York State Public Employees Federation and Subsidiary
Financial Statements and Other Financial Information
March 31, 2000
Marvin and company, p.c.
Certified Public Accountants and consultants
11 British American Blvd. Latham, NY 12110
Officers and Trustees
New York State Public Employees Federation
We have audited the accompanying consolidated statements
of financial position of the New York State Public
Employees Federation and Subsidiary (Federation) as of
March 31, 2000 and 1999, and the related consolidated
statements of activities and cash flows for the years
then ended. These consolidated financial statements are
the responsibility of the Federations management.
Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. 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 consolidated financial statements. An
audit also includes assessing the accounting principles
used and significant estimates made by 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 consolidated financial statements
referred to above present fairly, in all material
respects, the financial position of New York State Public
Employees Federation and Subsidiary as of March 31, 2000
and 1999, and the changes in their net assets and their
cash flows for the years then ended in conformity with
generally accepted accounting principles.
As discussed in Note 7 to the consolidated financial
statements, the Federation was unsuccessful in its appeal
of a judgment which confirmed its liability for certain
per capita taxes. The impact of this judgment raises
substantial doubt about the Federations ability to
continue as a going concern. Managements plans in
regard to this matter are also described in Note 7. The
consolidated financial statements do not include any
adjustments that might result from the outcome of this
Our audits were conducted for the purpose of forming an
opinion on the consolidated financial statements taken as
a whole. The consolidating statement of financial
position, the consolidating statement of activities, and
the schedule of consolidated detail of expenses are
presented for purposes of additional analysis and are not
a required part of the consolidated financial statements.
Such information has been subjected to the auditing
procedures applied in our audit of the consolidated
financial statements and, in our opinion, is fairly
stated in all material respects in relation to the
consolidated financial statements taken as a whole.
Marvin and Company, P.C.
June 9, 2000
NEW YORK STATE
PUBLIC EMPLOYEES FEDERATION AND SUBSIDIARY
Notes to Consolidated Financial Statements
March 31, 2000 and 1999
DESCRIPTION OF ORGANIZATION AND SUMMARY OF SIGNIFICANT
The New York State Public Employees Federation (PEF) is
affiliated with the American Federation of Teachers (AFT)
and the Service Employees International Union (SEIU). It
is a self-governing unit representing predominantly the
professional, scientific and technical employees of the
State of New York. The majority of revenues are from
membership dues and agency shop fees.
The consolidated financial statements include the
accounts of PEF and its subsidiary, PEF Land Holding
Corporation. The accounts of PEF include a general fund,
a political action fund, a Committee on Political
Education (COPE) fund and a plant fund. PEF Land Holding
Corporation is a not-for-profit corporation formed to
hold title to the land and office building used to house
PEFs headquarters. All material interfund accounts
and transactions between the entities have been
eliminated in arriving at the consolidated totals.
PEF and its subsidiary adhere to generally accepted
accounting principles as described in the American
Institute of Certified Public Accountants (AICPA)
Industry Audit Guide, Not-for-Profit Organizations. As
such, the consolidated financial statements include the
activities of the COPE fund established to submit
donations to political activities and organizations based
upon voluntary contributions from PEF members. In
addition, net assets and revenue, expenses, gains and
losses are classified based on the existence or absence
of donor-imposed restrictions. Changes in unrestricted
net assets include certain grants whose donor imposed
restrictions are for current or developing programs which
were met during the fiscal year. When a donor 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 are reported in the consolidated statement
of activities as net assets released from restrictions.
PEF is a labor union exempt from Federal income taxes
under Section 501(c)(5) of the Internal Revenue Code.
However, under Section 527 of the Code, PEF's investment
income from the Political Action Fund is subject to tax.
PEF Land Holding Corporation is a title holding
corporation and is exempt from Federal income taxes under
Section 501(c)(2) of the Code.
Cash equivalents consist of investments in certificates
of deposit with original maturities of three months or
PEF follows the provisions of Statement of
Financial Accounting Standards (SFAS) No. 124, Accounting
for Certain Investments Held by Not-for-Profit
Organizations. Under the provisions of SFAS No. 124,
investment securities are measured at fair value.
Investment in equity securities with readily determinable
fair values and all investments in debt securities (see
Note 3) are valued at their fair market value determined
by quoted market prices. Realized gains and losses from
the sale of securities are recognized on the trade date
and are calculated based on market value.
The net change in unrealized appreciation (depreciation)
from the beginning of the year to the end of the year is
included in net unrealized and realized gains (losses) in
the consolidated statement of activities. Interest income
is recognized as earned.
Property, Plant and Equipment and Depreciation
Property, plant and equipment are stated at cost less
accumulated depreciation. Depreciation is provided for in
amounts sufficient to relate the cost of depreciable
assets to operations using the straight-line method over
the following estimated useful lives:
fixtures and equipment
and repairs are charged to operations when incurred;
betterments and renewals are capitalized. When property,
plant and equipment are sold or otherwise disposed of,
the asset account and related accumulated depreciation
are relieved, any gain or loss is included in operations.
Use of Estimates
The preparation of financial statements in conformity
with generally accepted accounting principles 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 revenues and expenses during the reporting period.
Actual results could differ from those estimates.
2. NET MEMBERSHIP DUES AND AGENCY SHOP FEES
Membership Dues and Agency Shop Fees
Revenue is comprised of membership dues paid by members
of PEF and agency shop fees paid by those employees who
are members of the bargaining unit but not of PEF. Dues
income is recognized based upon the pay period for which
members' salaries are paid by the State of New York. The
biweekly dues and fees are calculated based on .8% of a
member's annual compensation and are limited to a maximum
annual amount of $640.
Divisional distributions represent allocations to local
organizations of PEF members. Each division was paid
$5.18 per member up to 200 members and $4.14 for each
member in excess of 200, in each calendar quarter for the
years ended March 31, 2000 and 1999.
Per Capita Taxes
PEF is required to pay per capita taxes on a monthly
basis to AFT and SEIU as a result of its affiliation with
these organizations. Per capita taxes are presented net
of the AFT constitutional rebates of $158,855 and
$156,625 for the years ended March 31, 2000 and 1999,
Affiliation dues are amounts paid by PEF to participate
with other labor organizations in various labor councils
in New York State.
Investment securities are carried at fair value and
consist of the following:
notes and bills
zero coupon bonds
gains (losses) for the years ended March 31, 2000 and
1999 were (21,250) and $52,700 respectively.
4. POLITICAL ACTION FUND
PEF maintains a Political Action Fund (the Fund) from
which political contributions are disbursed.
Contributions are approved by PEF's Executive Board and
funded from PEF's unrestricted net assets. The Fund is
administered within PEF by the Legislative Department,
which is also responsible for other lobbying activities.
For the years ended March 31, 2000 and 1999, the
Legislative Department has allocated $978,189 and
$799,170 from unrestricted net assets for its operations,
including political contributions. During the years ended
March 31, 2000 and 1999, $880,269 and $732,650 were
allocated for Legislative Department operations. For the
years ended March 31, 2000 and 1999, expenses were less
than the allocation by $97,919 and $66,520. At March 31,
2000 and 1999, the amount due from the general fund was
$142,130 and $44,211, respectively.
5. PENSION FUND
Substantially all employees of PEF are eligible to
participate in the Affiliates' Officers and Employees
Pension Fund of SEIU (the Pension Fund). The Pension Fund
is a defined benefit multi-employer pension plan. Total
pension expense approximated $796,000 and $802,000 for
the years ended March 31, 2000 and 1999, respectively.
These amounts are based upon a contribution rate of 14%
of total eligible employee compensation. Actuarial and
plan asset data relating to employees of PEF is not
PEF has entered into a variety of leases, primarily for
the use of office space and equipment, which are
accounted for as operating leases. In addition, PEF has
certain office and computer equipment leases that are
accounted for as capital leases. Included within
"furniture, fixtures and equipment" is
equipment held under capital leases with a cost basis of
$442,661 and $392,243, and accumulated amortization of
$281,433 and $199,157 at March 31, 2000 and 1999,
respectively. Amortization of leased assets is included
in depreciation and amortization expense. Future minimum
payments under all noncancelable leases having initial
terms in excess of one year at March 31, 2000 consist of
|Present Value of
Net Minimum Lease Payments
maturities of capital lease obligation
Obligations, net of current maturities
Total rental expense related to operating leases was
approximately $464,743 and $448,320 for the years then
ended March 31, 2000 and 1999. Lease agreements
frequently include renewal options and require PEF to pay
utilities, taxes, insurance and maintenance.
Additionally, PEF, as lessor, leases certain office space
in its main office building. Future minimum rental
payments receivable by year, under a noncancelable
operating lease and sublease for the next five years,
consist of the following at March 31, 2000:
2001 - $ 45,870
2002 - $ 28,657
2003 - $ 22,920
2004 - $ 22,920
2005 - $ 22,920
Total - $ 143,287
Under an arbitration award rendered in May 1985, PEF was
ordered to pay New York State United Teachers/American
Federation of Teachers (AFT) in excess of $9 million in
back per capita taxes for the period March 1983 through
May 1985. During fiscal 1988, a State Supreme Court
decision vacated the award in its entirety. However, AFT
subsequently appealed the decision and, in May 1989, the
Appellate Division reversed the lower court decision,
thereby awarding AFT approximately $9.2 million of back
per capita taxes. In 1989, PEF attempted to appeal the
decision of the Appellate Division.
On March 27, 1990, the Court of Appeals denied PEFs
motion and reaffirmed the judgment to AFT of
approximately $9.2 million for per capita taxes. During
the fiscal year ending March 31, 1991, AFT made a motion
to the State Supreme Court to be awarded prejudgment date
interest. In June 1991, the State Supreme Court granted
AFTs motion for prejudgment date interest. Interest
on the outstanding balance accrues at the rate of 9%
annually. Each year since 1991 AFT has unilaterally
forgiven one twentieth of the total outstanding principal
balance and the annual accrued interest amount.
"AFT has not sought enforcement of the judgment in
the past, but rather, as noted, has forgiven a portion of
the indebtedness and interest. It is not possible to
predict whether AFT will seek to enforce the judgment in
the future. Accordingly, PEF has reported a liability of
$8.9 million which represents the judgment amount plus
accrued interest at 9% per annum from the arbitration
dates less amounts previously forgiven. PEF has an
accumulated deficit of approximately $4.2 million, which
raises substantial doubt whether PEF would be able to
continue operations upon enforcement of the judgment. It
is managements intention to continue to pursue a
settlement plan with AFT which will not adversely impact
PEF has been named as a defendant in several other
lawsuits and claims. While the ultimate outcome of these
actions cannot be predicted at this time, it is the
opinion of management that the disposition of these
lawsuits and claims will not have a material adverse
effect on the financial position of PEF.
8. RELATED ORGANIZATIONS
PEF is affiliated with the following:
Public Employees Federation Membership Benefits
This trust was established to provide PEF members the
opportunity to obtain various insurance and other
benefits at group rates. This program is outside the
operations of PEF and is not included within the
accompanying consolidated financial statements. PEF is
not responsible for the debts of the Membership Benefits
Program and any remaining assets upon termination of the
program revert to the participants and not to PEF.
PEF incurs costs on behalf of the program, which are
billed back to the Membership Benefits Program. Included
in other receivables at March 31, 2000 and 1999 are
receivables from the program for $112,887 and $151,440,
respectively. The Membership Benefits Program occupies
space in PEFs headquarters under a 20-year lease
with PEF requiring minimum annual payments of $18,000
plus the proportionate share of taxes, utilities and
common area costs.
The Fund was established to provide various services,
such as continuing insurance and seminars, to retired PEF
members. This Fund is outside the operations and control
of PEF and is not included within the accompanying
consolidated financial statements. PEF incurs various
costs for payroll, benefits and office expenses on behalf
of the Retirees Fund which it bills back to the
Fund. Included in other receivables at March 31, 2000 and
1999 are receivables from the Fund for $88,642 and
9. PUBLIC SERVICE TUITION PROGRAM (PSTP)
PEF has entered into an agreement with New York State to
administer the PSTP for its members. Under PSTP,
PEFs members can receive up to $600 per semester
for classes attended at participating colleges with a
maximum of $1,200 per fiscal year. The Program has made
available over $10 million for tuition payments. During
fiscal 1999, PEF received $1,019,758 for tuition and
reimbursed members $2,024,915. Under the agreement PEF is
reimbursed for administrative expenses. For the year
ended March 31, 1999 PEFs reimbursable
administrative expenses were $230,963. As of March 31,
1999, the PSTP was no longer administered by PEF.
10. FUNCTIONAL EXPENSES
PEFs expenses by functional activity were as
11. TEMPORARILY RESTRICTED NET ASSETS
Temporarily restricted net assets at March 31, 2000 and
1999 are available for the following purposes:
12. CHANGES IN TEMPORARILY RESTRICTED NET ASSETS
Contributions of the following were received with donor
restrictions during fiscal 2000 and 1999:
Tuition Program: Tuition reimbursement advances
earned during fiscal 2000 and 1999 was restricted for the
were released from donor restrictions by incurring
expenses satisfying the restricted purposes:
restrictions accomplished: COPE
CONCENTRATION OF CREDIT RISK
At March 31, 2000 PEFs concentration of credit risk
consists of cash deposited in financial institutions in
excess of federally insured limits. The amount subject to
credit risk is approximately $1,673,000.
14. ACCRUED POST-RETIREMENT BENEFITS
Retired PEF employees can convert unused sick leave to
cash for the purpose of paying health insurance benefits.
To be eligible, retiring employees must meet one of the
three following criteria: sixty-five years of age and
three years of service; fifty-five years of age and 10
years of service; or age fifty and 30 years of service.
PEF recognizes the cost of providing post-retirement
health insurance benefits by expensing the cost as
The accumulated post-retirement benefit obligations at
March 31, 2000 and 1999 were $1,324,790 and $1,163,985
and are accrued in the accompanying statements of
financial position. The post-retirement expenses for the
years ended March 31, 2000 and 1999 were $160,805 and
$120,126 and are included in salary and benefit expenses.
For measurement purposes, a 3% annual rate of pay
increase was assumed for all years.
15. SELF-INSURANCE PLAN
PEF provides health insurance benefits utilizing a
self-funded plan that covers substantially all full-time
employees. The liability for claims incurred and claims
incurred but not reported was $180,000 and $89,392 at
March 31, 2000 and 1999, respectively.
PEF has purchased individual risk and excess risk
stop-loss insurance to limit its exposure to claims in
excess of specified amounts.
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