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NMB NATIONAL 71 PRINCIPAL NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A. REPORTING ENTITY The National Mediation Board (NMB), established in 1934 under Section 4 of the Railway Labor Act (RLA),
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NMB NATIONAL 71 PRINCIPAL NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A. REPORTING ENTITY The National Mediation Board (NMB), established in 1934 under Section 4 of the Railway Labor Act (RLA), is an independent U.S. federal government agency that performs a central role in facilitating harmonious labor-management relations within two of the nation s major transportation modes - the railroads and airlines. Recognizing the importance of these transportation industries to the public, shippers, and consumers, as well as to the economy and security of the country, the RLA established NMB to promote four key statutory goals: The prompt and orderly resolution of disputes arising out of the negotiation of new or revised collective bargaining agreements; The effectuation of employee rights of self-organization where a representation dispute exists; and The prompt and orderly resolution of disputes over the interpretation or application of existing agreements. NMB prepares its financial statements to be in conformity with generally accepted accounting principles. NMB does not hold any non-entity assets and has no funds from dedicated collections as described by the Statement of Federal Financial Accounting Standards (SFFAS) 43. B. BASIS OF PRESENTATION NMB s principal financial statements were prepared from its official financial records and general ledger in conformity with accounting principles generally accepted in the United States and follow the presentation guidance established by OMB Circular No. A-136 Financial Reporting Requirements, as amended. The amounts reported in the financial statements are consolidated totals net of intra-entity transactions. The financial statements have been prepared to report the financial position, net cost of operations, changes in net position, and the status and availability of budgetary resources of NMB. Unless specified otherwise, all amounts are presented in dollars. C. BASIS OF ACCOUNTING Transactions are recorded on both an accrual accounting basis and a budgetary basis. The accrual method of accounting requires recognition of the financial effects of transactions, events, and circumstances in the period(s) when those transactions, events, and circumstances occur, regardless of when cash is received or paid. Budgetary accounting facilitates compliance with legal requirements and controls over the use of funds and to keep track of budget authority at the various stages of execution including allotment, obligation, and outlay. The Balance Sheet, Statement of Net Cost, Statement of Net Position, and Statement of Budgetary Resources have been prepared in accordance with generally accepted accounting principles accepted in the United States for federal entities as prescribed by the standards set forth by the Federal Accounting Standards Advisory Board (FASAB). FASAB is recognized by the American Institute of Certified Public Accountants as the body designated to establish generally accepted accounting principles for federal entities. Certain assets, liabilities, and costs have been classified as intragovernmental throughout the financial statements and notes. Intragovernmental is defined as transactions made between two reporting entities within the federal government. NMB NATIONAL 72 D. REVENUE AND OTHER FINANCING SOURCES NMB receives funds to support its programs through annual appropriations. These may be used to pay program and administrative expenses (primarily salaries and benefits, occupancy, travel, and contractual services costs). Appropriations are recognized as other financing sources at the time they are used to pay program or administrative expenses. Appropriations used to acquire property and equipment is recognized as financing sources when the assets are purchased. E. USE OF ESTIMATES The preparation of the accompanying financial statements in accordance with U.S. generally accepted accounting principles requires management to make certain estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses. Actual results could differ from those estimates. F. FUND BALANCES WITH THE US DEPARTMENT OF TREASURY The U.S. Treasury (Treasury) processes cash receipts and disbursements on NMB s behalf. The balance of funds with Treasury represents appropriated funds that are available to pay current liabilities and finance authorized purchase obligations relative to goods or services that have not been received. NMB does not maintain cash in commercial bank accounts or foreign currency balances. G. ACCOUNTS RECEIVABLE Accounts receivable primarily consists of amounts due from current and former employees. These receivables are a result of payroll adjustments and or court ordered actions. An allowance for uncollectible accounts receivable from the public is established when either (1) management determines that collection is unlikely to occur after a review of outstanding accounts and the failure of all collection efforts, or (2) an account for which no allowance has been established is submitted to the Department of the Treasury for collection, which takes place when it becomes 120 days delinquent. Based on historical experience, all receivables are collectible and no allowance is provided. H. PROPERTY AND EQUIPMENT Property and equipment is stated at cost less accumulated depreciation. NMB capitalizes property and equipment purchases with a cost greater than $5,000, and a total useful life exceeding one year. Depreciation is calculated on a straight-line basis based on an estimated useful life of 5 years for all assets. Expenditures for repairs and maintenance are charged to operating expenses as incurred. When NMB enters into a lease agreement, as lessee, if the title of the asset transfers to NMB at the end of the lease or any of the other three capitalization criteria pursuant to SFFAS No. 6, Accounting for Property, Plant, and Equipment, are met, NMB capitalizes the lease at the present value of minimum lease payment and amortizes the cost over the economic useful life of the asset. I. LIABILITIES Liabilities represent the amount of monies or other resources that are likely to be paid by NMB as the result of a transaction or event that has already occurred. However, no liability can be paid by NMB absent an appropriation. Liabilities for which an appropriation has not been enacted are therefore classified as Liabilities Not Covered by Budgetary Resources and there is no certainty that the appropriations will be enacted. Also, liabilities of NMB arising from other than contracts can be abrogated by the government, acting in its sovereign capacity. Liabilities covered by budgetary resources are liabilities funded by a current appropriation or other funding source. These consist of accounts payable and accrued payroll and benefits. Accounts payable represent amounts owed to another entity for goods ordered and received and for services rendered except for employees. NMB NATIONAL 73 Liabilities not covered by budgetary resource are liabilities that are not funded by any current appropriation or other funding source. These liabilities consist of accrued annual leave and contingent liabilities. J. ACCRUED PAYROLL AND BENEFITS Accrued payroll and benefits reflect salaries and benefits that have been earned, but not disbursed as of September 30,. Accrued payroll and benefits are payable to employees and are therefore not classified as Intragovernmental. K. ANNUAL, SICK AND OTHER LEAVE Annual leave is accrued as a liability as it is earned. The accrual is reduced as leave is taken. Each pay period the balance in the accrued leave account is adjusted to reflect the current leave balances and pay rates. Accrued annual leave is paid from future funding sources and accordingly is reflected as a liability not covered by budgetary resources. Sick leave and other types of non-vested leave are charged to expense as the leave is used. L. RETIREMENT PLAN NMB s employees participate in either the Civil Service Retirement System (CSRS) or the Federal Employees Retirement System (FERS). Employees participating in CSRS contribute 7 percent of their gross pay to the plan, and NMB contributes 7 percent. On January 1, 1987, FERS went into effect pursuant to Public Law Most employees hired after December 31, 1983, are automatically covered by FERS and are eligible for Social Security benefits. Employees hired prior to January 1, 1984, could elect either to transfer to the FERS plan and become eligible for Social Security benefits or remain in CSRS. A primary feature of FERS is that it offers a savings plan in which NMB automatically contributes 1 percent of employees pay and matches any employee contribution up to an additional 4 percent of pay. The actuarial present value of accumulated benefits, assets available for benefits, and unfunded pension liability of CSRS and FERS is not allocated to individual departments and agencies and is therefore not disclosed by NMB. The reporting of these amounts is the responsibility of the Office of Personnel Management. M. COMMITMENTS AND CONTINGENCIES A commitment is a preliminary action that reserves available funds until an obligation is made which will result in a legal liability of the U.S. government. Examples of a commitment include purchase requisitions or unsigned contracts. All open commitments at year end are closed out and new commitments (requisitions) need to be recorded in the next fiscal year. Accordingly, no open commitments exist at year end to report in the either the financial statements or notes. A contingency is an existing condition, situation, or set of circumstances involving uncertainty as to possible gain or loss. The uncertainty will ultimately be resolved when one or more future events occur or fail to occur. A contingent liability is disclosed in the notes to the financial statements when a past event or exchange transaction has occurred, and future outflow or other sacrifice of resources is measurable and probable. A contingency is not disclosed when any of the conditions for liability recognition are not met and the chance of the future event or events occurring are not probable. NMB NATIONAL 74 NOTE 2: FUND BALANCES WITH TREASURY Fund Balance with Treasury account balances as of September 30, and were as follows: FUND BALANCES General Funds $ 7,091,321 $ 7,120,208 TOTAL $ 7,091,321 $ 7,120,208 STATUS OF FUND BALANCE WITH TREASURY Unobligated Balance Available $ 713,813 $ 566,880 Unavailble 3,457,010 3,410,824 Obligated Balance Not Yet Disbursed 2,920,498 3,142,504 TOTAL $ 7,091,321 $ 7,120,208 The available unobligated fund balances represent the current-period amount available for obligation or commitment. The unavailable unobligated fund balances represent the amount of appropriations for which the period of availability for obligation has expired. These balances are available for upward adjustments of obligations incurred only during the period for which the appropriation was available for obligation or for paying claims attributable to the appropriations. The obligated balance not yet disbursed includes accounts payable, accrued expenses, and undelivered orders that have reduced unexpended appropriations but have not yet decreased the fund balance. NOTE 3: LIABILITIES COVERED AND NOT COVERED BY BUDGETARY RESOURCES Liabilities Covered and Not Covered by Budgetary Resources as of September 30, and consist of the following: LIABILITIES NOT COVERED BY BUDGETARY RESOURCES Contingent Liabilities - 175,000 Unfunded Leave $ 492,780 $ 474,417 Total Liabilities Not Covered by Budgetary Resources $ 492,780 $ 649,417 Total Liabilities Covered by Budgetary Resources 988, ,545 TOTAL LIABILITIES $ 1,481,748 $ 1,182,962 NMB NATIONAL 75 NOTE 4: PENSIONS, OTHER RETIREMENT BENEFITS, AND OTHER POST RETIREMENT BENEFITS The NMB reports the full cost of employee pensions, other retirement benefits, and other postemployment benefits in accordance with SFFAS No. 5, Accounting for Liabilities of the Federal Government. Although the NMB funds a portion of the benefits under FERS and CSRS relating to its employees and withholds the necessary payroll deductions, a portion of the Normal Pension Cost remains unpaid. SFFAS No. 5 requires the recognition of this remaining cost as imputed financing. Pension and other retirement benefit expenses are calculated using cost factors determined by actuaries at the Office of Personnel Management. These cost factors are calculated based on economic and demographic assumptions. The cost factor is multiplied by the basic pay in order to obtain the Normal Cost for the accounting period. This Normal Cost is the present value of the projected benefits of each employee allocated on a level basis over the service of the employee between entry age and assumed exit age. The imputed financing amount represents the difference between the employer s total pension expense and the employer s contribution. Imputed Financing Sources in and consists of the following: Office of Personnel Management $ 409,061 $ 398,515 TOTAL IMPUTED FINANCING SOURCES $ 409,061 $ 398,515 NOTE 5: ACCOUNTING FOR LEASES OPERATING LEASES: NMB occupies office space under a lease agreement with the General Services Administration (GSA) that is accounting for as an operating lease. The lease term was for a period of eleven years began on November 1, 2005 and expires on October 31,. NMB has entered into a new operating lease to commence November 1, and expiring on October 31, NMB pays GSA a standard level users charge for the annual rental adjusted annually for operating cost escalations in accordance with the provisions in the Federal Management Regulations. OPERATING LEASE FISCAL YEAR OFFICE SPACE 1,418,181 1,434, , ,206, ,227, ,249, ,272, ,295, ,320, ,344, ,370,395 TOTAL FUTURE PAYMENTS $ 14,128,628 NMB NATIONAL 76 NOTE 6: CONTINGENT LIABILITIES ARBITRATOR LIABILITIES The NMB revised its policy, so that when cases are assigned to an Arbitrator the full cost of the case is obligated. The number of cases not assigned to any arbitrators September 30, and is 5,873 and 3,673 respectively. If these cases were assigned, we estimate it would cost $3,699,990 in fiscal year and $2,313,990 in fiscal year for arbitrators to hear and render an award on these cases. NOTE 7: INTRAGOVERNMENTAL COSTS AND EXCHANGE REVENUE The purpose of this classification of NMB s revenue and cost is to enable the Federal Government to provide consolidated financial statements, and not to match public and intragovernmental revenue with costs that are incurred to produce public and intragovernmental revenue. The intragovernmental costs relate to the source of goods and services purchased by NMB and are treated independently from the classification of related revenue. PROGRAM COSTS /ADR Intragovernmental Costs $ 2,336,021 $ 2,415,698 Public Costs 5,364,968 4,818,044 TOTAL /ADR $ 7,700,989 $ 7,233,742 REPRESENTATION Intragovernmental Costs $ 832,629 $ 926,929 Public Costs 1,388,135 1,317,070 TOTAL REPRESENTATION $ 2,220,764 $ 2,243,999 ARBITRATION Intragovernmental Costs $ 596,260 $ 604,713 Public Costs 2,548,584 1,961,330 TOTAL ARBITRATION $ 3,144,844 $ 2,566,043 PRESIDENTIAL EMERGENCY Intragovernmental Costs $ 1,738 $ 3,271 Public Costs 75, ,436 TOTAL PRESIDENTIAL EMERGENCY $ 77,069 $ 103,707 Total Intragovernmental Costs $ 3,766,648 $ 3,950,611 Total Public Costs 9,377,018 8,196,880 Total Gross Program Costs 13,143,666 12,147,491 NET PROGRAM COSTS $ 13,143,666 $ 12,147,491 NMB NATIONAL 77 NOTE 8: APPORTIONMENT CATEGORIES OF NEW OBLIGATIONS A new obligation reported on the Statement of Budgetary Resources in and consists of the following: DIRECT OBLIGATIONS Category A $ 12,631,515 $ 12,903,817 Category B 122, ,412 NEW OBLIGATIONS AND UPWARD ADJUSTMENTS $ 12,753,745 $ 13,013,229 NOTE 9: UNDELIVERED ORDERS AT THE END OF THE PERIOD The amount of budgetary resources obligated for undelivered orders at September 30, and is $1,931,529 and $2,608,959 respectively. NOTE 10: STATEMENT OF BUDGETARY RESOURCES VS. BUDGET OF THE UNITED STATES GOVERNMENT The reconciliation as of September 30, is presented below. The 2017 Budget of the United States Government, with the Actual Column completed for FY, had not been published as of the date of these financial statements. The budget is expected to be published and delivered to Congress in early February The National Mediation Board Budget Appendix can be found on the OMB website ( For the Fiscal Year Ended September 30, (In Millions) BUDGETARY RESOURCES OBLIGATIONS INCURRED DISTRIBUTED OFFSETTING RECEIPTS NET OUTLAYS Statement of Budgetary Resources $ 13 $ 13 $ 12 Difference - Adjustment for Rounding 1 BUDGET OF THE U.S. GOVERNMENT $ 13 $ 13 $ - $ 13 NMB NATIONAL 78 NOTE 11: RECONCILIATION OF NET COST OF OPERATIONS (PROPRIETARY) TO BUDGET RESOURCES USED TO FINANCE ACTIVITIES Budgetary Resources Obligated Obligations Incurred $ 12,753,745 $ 13,013,229 Spending Authority From Offsetting Collections and Recoveries (539,947) (972,997) Obligations Net of Offsetting Collections and Recoveries 12,213,798 12,040,232 Net Obligations 12,213,798 12,040,232 Other Resources Imputed Financing From Costs Imputed Financing From Costs Absorbed By Others 409, ,515 Net Other Resources Used to Finance Activities 409, ,515 TOTAL RESOURCES USED TO FINANCE ACTIVITIES 12,622,859 12,438,747 RESOURCES USED TO FINANCE ITEMS NOT PART OF THE NET COST OF OPERATIONS Services and Benefits Ordered But Not Yet Provided 677,430 (423,501) Total Resources Used to Finance Items Not Part of Net Cost of Operations 677,430 (423,501) Total Resources Used to Finance the Net Cost of Operations 13,300,289 12,015,246 COMPONENTS OF THE NET COST OF OPERATIONS THAT WILL NOT REQUIRE OR GENERATE RESOURCES IN THE CURRENT PERIOD Components Requiring or Generating Resources in Future Periods Increase In Annual Leave Liability 18,362 2,373 Other - 100,000 Total Components of Net Cost of Operations That Will Require or Generate Resources In Future Periods 18, ,373 Components Not Requiring or Generating Resources Depreciation and Amortization - 30,811 Other (174,985) (939) Total Components of Net Cost of Operations That Will Not Require or Generate Resources (174,985) 29,872 Total Components of Net Cost of Operations That Will Not Require or Generate Resources In The Current Period (156,623) 132,245 NET COST OF OPERATIONS $ 13,143,666 $ 12,147,491
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