance with their bylaws.
The Council’s designated fund, included as part of the unrestricted net assets, was established to accumulate a reserve for the Association.
Temporarily restricted net assets represent contributions and grants, which have been restricted by donors for specific programs or activities. Restrictions, which have been met by the passage of time or expenditure of net assets, are reported as revenues released from restrictions on the statement of activities. For the years ended June 30, 2004 and 2003, the Association received $140,389 and $213,957 in temporarily restricted contributions and grants, respectively.
Permanently Restricted Funds
Permanently restricted net assets represent contributions which have been restricted by donors indefinitely. Investment income generated from the principal of the permanently restricted net assets is used to fulfill programs and the general operations of the Association. For the years ended June 30, 2004 and 2003 the Association did not receive any permanently restricted contributions.
Gifts and bequests of property
Gifts and bequests of property are recorded at the earlier of the date received or when the bequest is no longer subject to probate and its value can be reasonably estimated. Gifts and bequests are valued at their estimated fair market value on the date they are recorded.
Donated Services and Materials
Contributions of services are recognized if the services received create or enhance nonfinancial assets or require specialized skills, and are provided by individuals possessing those skills and would typically need to be purchased if not provided by donation. Contributed services and promises to give services that do not meet the above criteria are not recognized. During 2004 and 2003, the Association did not receive any donated materials or services.
The Association is a nonprofit organization, which is exempt from federal income taxes under the provision of Section 501©(3) of the Internal Revenue Code. However, the Association is subject to unrelated business income tax for activities conducted outside its tax exempt purpose. The Association conducted unrelated business activities that resulted in net operating losses during 2004 and 2003, respectively, accordingly no provision for income taxes was recorded.
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 costs have been allocated among the programs and supporting services benefited.
4. RETIREMENT PLAN
The Association maintains a qualifying defined contribution retirement plan for qualifying full-time employees under Internal Revenue Code Section 403(b). The Association contributes up to a maximum of 10 percent of the employee’s total annual compensation to the plan each year. The contributions are fully vested and nonforfeitable. For the years ended June 30, 2004 and 2003, contributions to the plan were $76,153 and $95,518, respectively. There were no contributions due to the plan at June 30, 2004 and 2003, respectively.
5. LINE OF CREDIT
The Association had entered into an agreement for an $180,000 line of credit. Interest was charged at the lender’s prime rate plus .50%. The line of credit was collateralized by approximately $200,000 of U.S. Treasury Bonds and Notes. There was no balance on the line of credit as of June 30, 2003 and the line of credit agreement was voluntarily terminated during 2004. Interest expense for the years ended June 30, 2004 and 2003 was $3,378 and $0, respectively.
During 2001, the Association entered into an agreement with three other collaborators for the purpose of producing electronic versions of journals published by the Association and one of the other signers. The terms of the agreement have expired, however the Association plans to contribute $35,000 annually to the project.
The Association has entered into agreements for rental of space for the annual meeting. The Association is required to pay a portion of the anticipated room revenues in the event that the conference is canceled. Cancellation insurance has been obtained by the Association to offset any potential future losses. The Association anticipates that all minimum room rental requirements will be met.
7. CONCENTRATION OF RISK
The Association maintains cash balances in a financial institution which is insured by the Federal Deposit Insurance Corporation for amounts up to $100,000. The Association is exposed to concentrations of credit risk at times when cash balances exceed the FDIC limit. The Association has not experienced any losses and believes they are not exposed to significant risk.