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FY 1999 Consolidated Financial Statements
Notes to the Financial Statements for the Year Ended September 30, 1999

Note 1. Summary of Significant Accounting Policies

A. Basis of Presentation
These financial statements have been prepared to report the financial position and results of operations of the National Science Foundation ("NSF" or "Foundation") as required by the Chief Financial Officers Act of 1990 and the Government Management Reform Act of 1994. They have been prepared from the books and records of NSF in accordance with generally accepted accounting principles and standards applicable to federal entities. These statements are therefore different from the financial reports, also prepared by NSF pursuant to OMB directives that are used to monitor and control NSF's use of budgetary resources.

B. Reporting Entity
NSF is an independent federal agency created by the National Science Foundation Act of 1950 (P.L. 810-507). Its aim is to promote and advance scientific progress in the United States. The agency is responsible for the overall health of science and engineering across all disciplines. The Foundation is also committed to ensuring the nation's supply of scientists, engineers and science educators. NSF funds research and education in science and engineering by awarding grants and contracts to educational and research institutions in all parts of the United States. NSF, by law, cannot conduct research or operate research facilities. By award, NSF enters into relationships to fund the research operations conducted by the grantees.

NSF is led by a presidentially-appointed director and governed by the National Science Board ("The Board"). The Board is composed of 24 members, representing a cross-section of American leadership in science and engineering research and education, appointed by the President for six-year terms. The NSF Director is a member ex officio of the Board.

NSF is authorized by the general authority of the Foundation as found in United States Code Title 42, Section 1870 (f), to receive and use funds donated by others, if such funds are donated without restriction other than they be used in the furtherance of the mission of the Foundation. These donations are non-appropriated funds received from foreign governments, private companies, academic institutions, nonprofit foundations and individuals. Donated funds are accepted into the NSF trust fund account either as unrestricted or as earmarked contributions to specific NSF programs that the Foundation holds in trust for disbursal to its awardees. Foreign donations are deposited initially in a commercial bank as a convenient wire-transfer depository. When needed for program support purposes, they are transferred into an account at the U.S. Treasury. Interest earnings on the commercial bank deposits are used for the same purposes as the principal donations. Funds are made available for obligation as necessary to support NSF programs.

C. Basis of Accounting
The accompanying financial statements have been prepared on the accrual method in addition to recognizing certain budgetary transactions. Under the accrual method, revenues are recognized when earned and expenses are recognized when a liability is incurred, without regard to receipt or payment of cash. Budgetary accounting facilitates compliance with legal constraints and controls over the use of federal funds. NSF records its grant expenses from expenditure reports submitted by the grantees. Grantees may be on either an accrual or cash basis of accounting, and NSF records amounts as reported.

D. Revenues and Other Financing Sources
NSF receives the majority of its funding through Congressional appropriations. NSF receives both annual and multi-year appropriations that may be expended, within statutory limits. Additional amounts are obtained through reimbursements for services provided to and allocation transfers from other federal agencies and donations to the trust fund account. Also, NSF receives interest earned on overdue receivables and excess cash advances to grantees. The interest earned on overdue receivables is returned to the Treasury. Interest earned on excess cash advances to grantees is sent directly to the Department of Health and Human Services (HHS) in accordance with OMB Circular A-110.

Appropriations are recognized as a financing source at the time the related program or administrative expenses are incurred. Revenues from reimbursable agreements are recognized when the services are provided and the related expenditures are incurred. Donations are recognized as revenues when funds are received. Reimbursable agreements are mainly for grant administrative services provided by NSF on behalf of other federal agencies.

E. Fund Balance with the U.S. Treasury and Cash
Cash receipts and disbursements are processed by the Treasury. The Fund Balance with Treasury is comprised primarily of appropriated funds that are available to pay current liabilities and finance authorized purchase commitments, but also includes non-appropriated funding sources from donations and other revenue received from an NSF cooperative agreement to register Internet domain names.

NSF has also established commercial bank accounts to hold some donated funds in trust, in interest bearing accounts as permitted by the contributors. These funds are collateralized by the bank through the U.S. Treasury.

F. Accounts Receivable
Accounts Receivable consists of amounts due from governmental agencies, private organizations, and individuals. NSF establishes an allowance for uncollectible accounts receivable from private sources, but regards amounts due from other federal agencies as 100 percent collectible. Due to the small number and dollar amount of the private receivables, NSF analyzes each account independently to assess collectability and the need for an offsetting allowance.

G. Advances
Advances consists of advances to grantees, contractors and employees. Advances to grantees are payments in advance of grantees incurring reimbursable expenses.

H. General Property, Plant and Equipment (PP&E)
NSF capitalizes acquisitions with costs exceeding $25,000 and a useful life exceeding two years. Acquisitions not meeting these criteria are recorded as operating expenses. NSF currently reports capitalized PP&E at original acquisition cost; assets acquired from General Services Administration’s (GSA) excess property schedules are recorded at the value assigned by the donating agency. Depreciation expense is calculated using the straight-line method. The economic life classifications for capitalized assets are as follows:

Equipment

 

5 years

copiers, computers and peripheral equipment, fuel storage tanks, laboratory equipment, vehicles

 

7 years

communications equipment, office furniture and equipment, pumps, compressors

 

10 years

generators, DoD non-aircraft

Aircraft

 

7 years

aircraft

Buildings and Structures

 

31.5 years

buildings and structures placed in service prior to 1993

 

39 years

buildings and structures placed in service after 1993

Leasehold Improvements

 

14 years

leasehold improvements to NSF headquarters building

The FY 1999 PP&E balance consists of Equipment, Aircraft, Buildings and Structures, Leasehold Improvements, and Construction in Progress. These balances are comprised of PP&E maintained "in-house" by NSF to support agency operations and PP&E under the U.S. Antarctic Program (USAP). USAP property is currently the custodial responsibility of Antarctic Support Associates, the NSF contractor for the program.

The NSF headquarters building is leased by the GSA. NSF is billed by GSA for the leased space at rent based upon commercial rates for comparable space. The cost of the headquarters building is not capitalized in NSF’s financial statements. The cost of some leasehold improvements performed by GSA are financed with NSF appropriated funds. The leasehold improvements are capitalized in NSF’s financial statements as they are transferred to NSF upon completion, if the leasehold improvements meet NSF’s capitalization threshold. Amortization is calculated using the straight-line method over the lesser of their useful lives or the unexpired lease term.

NSF’s PP&E capitalization policy reflects agency specific guidance provided by the Federal Accounting Standards Advisory Board (FASAB) in FY 1997, which stated that PP&E under the USAP should be capitalized, as NSF maintained "operational" responsibility for the support of science activities in Antarctica. However, FASAB agreed that PP&E used by awardees for research and development activities, which NSF is prohibited by statue from operating, should not be included in NSF asset balances. Although NSF retains title to the property to facilitate transfer to subsequent awardees, operations and control of this PP&E are transferred to awardees responsible for coordinating, directing, and conducting research utilizing the PP&E resources. Current standards do not fully address this situation. Until standards are developed to more fully address this issue, FASAB has issued interim guidance that considers NSF’s ownership interest in this PP&E to be "limited in practice to an interest similar to a reversionary interest," and directed the agency to exclude these items from the balance sheet. Rather, costs incurred to acquire such PP&E are treated as expense and shown as costs and investments in research and development in the required supplemental stewardship information.

I. Advances from Others
Advances from Others consists of amounts obligated and advanced by other federal entities for grant administration and other services to be furnished under reimbursable agreements.

J. Accounts Payable
Accounts Payable consists of grant liabilities and liabilities to commercial vendors. Grant liabilities are grantee expenses not yet funded or reimbursed by NSF. At year-end, NSF posts an accrual for the amount of estimated unreimbursed grantee expenses. Accounts payable to commercial vendors are expenses for goods and services received but not yet paid by NSF.

K. Annual, Sick and Other Leave
Annual leave is accrued as it is earned, and the accrual is reduced as leave is taken. Each year, the balance in the accrued annual leave account is adjusted to reflect current pay rates. To the extent current and prior-year appropriations are not available to fund annual leave earned but not taken, funding will be obtained from future Salaries and Expenses appropriations. Sick leave and other types of nonvested leave are expensed as taken.

L. Employee Benefits
A liability is recorded for estimated and actual future payments to be made for workers' compensation pursuant to the Federal Employees' Compensation Act (FECA). The liability consists of the net present value of estimated future payments calculated by the U.S. Department of Labor (DOL) and the actual unreimbursed cost paid by DOL for compensation paid to recipients under FECA. The actual costs incurred are reflected as a liability because NSF will reimburse DOL two years after the actual payment of expenses. Future Salaries and Expenses Appropriations will be used for DOL's estimated reimbursement.

M. Cumulative Results of Operations
A net income or loss can result from operations for a period to the extent that donated revenues and other financing sources are earned in excess or shortage of expenses incurred. The net effect of these excesses and shortages over time is presented in Cumulative Results of Operations.

N. Retirement Plan
In FY 1999, approximately 37 percent of NSF employees participated in the Civil Service Retirement System (CSRS), to which NSF made matching contributions equal to 8.51 percent of pay. On January 1, 1987, the Federal Employees Retirement System (FERS) went into effect pursuant to the Federal Employees’ Retirement System Act of 1986 (5 U.S.C. 8401-79). Most employees hired after December 31, 1983 are automatically covered by FERS and Social Security. Employees hired prior to January 1, 1984 can elect to either join FERS and Social Security or remain in CSRS. A primary feature of FERS is that it offers a savings plan to which NSF automatically contributes 1 percent of pay and matches employee contributions up to an additional 4 percent of pay. NSF also contributes the employer’s matching share for Social Security for FERS participants.

Although NSF funds a portion of the benefits under FERS and CSRS relating to its employees and withholds the necessary payroll deductions, the agency has no liability for future payments to employees under these plans, nor does NSF report CSRS, FERS, or Social Security assets, or accumulated plan benefits, on its financial statements. Reporting such amounts is the responsibility of the Office of Personnel Management (OPM) and FERS. In 1999, NSF’s contributions to CSRS and FERS were $2,854,178 and $4,170,618.

SFFAS No.5 requires employing agencies to recognize the cost of pensions and other retirement benefits during their employees' active years of service. OPM actuaries determine pension cost factors by calculating the value of pension benefits expected to be paid in the future, and communicate these factors to the agency for current period expense reporting. Information was also provided by OPM regarding the full cost of health and life insurance benefits. In FY 1999, NSF recognized $2,733,256 of pension expenses, $2,635,415 of post-retirement health benefits expenses and $14,503 of post-retirement life insurance expenses, beyond amounts actually paid. NSF recognized an offsetting revenue of $5,383,174 as imputed financing sources for the extent of these intragovernmental expenses that will be paid by OPM.

O. Contingencies: Claims and Lawsuits
NSF has claims and lawsuits pending against it. In the opinion of management and legal counsel, none of these will materially affect the financial position or operations of the Foundation. When claims are expected to result in a material loss whether from the Foundation's appropriations or the "Judgment Fund," administered by the Department of Justice under Section 1304 of Title 31 of the United States Code, and the payment amounts can be reasonably estimated, NSF discloses and recognizes the loss in the financial statements.

Claims and lawsuits have also been made and filed against awardees of the Foundation by third parties. NSF is not a party to these actions and NSF believes there is no possibility that NSF will be legally required to satisfy such claims. Judgments or settlements of claims against awardees that impose financial obligation on them may be claimed as costs under the applicable contract, grant, or cooperative agreement and thus may affect the allocation of program funds in future fiscal years. In the event that the likelihood of loss on such claims by awardees becomes probable, their amounts can be reasonably estimated and Foundation management determines that it will probably pay them, NSF will recognize these potential payments as expenses.

P. Use of Estimates
The preparation of the accompanying financial statements required management to make estimates and assumptions about certain amounts included in the financial statements. Actual results will invariably differ from those estimates.

Q. Tax Status
NSF, as a federal agency, is not subject to federal, state, or local income taxes and, accordingly, no provision for income taxes is recorded.

 

Note 2. Fund Balance with Treasury

Fund Balance with Treasury consisted of the following components as of September 30, 1999:

(Amounts in Thousands)

Appropriated
Fund

Trust Fund

Other
Funds

Total

Obligated

$4,157,266

$12,866

$47,022

$4,217,154

Unobligated Available

95,900

14,246

491

110,637

Unobligated Unavailable

77,328

-

338

77,666

Total Fund Balance

$4,330,494

$27,112

$47,851

$4,405,457









"Other Funds" consists of $47,021,836 received from a corporation that registered second level Internet domain names under NSF cooperative agreement and nonexpenditure

transfer authorizations, deposits, holdings, and miscellaneous receipt accounts. The nonexpenditure transfer authorizations are appropriation allocations from other government agencies and include 21,267,055 Indian rupees converted at September 30, 1999, to U.S. dollars at the prevailing Treasury rate of 43.25 rupees to $1 US, or $491,724. The Trust Fund includes amounts donated to NSF. Unavailable balances include recovered expired appropriations and other amounts related to expired authority and holdings, which are unavailable for NSF use.

 

Note 3. Accounts Receivable, Net

The Intragovernmental Accounts Receivable of $974,504 consists of reimbursements and repayments due from other government agencies.

As of September 30, 1999, NSF recorded Accounts Receivable of $262,387 due from public sources, net of allowances. This amount represents $560,113 in Accounts Receivable and an allowance of $297,726 for amounts that are anticipated to be uncollectible. The following presents a reconciliation of Accounts Receivable that are anticipated to be uncollectible at September 30, 1999:

Balance at Beginning of Year

$90,308

Added in FY 1999

207,418

Written-off in FY 1999

-

Balance at End of Year

$297,726



 

Note 4. Advances

As of September 30, 1999, Advances consisted of the following components:

(Amounts in Thousands)

Advances to Grantees

$53,905

Advances to Contractors

2,064

Total Advances

$55,969



 

Note 5. General Property, Plant and Equipment, Net

The components of General Property, Plant and Equipment as of September 30, 1999 were:

(Amounts in Thousands)

Acquisition Cost

Accumulated Depreciation

Net Book Value

Equipment

$51,358

$43,534

$7,824

Aircraft

71,526

55,143

16,383

Buildings & Structures

83,461

32,015

51,446

Construction in Progress

25,818

-

25,818

Total PP&E

$232,163

$130,692

$101,471







 

Note 6. Liabilities Not Covered By Budgetary Resources

As of September 30, 1999, Liabilities Not Covered by Budgetary Resources consisted of the following:

(Amounts in Thousands)

Intragovernmental: Employee Benefits

$260

Employee Benefits

1,245

Lease Liabilities

277

Accrued Annual Leave

9,490

Total Liabilities Not Covered By Budgetary Resources

$11,272



 

Note 7. Other Liabilities

Other Liabilities represent current accrued employer contributions for payroll and benefits, disbursements in transit, accrued payroll and benefits and various employee related liabilities for payroll and benefit deductions. As of September 30, 1999, Other Liabilities consisted of:

(Amounts in Thousands)

Intragovernmental

 

Employer Contributions for Payroll and Benefits

$800

Disbursements in Transit

(40)

Total Other Intragovernmental Liabilities

760

Accrued Payroll and Benefits

2,173

State and Other Income Taxes Withheld

332

Disbursements in Transit

1,050

Employee Deductions for U.S. Savings Bonds

6

Total Other Liabilities

3,561



 

Note 8. Employee Benefits

Employee Benefits consisted of the following components as of September 30, 1999:

(Amounts in Thousands)

Intragovernmental: Unreimbursed Actual Costs

$260

Estimated Liability

1,245

Total Workers’ Compensation Benefits

$1,505



These amounts represent $260,218 of unreimbursed cost to the Department of Labor (DOL) for actual compensation paid to recipients under Federal Employee’s Compensation Act (FECA). FECA provides income and medical cost protection to cover Federal employees injured on the job or who have a work-related injury or occupational disease, and beneficiaries of employees whose death is attributable to a job related injury or occupational disease. The U.S. Department of Labor initially pays valid claims and bills the employing federal agency.

The estimated liability of $1,245,000 is for future worker’s compensation calculated by the DOL and includes the expected liability for death, disability, medical, and miscellaneous costs for approved compensation cases. The liability is determined using a method that utilizes historical benefit payment patterns related to a specific incurred period and annual benefit payments discounted to present value using OMB’s economic assumptions for 10-year Treasury notes and bonds. To account for the effects of inflation on the liability, wage and medical inflation factors are applied to the calculation of future benefits.

 

Note 9. Lease Liabilities

In FY 1999, NSF acquired three copiers under Lease to Ownership plans. The lease periods range from four to five years. Future payments under these leases as of September 30, 1999 are:

(Amounts in Thousands)

Future Lease Payments:

 

Fiscal Year 2000

$93

Fiscal Year 2001

93

Fiscal Year 2002

93

Fiscal Year 2003

45

Fiscal Year 2004

10

Total

334

Less: Imputed Interest

57

Total Capital Lease Liability

$277



 

Note 10. Unexpended Appropriations

Unexpended Appropriations consisted of the following components at September 30, 1999:

(Amounts in Thousands)

Unexpended Appropriations

Unobligated:

Available

$96,392

Unavailable

77,665

Undelivered Orders

3,894,341

Total Unexpended Appropriations

$4,068,398



The Undelivered Orders balance does not include the Undelivered Orders balances of the Trust Fund account, reimbursable agreements with other agencies, and other funds.

 

Note 11. Statement of Net Cost – Major Program Descriptions

NSF’s primary business is to make merit-based grants and cooperative agreements to individual researchers and groups, in partnership with colleges, universities, and other public, private, state, local, and federal institutions, throughout the U.S. By providing these resources, NSF contributes to the health and vitality of the U.S. research and education system, which enables and enhances the nation’s capacity to sustain growth and prosperity. These grants are managed through eight programmatic organizations within NSF that review and evaluate competitive proposals submitted by the science and engineering community for its consideration. The NSF organizations are: Biological Sciences; Computer and Information Science and Engineering; Engineering; Geosciences; Mathematical and Physical Sciences; Social, Behavioral and Economic Sciences; Education and Human Resources; and the Office of Polar Programs.

These NSF organizations make investments in science and engineering in two functional program areas: research projects and related programs, and education programs. Approximately 95 percent of NSF’s costs are directly related to these investments. A third investment is made to support management and administration activities of NSF.

Research programs provide investments in cutting edge research that yields new discoveries. These investments help to maintain the nation’s capacity to excel in science and engineering, particularly in academic institutions. NSF provides support for large, multi-user research facilities that meet the need of access to state-of-the art research facilities that otherwise would be unavailable to academic scientists, and for staff and support personnel to assist scientists and engineers in conducting research at facilities.

Education programs help ensure that an adequate, well prepared workforce of scientists and engineers can maintain leadership in science and technology, both now and in the future, and help all students to achieve the mathematics and science skills needed to thrive in an increasingly technological society.

Salary and Expenses and Inspector General (IG) investments provide for salaries and benefits of persons employed at NSF; general operating expenses, including key activities to advance the NSF information systems technology and to enhance staff training; and audit and IG activities. Costs such as depreciation of NSF assets are also included. These indirect costs are allocated to NSF programs based on each program’s direct costs.

In accordance with OMB Bulletin 97-01, cost incurred for services provided to other federal entities are reported in the full cost of NSF programs and are identified as "intragovernmental."

Earned revenues are funding sources provided through reimbursable agreements with other federal entities. Earned revenues are recognized when the related program or administrative expenses are incurred and are deducted from the full cost of the programs to arrive at the net cost of operating NSF’s programs.

 

Note 12. Budget Authority

The Budget Authority balance includes $36,912,547 of donations, interest, and penalties.

 
 
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